NFTs and cryptocurrencies

You may have heard about the trend in recent years in paying for products and services online using virtual currencies that carry real value. You may have also heard the last few years about people rushing to pay real money for weird and wonderful digital pictures of penguins, apes and other animals online, and wondered what all the fuss is about?

This deep dive will explore what NFTs and cryptocurrency are, how young people may encounter and use them online, and the relevant risks posed by both types of technology. Plus, ways in which you can support your learners in understanding both NFTs and cryptocurrencies will be covered.

What are NFTs?

Credit: Meta

NFT stands for ‘non-fungible token’. Non-fungible means one-of-a-kind and can’t be replaced or broken down into smaller units to be traded. For example, a 10€ bank note is fungible – it can be used to pay for smaller amounts, with you receiving change in return. It can also be exchanged for equal smaller amounts, e.g. ten 1€ coins. Some physical objects cannot be broken down, such as one-of-a-kind artwork (such as paintings and sculptures); they come as a single item.

Unlike physical one-of-a-kind objects, NFTs are one-of-a-kind digital assets, such as artwork, avatars, audio files, memes, videos, photos and other media. Just like their real-world counterparts, they hold value, but unlike other digital art, they are bought, sold and owned differently. They are part of what is known as the Web3 development of the World Wide Web – this guide by cryptocurrency provider Ethereum does a good job of explaining the Web3 concept.

NFTs are bought with cryptocurrencies (explained later in this deep dive) which allows a record of their ownership to be recorded on the blockchain (also explained more later!); a ledger of digital transactions that stores all the details securely to prevent tampering and ensure proof of ownership.

When you buy an NFT, you pay using cryptocurrency and your purchase is stored on the blockchain. You now ‘own’ the digital asset. You do not receive a physical version of the asset. You may take a copy of the digital asset (e.g. save a copy of the picture/photo, download the audio file, etc.) if you wish, but there is nothing to prevent any other online user from also downloading a copy of the asset as well!

If you’re scratching your head and wondering what people are actually receiving for their money, then you wouldn’t be the first person to question this! The next section outlines why NFTs hold value to some users, as well as why some young people may be interested in purchasing, selling or trading NFTs.

Why might young people be interested in NFTs?

As the previous section explained, ownership of an NFT does not grant you a special version of the asset, nor does it prevent anyone else from taking a copy of the asset if they so wish.

So why are people so interested in owning a one-of-a-kind asset that anyone can also take a copy of? In short, one of the main reasons for owning NFTs is the bragging rights; the right to claim that you own the rights to a particular digital asset. Just as different types of artwork carry value and reputation offline, with art collectors enhancing their own status and reputation by owning rare pieces, so too do online forms of art such as famous memes, virtual avatars and even social media posts – in 2021 the cofounder of Twitter, Jack Dorsey famously sold his first-ever tweet as an NFT for $2.9 million!

Credit: Valuables (by CENT)

However, there are other reasons why young people may become interested in NFTs:

• Experimentation with money – for some young people, NFTs are an attractive and interesting way to delve into the world of cryptocurrency. They may wish to try purchasing, selling and trading NFTs. They may even offer up their own digital creations to be sold in order to earn money.
• Influence – Celebrities, high-profile individuals and influencers with established audiences will often promote and sell their own lines of products and merchandise, and this could include NFTs. Young people who are huge fans may wish to purchase an NFT in the same way as they might buy a branded t-shirt or range of beauty products that their favourite influencer launches – either to support that influencer or be part of a trend.
• Appealing – Who wouldn’t want their own Pudgy Penguin? Some of the NFTs available are very appealing to children and young people and may encourage them into making a purchase. Pudgy Penguins not only allows you to purchase NFTs but also physical merchandise, which may attract young people towards the NFT marketplace.
• Gaming – Even some video games have begun to integrate NFTs into their functionality and features. For example, major games publisher Square-Enix are developing Symbiogenesis – a free-to-play game where players can purchase characters as NFTs, with a chance to be one of three players selected at random to determine how the game will eventually end. For some young people, their love of gaming may lead them into NFT purchases in a game they greatly enjoy.

