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2021 will be remembered for many things: not being 2020, vaccines, Euro 2020 – even though it’s 2021 – and NFTs. All need no explanation, except maybe that three-letter acronym. Just what is an NFT? Well, we thought we’d provide a short explainer as McLaren Racing and Tezos, McLaren Racing’s Official Blockchain Partner, launch a whole new way for fans to engage with the illustrious racing history of McLaren.
So, what are NFTs?
NFTs, or non-fungible tokens, are digital assets that stand to redefine how we engage with digital content in the digital age. No two NFTs are the same and they each have a unique digital signature that proves provenance and individual ownership of an asset. A fungible asset, on the other hand, is not unique: it can easily be traded or exchanged for an identical item of the same value – this could be currency, shares in a company, or goods.
How do NFTs work?
NFTs exist on blockchains, digital databases that underpin cryptocurrencies such as Tezos, Bitcoin and Ethereum. They are created from digital objects that represent both tangible and intangible objects such as art, videos, GIFs, collectables and music. Rather than owning a physical asset, the buyer owns a digital asset instead.
Wait, what’s a blockchain?
A blockchain is a distributed public ledger that is a record of who owns what. The technology underpins digital currencies and NFTs. Blockchains allow digital information to be distributed but not altered, copied or deleted from a network made up of thousands of computers. However, some blockchain networks use tremendous amounts of energy to run their networks. We are proud to have partnered with Tezos, a pioneering energy-efficient blockchain, that uses 2 million times less energy than networks like Bitcoin and Ethereum.
And a cryptocurrency?
Cryptocurrencies are digital forms of money not issued by a central bank or government. Each cryptocurrency has unique properties for its own bespoke use cases including privacy, speed, and more. Like any form of money, cryptocurrencies are fungible: a Bitcoin is always equal to another Bitcoin, in just the same way that a pound is always equal to a pound.
OK, got it… I think. Tell me more about NFTs?
NFTs give the owner exclusive ownership rights to a piece of data. Be it digital or physical, anything considered desirable or collectable can become an NFT that is bought or sold, even though NFTs frequently comprise artwork, footage or audio that is already easily available for free on the internet.
If anyone can view the data online for free, why would I spend my hard-earned cash on an NFT?
Downloading, copying and distributing digital files online is nothing new but, just like a one-of-a-kind painting, there’s only one original that can be owned. And when you buy an NFT, you are getting a verified, digital certification of ownership of a piece of data – proof that you own the original.
Admittedly, if you bought an NFT of the all-conquering MP4/4 it wouldn’t be quite the same as owning the actual car, but you would own a unique, non-interchangeable digital representation of it. Not only is that going to be worth a lot, but it’s also going to give you some serious bragging rights.
Is it green?
The process of creating and adding NFTs to blockchains, along with the plethora of transactions and verification of these transactions, takes place online and in the digital space so requires large amounts of computing power and therefore, of course, energy. Many blockchains run using a system called proof-of-work, which relies on server farms running at full pelt, the main reason behind their high energy usage. But this is where Tezos comes in. Tezos operates a blockchain with a proof-of-stake system. Crucially, this system doesn’t rely on massive computer power. Its demand for electricity is significantly less and it’s far more energy-efficient.
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