 MFTs either love them or you hate them and when plots of virtual lands and cartoons of bored monkeys sell for millions of dollars it's easy to see why for many of us they seem like a pivotal web through technology or an absolute scam, but regardless of what side you're on one thing is for certain, NFTs are one of the few crypto technologies that have actually made it into mainstream consciousness and it seems like they're here to stay. Can you explain what an NFT is? Probably about 50 new NFT projects launching per day. I don't care if you buy an NFT, I just don't care. So what are NFTs and why have they become such a cultural phenomenon? I'm Jackson Dumont, director of video at Coin Telegraph. In this video we'll explain how NFTs work and why they boomed to the forefront of Web3 technologies. If you haven't done so already please consider leaving a like and clicking that subscribe button. Are the leading media for crypto news coverage and education? What are NFTs? NFT is short for non-fungible token. Let's take a moment to break it down in the most simplest of terms starting with the word fungible. Something is fungible when it can easily be replaced with another identical thing of the same value. A $100 bill like this one can easily be replaced by another $100 bill. After all, a Benny is, well, a Benny. On the other hand, something non-fungible is non-replaceable. It's unique. A lot like there's only one Sistine Chapel or one starry night. And because it's rare, it has got the potential to be incredibly valuable. But how do you ensure that their uniqueness is always protected? That's where the crypto technology called blockchain comes in. The blockchain is the most secure form of ledger. A network of computers reads and approves transactions and data at all hours of the day, not just from nine to six. If you want to learn more about blockchain, you can watch our video here. The proof of who created a digital or physical item along with any other vital information is recorded on the blockchain. The blockchain creates a digital signature in the form of a token. The token can't be edited, meaning it's immutable. And to access your item, you need to access the token that tells you where the image is hosted on a website or distributed file system. And there you have it, the NFT in NFTs. People often say, hey Jackson, why would I pay money for an NFT when I can just copy and paste a JPEG of the NFT and take it for myself? Well, Karen, you can right click and save it, but you can't own it. NFTs are the technology that allow you to own digital created goods in the digital space. Having a photo on your desktop doesn't mean you own it. It just means it's there on your desktop. So yeah, you can copy a digital file of the art that's included with an NFT as many times as you want. But thanks to the power of blockchain, NFTs are designed to give someone something that can't be copied, ownership. Only one person can own the token at a time. NFTs provide unique, verifiable and immutable, proof of ownership of digital goods. True digital ownership of assets through NFTs is a revolutionary idea that will transform how we interact with the internet. Right now, our digital assets are scattered across different digital owners in a Web 2 ecosystem. Your Instagram username is owned by Instagram, which is owned by Meta. Your Fortnite skin is owned by Epic Games. But as we transition out of Web 2 and enter the new age of Web 3, the internet will be owned by its users. And NFTs are central to that shift with digital assets that can be held, traded, collateralized and moved without relying on a centralized third party. Now, say you want to buy an NFT, you'll have to follow three major steps. First, you purchase some crypto on an exchange, and the exchange you're used depends on which blockchain the NFT lives on. A lot of marketplaces use Ethereum, but Solana is also used, for instance. Let's move on to step two. You have to transfer your crypto to a digital checking account simply referred to as a crypto wallet, such as the likes of MetaMask, Ledger or Temple. Once the transfer is complete, you have to connect your wallet to an NFT marketplace, and only then will you be ready to browse by. The largest marketplace is OpenSea. You can think about it as the Amazon of NFTs. But other marketplaces include Superware, Foundation and Nifty Gateway. While scrolling through these marketplaces, the old fine NFTs are mostly focused on collectible artwork or tokenized versions of physical items. The NFTs are also making significant strides in spreading into music, entertainment, sports and live events. Here's a quick rundown of some of the types of NFTs. There are PFPs or Profile Pick projects and avatars, which people often use as their social media picks. As you've heard of Cryptopunks or Deadfellows, we'll see a lot more PFPs and avatars circulate in use as we move forward into Web 3. Then there are Photography NFTs, which can be summed up by their name, Nupset. The same pretty much goes for collectibles. They include the likes of trading cards, sports memorabilia, video clips, concert tickets and more. Next up on our list of NFTs we have Generative Art NFTs. This art is produced in part or completely by an autonomous system that makes decisions in place of the artist. The result? Cool cats. Board apes. There are also Music NFTs, the blockchain alternative to buying tracks on