Explore how cryptocurrency and NFTs work
Cryptocurrency and non-fungible tokens (NFTs) are shaping the future of the internet. Research shows more children and young people exploring new ways to make money. This might put them at risk for a variety of online harms that parents need to know about.
NFT stands for Non-Fungible Token. Non-fungible means not replaceable by something identical. Non-fungible tokens, then, are digital files that users cannot replicate.
NFTs are most often associated with digital artwork as in the case of the Bored Ape Yacht Club. However, an NFT can take the shape of anything beyond digital art too, including music, photography, avatars and even video game assets.
NFTs in social media are popular for buying and selling. Users might come across videos and posts advertising new NFTs to purchase, or they might communicate on platforms like Reddit.
Cryptocurrency, or crypto, is a type of currency that only exists online. Blockchain technology keeps track and stores records of cryptocurrency (and NFTs). It is kept decentralised, which means there isn’t one authority or financial institution that controls crypto.
The idea of cryptocurrency works similar to the stock market. Different broker apps exist to help users invest in cryptocurrency of any kind. To start, users generally have to purchase cryptocurrency with real-world money using credit cards or other forms of payment.
Alternatively, users can mine for crypto. However, this also requires investment in the right mining hardware and software, as well as increased use of electricity. Regardless of how someone gets started, it isn’t generally cheap.
Cryptocurrency first became really popular with Bitcoin in 2009. Since then, many other forms of cryptocurrency have been created. Below are some of the most popular.
These are just 3, but there are thousands of other cryptocurrencies that young people might invest in online.
Altcoins, or ‘alternative coins’, are types of cryptocurrency apart from the more popular types. Generally, this refers to coins other than Bitcoin and, for some, Ethereum. Altcoins may be used in different ways than standard crypto coins. Some of these purposes may include:
Other uses, including payment like Bitcoin and Ethereum, also exist. However, it can sometimes be difficult to determine its use. Users also run a greater risk of scams or loss of interest.
Popular platforms like Discord, Reddit and Telegram see weekly launches of altcoins, which might encourage young people to invest early.
Both NFTs and cryptocurrency would be a part of the proposed Web3 and are a big part of the metaverse. Unlike cryptocurrency, users cannot exchange one NFT for another. However, users engaging with either might also use the other.
To purchase non-fungible tokens, a user must have a crypto wallet generally used for cryptocurrency. This is also where platforms store NFT keys as proof of ownership of an NFT collection. Just like an offline wallet, users keep their crypto wallets safe and private. While many NFTs are for sale with cryptocurrency only, there are often options for those who wish to purchase with local currency and credit cards.
Users might advertise the investment or sale of crypto and NFTs in social media settings. This method of marketing means these posts could come across anyone’s social feed, including children and teens.
So, it’s important to talk to your child about their online money management to help them make good financial choices.
Like trading stocks or making financial investments, working with NFTs and cryptocurrency has certain risks.
Influencers might tell their followers which non-fungible tokens, altcoins or other cryptocurrency to buy because of sponsorships. This can lead to young people misunderstanding the source of the influencer’s wealth, which may lead to loss of their own money. In fact, some influencers are paid thousands to endorse projects in cryptocurrency.
Some young people may get into this form of investing with the idea of making large sums of money. Unfortunately, that’s not the case for many.
While young people might see content from influencers selling NFTs on social media or promoting crypto highlighting the potential to grow investments, they might not understand the reasons behind this. For instance, the influencer may be selling a course by which they make most of their money. Or they might have a sponsorship with a platform to promote them. In that sense, they aren’t making a lot of money from NFTs or cryptocurrency.
In Ofcom’s 2022 Children’s Media Lives report, teens reported seeing content on social media promoting NFTs or cryptocurrency. Because they might watch the whole video, the algorithm suggests to them related content. As such, they see more people talking about it but potentially not explaining it. This might lead to children seeking out the answers themselves or investing in one or the other with only a basic understanding of the NFT marketplace.
