WTF is an NFT?
NFT’s: An Introduction
Unless you’ve been living under a rock for the last few months, (and let’s be honest, some people have), then you have probably heard of NFT’s. Even though they have been around for a couple of years, they really came to prominence in the early part of 2021 with some gigantic headline exploding sales. Riding on the back of blockchain technology, which make cryptocurrencies like Bitcoin possible, NFT’s have the potential to be a paradigm shifting advancement. This article will give a layman’s explanation of what they are, and what impact they may have on the future. It’s still very early in the NFT timeline, and it’s kind of like the wild wild west right now. But understanding what’s happening and how you can get involved could pay hefty dividends in the near future. Let’s dive in!
To understand what NFT’s are, you first have to understand what blockchain technology is. Many of you will know this already, so bear with me. Blockchain is a technology that allows for a decentralized method of verifying information on the internet. Think of a ledger, or accounting book. Blockchain is sort of like a ledger that is on the internet. Each block in the blockchain contains coded individual information. When a change is made to a block, such as a bitcoin ownership transfer, then that block is updated with the digital information. The block is then spread across the ledger, or chain, to different places where people can verify the information.
When you buy bitcoin, for example, this changes information on the blockchain to update your ownership of the bitcoin. This information is then spread across the network to millions of different “nodes”, or points of verification. The promise of blockchain is that it takes centralized power and gives it back to the hands of the people. In essence, you don’t have to go through central banks or governments anymore. You can transfer digital assets directly to each other, peer to peer, on the blockchain. This has profound implications for technology, finance, politics, and even the existence of the nation state. We are barely in the beginning stages of what this means for society.
OK, now that we have a better grip on blockchain, let’s take a look at NFT’s. NFT stands for Non-Fungible Token. Non-fungible means not exchangeable. Non-exchangeable means there is only one. As opposed to the traditional method of distributing digital assets, blockchain technology now allows you to create one of something. A non-fungible version of it.
Let’s take for example, a digital artwork. You create this beautiful piece of art using photoshop, illustrator, or whatever software. You then “mint” the piece, which basically means you create a unique digital signature of it and put it on the blockchain. At that point, there is only 1 real version of that artwork. Sure, you can right click and save, and still distribute it everywhere. But that one NFT, or blockchain version of the piece, is the one and only original of that work. This can be verified using the blockchain. And any changing of ownership of this piece will then be updated in its digital code on the blockchain.
What Does The NFT Market Actually Look Like?
This has profound implications for the idea of ownership of digital assets. Beeple, a famous digital artist, did an auction earlier this year of a collection of his artwork which sold for $69 million dollars. This made him the third wealthiest living artist in the world. Whoever bought those pieces now owns the unique 1 of 1 of those particular works.
You can look at it this way. There is only one Mona Lisa. Yet there are millions of prints of the Mona Lisa. Would you rather own the original Mona Lisa, or one of the prints? Owning the NFT of a work is the same as owning an actual painting from an artist.
Why Should Anyone Buy an NFT?
To add another interesting layer to all of this, secondary markets have popped up around all sorts of NFT’s. On a secondary market, an owner of an NFT can resell the work to someone else. This is all done on the blockchain and the change of ownership will be updated in the ledger. Also, the creator of the NFT, upon minting the work, can designate a certain percentage of each sale to go back to them, as a sort of royalty on the work. So say a piece originally sold for $1000, and they had a %10 royalty designation. The next time it sells, the price is $100,000. The artist then gets a 10% royalty, or $10,000. This is a very interesting thing for artists and creators, and could potentially be a revolutionary way for them to get financially compensated for their work.
I’m a musician, so the future of this technology with music assets is extremely intriguing. This opens up the possibility of an artist’s fans becoming part owners of their music. Imagine, as a musical artist, your fans having the ability to invest in your new single like a stock. If the song becomes a hit, and lots of royalties are incurred, then the fans will be able to enjoy those returns as well. Do you think the fans would be more likely to share a song on social media if they are getting paid royalties from its success? I think so.
The Future of NFT’s
NFT’s are getting their start in art, but I think the future of them goes far beyond that realm. When you really think about it, any contract made between humans can be minted on the block chain. This produces a non-fungible version of that agreement. Home and car sales, insurance policies, marriage agreements? I mean the future of this is wide open. Already tweets, photos, memes, and videos have become NFT’s. Even this blog could become an NFT!
If you want to get into the space, I suggest searching Twitter for some of the NFT pioneers. There are several profiles to follow that will give you an insight into the realm of possibilities. Just search #NFT and see what you find. Do research on YouTube and watch some videos. Also, check out websites like MakersPlace, SuperRare, and OpenSea to see what’s already out there.
We can’t even imagine the changes that the near future will bring about. Technology is happening so fast, and it feels like we’re riding on the back of a space turtle flying at warp speed. It seems obvious to me, however, as someone who has paid close attention to the crypto market for several years, that NFT’s are here to stay. I think they will have a huge impact on how we do business as a society going forward.
But for now, go check out CryptoPunks, MoonCats, or any other OG NFT’s. You’ll be amazed by what you find, and even more amazed at the price tags next to them. Open your mind, open your digital wallet, and enjoy the journey!