iTunes. And for anyone who still does that, while iTunes lets you buy the rights to listen to the music, Music NFTs let you listen and even own the rights to the track through the NFTs. Which is better? I'll leave that for you to decide. Then we have Game of Five NFTs, which take typical gaming elements such as point scoring, competitions and rules of play and apply all of that to blockchain technology. Assets used within the game are programmed as NFTs and users can trade and swap the assets for financial rewards. The reality is the list of types of NFTs is evolving with each day. NFTs might one day be used to transfer land deeds, provide proof of ownership and perhaps even keep track of the change in a property's value over time in the physical world. And in the digital world, projects such as Decentraland allow users to purchase NFTs that represent the virtual land they've either bought, rented or sold. In the future, these virtual lands can be built up and generate income. It's for these reasons, among so many others, that experts predict the NFT market will reach $80 billion by 2025. It seems like every day you hear about a new collectible NFT selling for almost irrational amounts of money. I'm looking at you, Pet Rock. But while it's true that the market for NFTs did explode for a sweet, sweet period in 2021, it's unclear whether we'll have a boom like that again. The future of NFTs. Is it all a scam? I'll be upfront with you. NFTs have been a rollercoaster ride. As any technology in its infancy, it's prone to the influence of some evil players. It just so happens that the worst cases of theft in the NFT space were phishing scams and rug pulls. Let's start with phishing scams. Bad actors impersonated reputable figures such as banks, NFT marketplaces and NFT artists to trick people into handing out their personal information, like, say, credentials to their crypto walls. Then, they bled the users dry. In June 2022, a massive security breach at the NFT community's largest and most active marketplace, OpenSea, exposed its many members to some incredibly fishy emails, as in PH phishing emails. Any OpenSea user who had shared their email address with the site at any point in time had their information handed over to a so-called unauthorized third party. The hack saw $1.7 million worth of NFTs stolen. And it isn't just emails either. Clicking on any unverified link on any platform could result in a user losing their precious NFTs. In April 2022, hackers hacked into Board 8 Yacht Club's Instagram and stole $1 million worth of NFTs from their followers. The hackers posted a link mirroring the website, and when they signed in, they signed into a transfer form, at which point their wall assets were transferred to the scammer's wallet. Just a month later, it happened again with Beeple's Twitter account. Scammers posted links to a fake NFT giveaway. When users clicked on the link, they found their NFTs were stolen. But aside from offers that seemed too good to be true, there are some NFT scams that are months in the making. That's right, we're talking about rugpulse. Pulse are when developers attract early investors to a project, building up momentum for a project and then quickly abandon it, or pull the rug from under you. These scams often result in scammers pocketing all the investor's money and vanishing it into thinner. Sometimes, you're getting a taste of the dark side of Web 3. You should know that rugpulse can even be disguised as ice creams. That's right, nothing is safe. Now back to the case in hand. NFT project Frosties was an ice cream-themed collection of 8,888 NFTs. The founders built up a community on Discord and promised NFT collectors anything from merch and raffles to a sizable fund to ensure the project's longevity. The NFTs were priced at .04 ETH Permanent and when the collection sold out in a matter of hours, the team had pulled in 335 ETH or roughly $1.3 million. But then just like that, the project website and their Discord quickly disappeared and so did the founders. The funds were transferred to various swaths. The U.S. Department of Justice picked up the case and launched a two-month investigation. New York prosecutors arrested and charged the founders with conspiracy to get fraud and money laundering. The case is the department's first NFT rugpulse. It's won for the bucks. If there's any bright side to all these scams, it would be that we've gotten better at detecting them. Thanks to social media NFTs spreading like wildfire, an increasing number of people are a little too quick to hop on the bandwagon without having any knowledge about the web-through space. It would be a pity to mistake NFTs as a scam technology when it's clear that most of the blame for these scams fall on bad actors. That being said, it's a new technology. It's a blank canvas waiting to be given a purpose and in due time, the technology will improve itself. It will be more resistant to bugs and hackers. Until that happens, we need to be wary and educate ourselves of the realities of creating and buying NFTs. It's up to us to learn how to identify safe and unsafe projects when we make life-changing investment decisions. If you enjoyed the video, be sure to like it and leave us a comment below. And please don't forget to subscribe to the channel. The Cointelegraph Cryptopedia is your guide to the chaotic space of blockchain technology and cryptocurrencies.