COMMON QUESTIONS ABOUT

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By BCA Staff

Over the past two issues, BCA Insider has run stories detailing cryptocurrency and NFTs, explaining how some in our industry are utilizing these new digital assets to further their businesses.

While both stories were meant to be primers on the subjects with the goal to help our members understand these terms better, a lot of confusion still exists, which is understandable.

Below are some of the most common questions that our members still have about cryptocurrency and NFTs and hopefully, this will help you on your road to utilizing these valuable digital tools.

Cryptocurrency

I still don’t get it. This is money that’s digital? What exactly are cryptocurrencies?

While this is seemingly a simple question, it still can be confusing. The easiest definition is that cryptocurrencies are digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank, to uphold or maintain it.

Beyond being utilized as a method for payment, what are other functions of cryptocurrencies?

Cryptocurrency value can be pegged to underlying assets such as the U.S. dollar, central bank digital currencies, privacy coins, governance tokens, utility tokens, and non-fungible tokens. Of course, there are also investors and speculators who are hoping for appreciation. It is very important you know the intent and functionality of cryptocurrency you own or are considering owning.

How are cryptocurrency transactions recorded?

Cryptocurrency transactions are recorded on a shared, digital ledger called a blockchain. This is decentralized technology, spread across many computers, that records each and every transaction.

Aren’t blockchain and cryptocurrencies the same thing?

No. Blockchain is the technology that allows for cryptocurrencies to work. It is a decentralized and digital ledger of transactions used for cryptocurrencies and other assets/functions. It is important to separate the technology behind cryptocurrencies from the actual cryptocurrencies.

What are the most popular cryptocurrencies today?

The most popular and widely utilized cryptocurrency is Bitcoin, with about 65 percent of the $1 trillion industry. There are close to 8,000 different cryptocurrencies available today and growing. The others in the top five are Ethereum, Tether, USDC and Binance Coin.

Why are there so many cryptocurrencies?

That’s an easy one. People saw the early success of Bitcoin and wanted to get in on the action and try to make money. But be wary. More than 2,000 cryptocurrencies have failed in the past few years due to a lack of funding at the start and after launch, some failed to evolve, and a few were outright frauds.

How Safe is Crypto?

Despite its decentralized nature, transactions on most cryptocurrency networks are very secure, as long as crypto users take precautions.

Nfts

What exactly is an NFT?

At the most basic level, a non-fungible token is a one-of-akind, verifiable digital asset that can be exchanged between a creator and a buyer. The one-of-a-kind characteristic is important in distinguishing NFTs from other digital assets; one NFT is not interchangeable for another, like a dollar bill or a share of stock, but is unique and has its own value.

Why are NFTs valuable?

All value comes from the property it represents, which is normally something that exists in the digital world. This could be an original piece of art or digital memorabilia. The NFT itself doesn’t necessarily contain the digital property, but points to its location on the blockchain. Like a concert ticket or a deed to a physical property, an NFT reflects the value of the thing it represents.

What’s the link between NFTs and cryptocurrency?

While the two often go hand-in-hand, NFTs aren’t cryptocurrencies, they are built using technology similar to Ethereum and Bitcoin. Like cryptocurrencies, NFTs exist on a blockchain, which verifies their unique identity and ownership. The blockchain also keeps a record of all the transactions connected to the NFT and the property it represents.

NFTs seem to be aimed at collectors only. How can that help our business?

Because NFTs run on a blockchain, they could offer potential for uses beyond art and collectibles. Just look at what Riley and Jake Pechauer created with the Pool Shark Billiard Club, a series of 8,888 one-of-a-kind shark NFTs that promote billiards. In theory, NFTs could offer efficiency and security through embedded smart contracts.

How do I purchase an NFT?

Purchasing an NFT is not like a typical e-commerce transaction. Those interested in buying one must change their native currency to a blockchain-based cryptocurrency before they can complete their transaction. This exchange generally happens on a dedicated NFT platform.

How Are NFTs Distributed?

NFTs are sent directly to consumers from the point of purchase. For business owners, these assets can offer a direct-to-consumer product that eliminates a physical footprint and distribution. While this will be a cost-saving solution for B2C businesses, B2B companies will need to learn how to implement NFTs into their model.

As a small business, why should I implement NFTs?

The usage of NFTs may seem like it’s exclusively for artists and major corporations, but many small businesses are now using them as well. Small businesses have created and sold NFTs for sweepstakes initiatives and to raise money for charities they support. They can also create and sell NFTs to promote their business and generate revenue.

What are the drawbacks of NFTs?

While NFTs are an exciting technology with lots of financial potential, they do have limitations, one being the lack of broadband access in areas of the United States and other parts of the world. Without internet access, consumers cannot participate in the exchange of NFTs.

If you still have questions about either cryptocurrency or NFTs, send them to billiardskeith@gmail.com and our staff will do our best to answer.