Chances are you’ve heard the term NFT floating around news, media, or even from friends and colleagues. I definitely have, but whenever I ask for it to be explained to me, I feel even more confused than before I asked. Anyone else?
Great, so here I am going to explain what the hell an NFT is, how they work, and why they aren’t going anywhere anytime soon.
What Is An NFT?
Non-Fungible Token: This is what NFT actually stands for. All it means is that it’s unable to be copied or it’s one of a kind. A fungible item is mutually interchangeable. If I trade you my $20 bill, for your $20 bill, both bills are worth the same at a cash register. An NFT is not. Each “token” has a different value and is unique.
In theory, an NFT is not much different than an original Picasso or Van Gogh painting, other than it’s intangible.
An NFT is digital and can be anything digital. The current commotion around NFTs is surrounding digital art. It can be photos, written pieces, GIF’s, videos, music, and so much more!
If it’s digital, can’t everyone see it online or print their own copy?
Yes. So, what is the point then? Well, the original unique piece is owned by one person. Much like the famous paintings you see in museums, anyone can buy a print, but only one person can own the artists’ original. Once you wrap your head around this, you’re halfway to understanding this confusing stuff!
Without confusing you more, some NFT artworks are offered to multiple buyers, as a copy of a numbered series. So, you may own or hold 1/100 of the piece of digital art. It’s still unique and it’s still solely yours, but 99 other people have it, too.
How does an NFT actually work?
At this point, we’ve all heard about cryptocurrency, right? Bitcoin is the original mack daddy of crypto, but in recent years we’ve seen an emergence of other forms of cryptocurrency (think etherem, litecoin or dogecoin.)
Many of these cryptos are decentralized, meaning no bank is needed to transfer wealth or ownership. Many also operate on a blockchain.
When you buy an NFT, it’s with a cryptocurrency in a digital wallet and as of now that cryptocurrency is Ethereum. The funds in this wallet can either be traded within your app/wallet after you receive payment from a sale or cashed out for tangible money in your bank account.
What is a blockchain?
A blockchain stores data (transactions in this case) in a block, that is then linked to other blocks, creating a chain. Imagine a chainlink fence, where each link is unique. As the chain grows and more is added to it, the earlier links become increasingly difficult to change and are even more secure.
The blockchain is where your purchase is secured. So, we can’t touch the art or the payment source? What a mind f*ck!
It’s 2021 and digital is the new black- get on board or get left behind.
Some examples of NFTs:
We all know who Elon Musk is. Have you heard of his wife, the musician Grimes? Either way, she has sold millions of dollars worth of digital art, including this video for $389,000. She also sold two other videos that each had thousands of copies for sale at $7500 each. Let’s just say she made over $5m on these two short videos.
Jack Dorsey, the CEO and founder of Twitter, sold an autographed digital copy of his first tweet ever for $2.9m. Unreal, but true.
Another seller sold a 16-second video of a golden gummy bear skeleton that simply rotates for $1m.
Are there any limitations on what can be an NFT?
Nope. As long as someone is willing to buy it and it’s listed by the original owner, it’s fair game. From newspaper articles, to GIFs, it’s all sellable.
Because of this, people all over the world are selling artworks and original pieces to anyone who will buy them. Everywhere you turn now, NFTs are popping up; news, media, social media, table talk.
This is truly the tip of the iceberg, but hopefully helps you get started in understanding what a non-fungible token is. Before you jump in, do your research, lookup the words if you don’t understand them (like I did!) and join the conversation on NFTs!