NFTs Need No Introduction. Maybe Just an Explanation
You've probably heard of NFTs, or non-fungible tokens. If you haven't, don’t worry. That’s why Grindery exists - to inspire and empower Web2 and Web3 users to collaborate. NFTs are digital assets that are stored on a blockchain. Unlike cryptocurrencies, which are interchangeable, NFTs are unique and, therefore, can only be purchased or sold, but not exchanged or replaced as each one is unique.
While at first glance. they seem like really expensive pictures; they’re capable of being so much more.
Explaining The Non-Fungible Token
An NFT is, in its most basic form, a digital item, also referred to as a token. It can be art, a song, an in-game item, a video, an Instagram post, or even a tweet. They can be bought and sold on-chain, in most cases with cryptocurrency, and are encoded with the same software as cryptos.
By buying the NFT, you get a unique digital token that proves your authority over and ownership of that NFT. It’s no different than purchasing that rare Wayne Gretzky hockey card, but digital, and now everyone knows that you own it and how much you paid for it, as the transaction lives as an immutable record on the blockchain.
As an NFT, however, the same piece of digital art, song, or collectible can have multiple copies. Still, each individual item is a unique NFT, and the differences are only apparent on-chain. For example, a musician can have a song released as an NFT and downloaded a million times, but each one of those downloads is a separate NFT with its own record on the blockchain. Each user owns their copy of the song.
Buy Why Spend Millions on Them?
This is easily the most asked question about NFTs. What’s the big deal? Anyone can view that individual NFT, screenshot it, save it to their profiles, or listen to a song/album online. Why was it a $41 billion market in 2021?
What it amounts to are the bragging rights of owning that digital collectible. Regardless of how many ‘copies’ exist, NFTs are still one of a kind. They’re usually a limited-run, predicated on digital scarcity. When the supply is cut off, the value of the asset is raised, creating a demand and a market for it. When you buy one, you’re purchasing the original, with its own built-in authentication and indisputable proof that you own it. NFTs can only have one owner at a time.
While NFTs have existed since 2013, they’ve become increasingly popular in recent years with the explosion in cryptocurrencies and widespread applications of the blockchain.
While not everyone wants to buy an NFT today, they’re certainly a popular commodity.
Putting the “Fun” in Fungible
Before delving into the world of blockchains, DAOs, and Web3, the word “fungible” was a word that was rarely used in everyday conversation.
Cryptocurrencies such as ETH and Bitcoin, or fiat currency like USD, can be traded or exchanged for one another. They’re also equal in value - one US dollar is equivalent to another US dollar, and BTC is always the same value as someone else’s BTC. Or, it’s as if you and a friend buy the same pair of sneakers from the same store, at the same time. Your pair of sneakers is the same as their pair of sneakers at the moment of purchase. These things are “fungible” and it’s crypto’s fungibility that allows for conducting transactions on the blockchain in a trusted manner.
NFTs are different. Each has a digital signature, and one NFT cannot be exchanged for another in an equal manner. This means they are non-fungible. For example, you may have an NFT, and your colleague may have a copy of the NFT. You both paid the same for it, and they’re identical, but they are uniquely identified on the blockchain. Which means they are, in no way, equal.
If this sounds like a new concept, it’s not. Everyone has encountered non-fungible things in their life. Assets and goods such as houses, cars are non-fungible. Someone can borrow your car, but they cannot replace it with a different make or model. Even if it was the ‘same’ model, the mileage and wear are different. The two cars aren’t equivalent. Same with real estate. You can’t replace someone’s home with another in an equal way. Streets are different and neighborhoods vary. Plus, you can’t build the exact same house in the exact same place, with the exact same attributes and specifications.
This makes NFTs a very good digital equivalent for these things, which is one of the applications. You can think of it as a passport for your car or your house, and you can register maintenance related to that digital passport. So beyond the fun, NFTs will bring a huge change in how both real and digital world assets are managed. And it is also another way to manage intellectual property in general.
NFTs and You
Today, for those not deeply immersed in Web3 and digital assets, NFTs have the reputation of being really expensive images of Bored Apes and this collage by digital artist Beeple. In reality, they don’t necessarily have to be anything extravagant.
An NFT can be created or “minted” from any object that represents both a tangible and intangible item. Beyond art, NFTs have been minted from videos and sports highlights, virtual avatars and video game skins, and even designer sneakers from Nike and Gucci.
The application of blockchain technology and NFTs offers contemporary artists and content creators a way to monetize their work. They don’t need to rely on galleries, Youtube’s algorithm, or Soundcloud any longer. They can sell their work directly to the consumer as an NFT, and the artist themselves can keep the profit. They are able to sign their work via the blockchain code, and if their art is sold, they can program a way to get a portion of the proceeds of the sale via a smart contract.
Or, perhaps the NFT has nothing to do with art. Schools can offer NFTs as tests, study guides, or for fundraising purposes. Or for maintaining and sharing medical data in hospitals. NFTs don’t have to be about profit alone.
Are NFTs Here to Stay?
Arguably, yes. NFTs are here to stay. But that doesn’t necessarily mean everyone should go out and invest in them, and start minting NFTs to monetize their efforts. NFTs are still new, and there’s not a lot of data to judge their worth over long periods of time.
That said, NFTs are based on value. That value is determined by what someone else is willing to pay for it. Demand will drive price, rather than economic, technological, or personal factors. These aren’t like stocks that rely on external stimuli to generate demand and generate value.
With an NFT, you might be able to sell it later for more than you spent for it. Or possibly for less. Or, perhaps not at all.
But if there’s interest in the collectible and an active market, then NFTs will remain, and find themselves more prominent in non-artistic environments moving forward.