If you’re anything like me, you’ve probably seen a lot of talk on social media and news sites about things called NFTs. And again, if you are like me, you probably have no idea what that means or why you should care, as I haven’t for a long time.
When I hear information about any sort of cryptocurrencies like bitcoin, dogecoin or anything in-between, the terminology and concepts usually go right over my head. However, I’ve conducted some research and strung together some basic knowledge and information about the topic to be able to have a basic enough understanding of NFT’s to not only hold my own in a conversation but sound like I know what I am talking about about as well.
If you struggle with understanding this side of the internet as well, this article will give not only information you need to know what is going on but an understanding as to why this topic won’t be going away anytime soon.
But first, let’s take a glance a glance at the topics we are going to discuss today:
- What does NFT mean?
- What is blockchain?
- Why should I care?
- How can I get involved?
1. What does NFT mean?
So, let’s start with the basics. NFT stands for Non-Fungible Token. That’s not much of an explanation, is it? Let’s back up even further – when something is fungible, it means that it can be readily interchanged with something else. So, for example, a $100 bill can be exchanged with two $50 bills, five $20 bills and so on, and it is still the exact same value. It even has value when being exchanged for other currencies.
So, when something is non-fungible, it means that its value cannot be interchangeable. Therefore, NFTs are not cryptocurrencies like bitcoin or other fungible online assets. Instead, each NFT is unique, and the value of one cannot simply be evaluated by the value of another.
NFTs are intangible, digital crypto assets. You cannot physically hold an NFT by means other than printing out a file, but even by doing so you cannot hold the value of the asset. The value of NFT’s come in the form of a digital token on your computer after you buy one – a token that commemorates the fact that you have the original copy of the file (which is the money-making aspect of the NFT). As we will discuss later in this article, NFTs are taking the form of digital art, including but not limited to:
- Digital Images
Or any other type of “digital art file” you can think of.
So now, you may be thinking, why would I pay for something that I can find a copy of on Google Images. (And I wouldn’t blame you for that.) However, as previously mentioned, people are finding extreme value in owning the original copies of these files, just as a collector of any other tangible items might. To drive the point home with another example—the original Mona Lisa is valued so highly that it is worth hundreds of millions of dollars in today’s world, but sure, if you really like the painting, you can print out a copy from the internet for virtually nothing. Albeit this may be an extreme example to compare the original Mona Lisa to an original computer-generated GIF of a dancing kitty, but you would be surprised at how much people are actually paying for GIFs of dancing kitties in the NFT marketplace.
I’m sure if you asked someone in the Tech industry about NFTs, they would probably give you a more eloquent explanation about the subject without examples using simple math or kittens, but this simplified understanding of the term covers enough grounds of the basics to give you an understanding of the definition of non-fungible tokens.
The next thing you might be thinking is, how is the value of one of these tokens created? You might not know it yet, but that question is ultimately asking:
2. What is blockchain?
Blockchain, in a sense, is what allows NFTs to exist. It is essentially a shared database among computers, also known as a distributed ledger technology, or DLT. It creates a global network among computers to share information.
Specifically, blockchains assist in completing digital transactions in a more effective way than other online transfer means. Blockchain transactions do not require a third party, are nearly impossible to counterfeit and are protected by complex encryptions, making then very difficult to hack.
When a transaction involving a digital asset, such as bitcoin or an NFT, occurs, a record is created in the form of a “block” on this global network of computers. The details of the transaction are permanently inscribed on the block, which can never be erased. As more transactions occur with a single asset, more blocks are added to the chain of events, hence the name “blockchain”. These specific chains are also known as “ledgers”, and they are always on public display so the entire network can trace exactly how the assets are passed around. Therefore, hackers would be unsuccessful in altering the data in the blockchain because each user has a copy of the ledgers and will have the ability to mark a transaction as invalid.
For a block to be added to a blockchain, there are users around the world whose job it is to validate the transaction. This kind of user is also known as a “miner”. When miners successfully add another block to a blockchain, this process is called “mining”.
