Non-fungible token, also known as NFT, is everywhere. You see it on the news, on social media posts and in conversations throughout the holiday season. So what exactly is NFT and why is it being mentioned all over the place?
Let’s start with the literal meaning. Non-fungible means unique and one of a kind. For example, if I trade a 5 dollar bill for another 5 dollar bill, yes the condition of the bill might be different but I still end up with exactly the same amount of money. This is fungible. One-of-a-kind trading card, however, is non-fungible. Trade a Super Mario for a 1979, Gem Mint 10 condition Wayne Gretzky rookie card, and you end up with something completely different, in fact, you might just be a couple of million dollars richer. Side note, Wayne Gretzky also has his own NFTs.
So what exactly is a Non-Fungible Token?
NFTs can really be anything digital, the most common ones in today’s market are digital drawings or music. But in some instances, even a tweet can be an NFT. The founder of Twitter Jack Dorsey sold his very first tweet from 2006 as an NFT for 2.9 million dollars.
It’s worth mentioning that Jack did not think it would blow up like that in the beginning and he donated all the money to charity right away.
How is a tweet or a digital artwork non-fungible?
This is where most debates about the legitimacy of NTS land, unlike a Michael Jordan basketball card, the Jack Dorsey tweet is viewable by anyone in the public as long as Jack or Twitter itself doesn’t take it down. Any digital artwork can be saved to any device by anyone with a few clicks, so how does the “ownership” work? The answer has something to do with blockchain.
The vast majority of NFTs right now is tied to the Ethereum blockchain, the Ethereum blockchain stores unique information of the NFT, such as the creator, the signature and verification of the creator, as well as ownership information. Do note that other blockchains can also implement their version of NFTs, it’s just most of the current ones are tied to Ethereum.
I know what you are thinking, so what my name is not on the NFT, I can still download, save, set it as screen wallpaper on all the NFTs. But think about how much you can flex of owning the “original” one? Well, this article is not to convince or persuade you, either way, it’s just letting you know what NFTs are all about.
So are all NFTs unique?
Yes and no, while it is unique in the sense that you own the original one, an NFT creator can also distribute 50 of the same artwork as 50 NFTs, kind of like a “limited edition” baseball card.
How did this all start?
Although not exactly the first NFT ever minted, but this definitely is one of the events that kick-started this trend. Back in 2017, an American studio Larva labs developed a series of collectable digital characters. 10,000 unique characters to be exact, called CryptoPunks. As mentioned earlier, the ability to make digital copies is easy, so they were made digitally scarce through the use of blockchain that keeps track of file ownership. This gives proof of ownership to each Punks’ holder, meaning there will only ever be one true copy of each of the 10,000 digital characters in the world.
Where do you buy and sell NFTs?
There are many different marketplaces that you can sell or buy NFTs, such as OpenSea, Rarible, and Grimes’ choice, Nifty Gateway, but there are plenty of others.
How do you buy and sell NFTs?
You will need a cryptocurrency wallet that is compatible with NFT and also compatible with the NFT marketplace. You will also need to have cryptocurrency, which as of right now most of the NFTs on these marketplaces use Ethereum. Once you have these things set up then it’s just like buying something online.
Just be very careful about what you buy though, it is a fairly new concept with little to no regulation, and there is definitely not a refund policy in place. There are also some cases where a scam artist copies the legitimate NFT artwork, brand it to something very similar usually with an almost identical name and tries to confuse buyers. Market places do try to stop these from happening but it’s impossible to catch them all and you definitely don’t want to dump your hard-earned money to some scam artist.
If you can create any kind of digital artwork, you can sell it as NFTs. We can dive into more details in another article as it is it’s own world, but basically, some marketplaces allow you to up load your artwork and they take care of the rest. There are pros and cons on different platforms as well as different minting methods, but we can get into that later.
So what is the point of NFTs?
Now that is a million dollar question, like, literally. Some NFTs are just a piece of art, but some NFTs have additional value. For example, there are NFTs minted by clothing brands or musicians that also act as an exclusive membership that gives you access to early release products, or hidden tracks on an album that members can listen to it first. These are the NFTs that have additional benefits and often are easier to flip for more money.
If you are an artist looking to sell your art work to pay your bills, this is a new trendy way to do so. You might not be able to sell for much or sell at all in the beginning but there is always a chance someone is willing to buy it and the cost of selling it is minimal. In fact, becuase NFTs are sold and bought with the support of blockchain, all the transaction is recorded, there are features you can enable so that you get paid a percentage everytime the NFT is sold to the next person, this will make sure that if your work got promoted by some celebrity and it balloons in value, you will not miss out completely. This is something a traditional artwork doesn’t have.
If you are a buyer or a collector of NFTs, good for you! You are participating in a very trendy activity, you are gaining access to exclusive memberships, you are owning a token that represents something significant, if non of that applies to the NFT you bought, at least you are supporting the artists you like financially.
NFTs are relatively new, it does not have too much regulation and the trend might fade away sometime in the future, but for now, it is going to be talked about and mentioned everywhere, and more “things” will be minted as an NFT, if you are interested in buying some, just buy responsibly and enjoy the process. Don’t expect to make enough money to retire tomorrow. If you are an artist that is looking to create some of your own NFTs, send us a message and we can help you out.