What are the possible risks around NFTs?

While NFTs and the marketplaces for them are in some ways a reflection of the way in which physical art is bought, sold and collected offline, there are a number of risks for young people to be aware of around becoming involved in those marketplaces, as well as in buying/selling NFTs.

Note: Before highlighting these risks it is worth noting that, as of early 2024, a lot of the initial buzz around NFTs in previous years has now died down, with some critics proclaiming the phenomenon to be ‘dead’. Regardless, there are NFT marketplaces still available today which young people may encounter.

Some of the risks that young people may face involving NFTs include:

• Pressure to buy – Sponsored posts or NFT product placement in social media by influencers and celebrities may greatly influence some young people into spending their money on NFTs, without necessarily fully understanding what they are buying. Some NFTs may be sold using pressuring language to create a fear of missing out.
• Scams – Similar to the above, scammers may use various techniques to pressure young people into purchasing NFTs, or use fake advertising and marketplaces to trick young people into spending money but receiving no ownership rights in return.
• A fluctuating market – Because NFTs rely on cryptocurrency, which can rise and fall in value, so too can the value of the NFTs themselves based on changes in the market. Remember that Jack Dorsey tweet from earlier? It’s now estimated to be worth less than $4… Young people looking to use NFTs to invest and make money could end up with less money than they started with.
• A worthwhile return – for games and marketplaces where NFTs can be earned or won, there is a risk that the level of time and effort required to get an NFT ends up being far more than the NFT is worth, particularly when calculated at an hourly or daily rate for the work that a young person has put in!

What are cryptocurrencies?

You’ve already heard the term cryptocurrencies mentioned several times in this deep dive. But what are they and how do they work? This video from the International Monetary Fund explains it in two minutes:

There are a huge number of different cryptocurrencies available; this article suggests that there are almost 9000 active cryptocurrencies with 420 million crypto users across the globe! The most popular cryptocurrencies include ones you may have heard of, such as Bitcoin, Ethereum, Dogecoin and Solana. Each currency carries a different value, and just like the stock market, the value of these currencies changes with time – from a high of $68,000 for one Bitcoin in November 2021, to a low of just over $16,000 a year later in November 2022.

What is Bitcoin mining?

You may have heard online users and news reports discuss ‘mining’ bitcoin, and wondered how on earth a digital currency can be mined? However, there is no need for pickaxes and shovels in this mining – instead, miners use computers with GPUs (graphics processing units) to solve complicated mathematical problems. A large amount of computing power and time is required to solve the problem, and the first miner to solve it receives a Bitcoin and a new problem is posed to be solved. This is a reward for solving the problem, and given that a single Bitcoin is worth tens of thousands of dollars – it greatly incentivises people to mine!

The process of mining also performs an important function on the Bitcoin network – it enables the auditing and validation of information on the blockchain, enabling new Bitcoins to enter circulation into the closed system. The new Bitcoin is the miner’s reward for expanding the blockchain. 

Still confused? This video might help:

What are the benefits of cryptocurrencies?

As you heard in the IMF video, there are a number of benefits to cryptocurrencies:

• More direct – the transaction goes from sender to recipient with no-one in the middle.
• More transparent – the transaction is broadcast to the whole network so everyone can see it took place. There are a limited number of bitcoins in the blockchain, so each one is accounted for.
• More secure – each transaction is added to the ledger in the blockchain, allowing transaction history to be traced and prevent tampering.
• More inclusive – transactions are faster and cheaper than traditional methods, and users do not need a bank account to participate.

For some young people, the opportunity to buy and sell products and services (both digital and non-digital) might be a very appealing one, particularly if they have skills/abilities that are recognised in digital spaces.

What are the possible risks around cryptocurrencies?