So, now that we have a basic understanding of the concept of blockchain, let’s think about it in terms of NFTs specifically. When a digital artwork or asset becomes an NTF, the token will be permanently attached to it. It will then be bought and sold however many times, but the token will always remain, and each transaction will be recorded on the blockchain.
By now, you know the whole background of why an NFT is an NFT and the process behind how they go through transactions. But, as I mentioned, if you asked someone with a college degree or life-long interest in the tech field, they’ll probably go on for hours diving deeper into the subject. I can tell you, although, that because NFTs use blockchains, the same principled behind cryptocurrencies, it is easy to see how they are linked so close to things like bitcoin. However, it may not be as easy to see why there is a sudden craze over these digital assets. So, if you’re asking…
3. Why should I care?
I’ve got you covered there too. It’s a fair question, considering NFTs have been around since 2016 and have only been a popular topic of conversation recently. The event that sparked this flame was the recent sale of a work by an artist known as Beeple. Beeple’s digital art piece was a collage of 5000 pictures sold for a record-breaking $69 Million on the NFT marketplace. Along with being the historically most expensive piece of the digital art piece, this sale made this piece the third most expensive artwork in the world.
This was groundbreaking, considering this piece of art can be found by anyone with a simple Google search. Transactions such as this one are giving the idea of NFTs and blockchain transactions a sense of legitimacy, and point to them being around for a long time to come.
The high-stakes transactions don’t stop there—NFTs are giving digital artists around the world a platform to sell on, as well as giving already known artists and figures another platform to reach their fans with. The following are just a couple examples of the types of work that can be bought and sold on the NFT marketplace:
- Jack Dorsey, the founder of Twitter, is selling an NFT of his first tweet, with bidding up to $2.5 Million
- A video clip of a LeBron James’ slam dunk has sold for over $200,000
- Kings of Lean recently sold their latest album as an NFT for close to $2 million
- Singer Grimes sold multiple digital artworks for a total of about $6 million
As you can tell by now, the presence of NFTs and blockchain principles are quickly revolutionizing the art world. Because buying NFTs can be seen as an investment and a source of profit, in the long run, I suspect that NFTs will be more than just a fleeting trend. If you are of the same ideology, the next question you could have might be…
4. How can I get involved?
If you’re looking to get your foot in the door in the NFT marketplace, you have a couple of options. There is no limit to website marketplaces on which to buy NFTs. Some of the few include Nifty Gateway, SuperRare, Rarible, YellowHeart, and countless others that provide consumers with the opportunity to invest in NFTs and get their names on a ledger.
If you consider yourself an artist or a content creator, then it could be worth it to strongly consider creating and selling your work on these sorts of marketplaces. With these websites, you can make a profit where there otherwise may not have been. Each website has a different procedure in order to sign up and start selling. But once you have found a website you enjoy and a reasonable platform to sell from, you can turn virtually any sketch, video, audio file or any other art into a profitable digital asset to be sold online.
In this article, we’ve covered a lot of ground. First, we discussed what an NFT really is—it stands for non-fungible asset, which has recently become the new craze in the crypto world. These digital assets are not interchangeable, and take the form of various digital art works, such as images, GIFs, audio files, video clips, and everything in-between. They are bought and sold using blockchain principles, the second topic we discussed. Blockchains are global networks that link computer users together with information. They create a community of users who engage in transactions that are permanently recorded for the public to view. Next, we discussed why NFTs have taken over conversations as of late, and why you should care about it. NFTs have revolutionized the art world and have produced some of the most expensive pieces of art in history. This digital marketplace does not seem to be slowing down anytime soon, so we next discussed the ways that you can get involved with NFTs. Whether you’re looking to be a buyer or seller, there are countless websites that will enable you to become an active trader of NFTs. Just about any digital file can be tagged as an NFT, and from the looks of it, can make a substantial profit. On the other hand, if you are looking to start buying NFTs, they may prove to be a worthy investment in the near future.