Investment in NFTs and, especially, cryptocurrency is high-risk. Just like the stock market, the buy and sell rates fluctuate regularly. This means that a teen might invest a large sum of money into crypto and end up losing all or most of it.
Similarly, someone can buy an NFT with the intention to sell, but prices and value change quickly. They might end up with something relatively worthless on their hands.
In the case of altcoins, which start off based on community interest, a user might invest in something that never gets off the ground. This could be due to scams or loss of investors.
Both non-fungible tokens and cryptocurrency are legal in the UK. However, they are not regulated by the same laws that affect a physical object like a piece of art or finances. Unfortunately, this means stolen assets or scams are more likely and not necessarily punishable.
Additionally, users risk investing in NFTs that are fake or copied from original digital artists. They are unlikely to get their money back if this happens. The popularity of NFTs in social media settings means that young people often see this content without a clear understanding of the potential risks involved. As such, they might buy into something they’re unfamiliar with.
Educate yourself: Learn about NFTs, cryptocurrencies, and the risks associated with them.
Keep apps official: Download crypto mobile apps from official stores like Google Play and Apple App Store.
Apply a ‘Should I trust this?’ checklist: Children should ask themselvse: ‘Do I trust that the URL?’ ‘Is the URL right?’ ‘Is it too good to be true?’ ‘Is the influencer post real advice or an ad?’ Encourage them to do their research or talk to you.
Do research before investing: Research the cryptocurrency name or company with your child alongside keywords like ‘scam’, ‘fake’ and ‘review’ to see if there is any mention of potential risks around it.
Keep credentials private: Make sure your child knows never to share cryptocurrency wallet information with anyone.
Stay updated: Subscribe to reputable sources of information like our newsletter and Money Saving Expert to follow industry experts’ advice on how to stay ahead of new threats.
Discuss the value of NFTs and how they change: As NFTs’ value goes up and down with trends, it’s important to talk to young people about what a realistic amount to invest looks like and the potential of NFTs losing value very quickly.
Report any scams: If you think you’ve been a victim of an NFT scam or you suspect that you’ve been targeted by one, you can report it to the NFT platform so they can investigate it. You can also report it to Action Fraud online at www.actionfraud.police.uk.
Some platforms for NFTs and cryptocurrency are becoming more popular among children and young people. There are also new platforms targeted towards children that may help them learn about NFTs and cryptocurrency. Below are some popular platforms for non-fungible tokens and cryptocurrency trading.
Zigazoo is a social media and NFT platform designed for children of all ages. However, children under the age of 13 require parental permission. Parents and teachers helped create it.
While it works mostly as a social media network, Zigazoo also has an NFT education initiative to help parents and their children trade in NFTs. Some of their NFT drops include children franchises such as America’s Air Bud, CoComelon and YouTuber Blippi.
While Zigazoo’s design benefits children, it still deals with finances and something that isn’t tangible. If your child wants to use Zigazoo, it’s important to take an active role in their journey. Use it as an opportunity to teach them about financial responsibility.
Toekenz is a family-centred platform for kids. It uses games and hands-on lessons to teach children about trading in NFTs and cryptocurrency in an ad-free environment. While it isn’t yet available to the general public, Toekenz promises to be a family-friendly way to learn about Web3, blockchains, NFTs and crypto.
As with any new platform, it’s important to be vigilant about how your child uses it. This may include managing their screen time, having conversations about their use and using the platform alongside them.
Axie Infinity is an NFT-based ‘play-to-earn’ online video game. It uses cryptocurrency that is on the Ethereum blockchain, and it is intended for users over the age of 18. Users can breed and battle characters called axies and can also create homes and worlds. Players collect and mint the axies, which represent the NFTs.
The platform is for adults, but the graphics and concept may be enticing to younger players. Setting parental controls on your devices and checking in on their digital habits can help keep young people safe from risk involved on the platform.
Axie Infinity also has had trouble with an NFT and crypto crash as well as a network hack that resulted in the theft of millions of US dollars worth of crypto.