All the risks outlined with NFTs are also relevant for young people and cryptocurrency – they may feel pressured into buying and using cryptocurrency by influencers or invest in cryptocurrency only to get a very poor return if the currency falls sharply, and even permanently lose money if the currency becomes inactive. There are also other significant risks:

• Value for money – with so many cryptocurrencies available, it can be difficult to know whether investing in one currency is providing better value for money as opposed to a investing in a different currency. Young people may lack the understanding of finances and economics in order to make informed decisions. The cryptocurrency market is currently unregulated, and doesn’t have the safeguards that the traditional stock market has in place.
• Scams – as with NFTs, scammers may use fake marketplaces and advertising to trick young people into providing bank details or other financial information to buy cryptocurrency, only to receive nothing in return. In addition, cybercriminals may use these financial details to steal more money from a victim. You can learn more about cybercrime in this deep dive.
• Hacking – alongside scams, cybercriminals may seek to take over accounts linked to cryptocurrency, in order to transfer it to themselves. Any account owning cryptocurrency is a target – it may be a digital currency, but it has a real monetary value, and this can attract criminals to attempt to break into accounts.
• Cryptojacking – crypto mining requires huge amounts of computer power, as well as trial and error to produce new Bitcoins. Cyber criminals may attempt to infect other people’s computers/devices with malware that allows them to use those computers as part of a large network, boosting the computing power to allow the criminal to mine faster and claim the Bitcoin reward. Even young people with no interest in cryptocurrencies could become involved if their device is infected and used as part of a mining network.
• Other implications – for young people who want to mine Bitcoin, the cost of computer hardware, and the energy costs in running the computers could end up more costly than the monetary reward of a new Bitcoin. There are also environmental implications in running computers 24/7 for days on end in an attempt to successfully mine Bitcoin.

Activity

Take a few moments to reflect on what you have learned so far in this deep dive. When thinking about your learners, consider the following questions:

• How relevant are NFTs and cryptocurrencies to my learners? (For younger learners, they may be unaware of these technologies, whereas some older learners may actively be engaged in buying/selling NFTs or using cryptocurrency.)
• How might my learners encounter NFTs and cryptocurrencies online? (Consider favourite apps, games and influencers.)
• Which risks are most relevant to my learners?
• Which risks do my learners already know about? Which risks might be new/unknown to them?

How can I support young people to understand NFTs and crypto?

Depending on your learners’ age, development and online experiences, NFTs and cryptocurrencies may not present a great issue.

However, many of the risks presented by these two technologies can be covered through education and discussion about other online safety topics/areas:

• Learn together – NFTs and cryptocurrencies are complex topics. If your learners are interested in them, take the time to learn more about how they work together. This could be by watching some YouTube videos, reading beginner guides or following news stories in this area.
• Promote cybersecurity – any online account holds value, whether that be in the form of personal data, NFTs or recognised currencies (crypto or traditional). Therefore, good cybersecurity habits are key – strong and unique passwords, two-factor authentication and keeping apps/device up to date are all important considerations. You can learn more about cybersecurity strategies in this deep dive. 
• Discuss how to make sound financial decisions – you may have your own views as to the value of NFTs and cryptocurrencies, but there are valid reasons why young people may wish to invest in them. What is most important is that young people are able to make informed decisions. So discussions about money, about the financial risks related to fluctuating value and about the odds of winning in competitions are all useful in helping young people get to grips with the risks around money – be it physical or digital.
• Encourage critical thinking – many scams and poor-value deals are driven by disinformation or through influence by high-profile people online. Encourage your learners to think critically about the offers that are presented to them online – what is the motive behind them? What are the benefits? What are the risks?
• Remind learners of how to get help – getting into financial difficulty may lead some young people into feeling too embarrassed or ashamed to seek help. Remind them that they can always turn to you or another trusted adult for support for any online experience that worries them.

Further information and resources

Want to learn more about NFTs and cryptocurrencies? These resources may be useful:

• Cryptocurrency and Blockchain for teachers – This collection of links to educational resources can help you explore these complex concepts with your learners in an age-appropriate way.
• Internet Matters – This article provides a good overview of NFTs and cryptocurrency, as well as a useful glossary of key terms.
• OpenSea – Learn – Articles and guides from the OpenSea marketplace that allow you to deepen your understanding of the technical aspects of NFTs and cryptocurrencies.