Gods Unchained is a digital collectible card game. It is one of the most popular NFT-based online games. Users use their cards to fight and win more cards that they can sell. It shares similarities with offline trading card games like Pokemon and Magic the Gathering. It is for users over 18-years-old, but anyone over the age of 13 can use it with parent permission.
Gamefied platforms that use money pose potential risk to children. They may not see the risk of financial loss associated with a virtual trading card game, so it’s important to have regular conversations about their use. Set limits on spending and use the platform with them to minimise risk.
The Sandbox is a 3D grid game similar in style to Minecraft. Users must be at least 18-years-old to use the platform. Like other similar games, The Sandbox also uses the Ethereum blockchain to trade and purchase in-game NFTs.
In order to purchases these digital items, users must first purchase SAND, which is the main cryptocurrency used in the game. Players can use SAND to purchase other related game features such as LAND (The Sandbox’s digital real estate) and ASSETs (other items) in addition to other tokens.
The similar style to Minecraft may encourage use among young players. However, users under 18 are not allowed on the platform. If your child wants to use an NFT game under your supervision, work together to find a platform that will work for them and their interests.
OpenSea is one of many NFT and cryptocurrency platforms available to users online. It is one of the largest marketplaces for users to create, sell, auction and buy NFTs. Users under 18 can use the service if they are 13-years-old and use the service through a parent or carer’s account.
Because the marketplace is so large, it can be overwhelming for someone to use. As such, a user who is under-18 may not fully know where to start.
If your child is using the platform through your account, remember that their actions are your responsibility and will also affect you. Be sure to talk about proper use and money management so they understand how to use such platforms responsibly.
An airdrop is a method of releasing cryptocurrencies to many people at once.
A blockchain is a type of public record of information that is hard or impossible to change. It limits hacking and cheating of the system. It is most often associated with cryptocurrencies, but is also used with NFTs.
A block refers back to the one before it, creating an unchangeable history of the blockchain.
DeFi stands for Decentralised Finance. It refers to financial products and services created within the world of cryptocurrency such as savings accounts for crypto or lending services.
Flipping is the act of buying NFTs low and selling high.
This refers to non-fungible tokens created for sale. Generally, a minted NFT is one written to the blockchain (and therefore not able to change). To mint an NFT, one simply needs to purchase it.
With either NFTs or cryptocurrency, a rug pull refers to someone getting investors for their NFT or crypto and then ‘pulling the rug’, walking away with investors’ money. It is a type of scam.
A utility token refers to NFTs that have some sort of use, which is different from simple image NFTs. They might let users gain access to websites, Discord groups or real-life events.
Aping or apeing refers to the act of buying an NFT or token quickly after it launches without much research.
A bull market refers to a market where prices are trending upwards over a period of time. A bear market refers to a market where prices are trending downwards.
A drop is the name for an NFT sale. Users may advertise the sale of NFTs in social media or other settings.
A generative set refers to NFT sets created through an automatic programme. This might look like a standard image, such as an ape, where backgrounds, accessories and clothing are generated to create new images.
Depending on the algorithm, some combinations may be rarer than others, which means they may be more expensive.
To moon is to achieve the top valuation of an NFT.
The secondary market is almost like a secondhand sale. It follows the primary sale of the NFTs.
A wallet stores a user’s private keys that gain access to their cryptocurrency transactions.
A bagholder is someone who buys into a cryptocurrency position at an elevated price before seeing the fall of their holdings’ value.
Cryptojacking is a method of mining cryptocurrency on a computer without the owner’s knowledge. Those committing cryptojacking can then earn money without having to spend any on equipment or electricity to mine. This is the result of installing malware on the victim’s computer.
Dust is a small amount of cryptocurrency stuck in your wallet either because it’s worth too little to transfer or doesn’t meet exchange minimums.
This stands for Inter-Planetary File System. It is a storage system that exists on the internet instead of on individual servers.
Paperhands are people who make little gain or potentially make a loss on an NFT project by selling their buy-in to the project too quickly.
NFT stands for non-fungible tokens. Token is another way to say NFT.
Web3 refers to an idea for a new World Wide Web that incorporate decentralisation, blockchains and an economy based on tokens.
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