NFT — PFP — WEB3 — OMG
A couple of Sundays ago my phone blew up, not with brunch invites, but with links to The Latecomers Guide to Crypto, a 10-page pullout section in the New York Times by Kevin Roose. It covered everything from blockchain and cryptocurrencies to DAOs, DeFi, Web3, and yes, NFTs. It’s a great overview. You should read it, and you should also bookmark this glossary for both the formal terminology and all the jargon. Ya know, so you don’t miss any alpha dropping or become a victim of a rug pull…oy.
For now, let’s get back to the basics of NFTs. Borrowing from NPR, here’s my brief but spectacular take on “WTF is an NFT?” I promise it won’t hurt a bit.
Baby You Can Drive My Car
You didn’t learn how compression, air, and fuel work together in an engine before you bought your first car, and you didn’t need to understand the Internet to send that first email. Similarly, if you want to understand the basics of NFTs you don’t really have to know that a blockchain is a publicly accessible digital ledger used to store and transfer information in a trustless way that removes the need for a central authority. Wait, what? Nevermind…
Here’s the deal. N = non, F = fungible, T = token. I’ll assume that we are all good on the “N.” As for the “F,” fungible in this case boils down to interchangeable. If I have a $20 bill and you have a $20 bill, we can swap them — or we can swap them for two $10s or four $5s, yada yada — we’re walking away with the same exact value. Whereas if I have a Picasso and you have a Matisse (apparently we’re ballers!) the paintings may be valued at the same amount at a point in time, but they’re not exactly interchangeable. Originals are not fungible.
On to the “T.” Dictionary.com defines a token as 1. “a visible or tangible representation of a fact, quality or feeling, e.g., here is a small token of my appreciation;” and 2. “a voucher that can be exchanged for goods or services.” Meh — neither of these are great definitions for our purposes so let’s smash them together and agree that our token is a digital object that provides value.
Putting together the N, F, and T, an NFT is simply a unique digital object that provides value. Cool. NFTs live on blockchains which means it’s easy to prove you own a specific one, and correspondingly, impossible for someone else to simply copy it (aka right-click) and say they own it. Yes, yes, there’s more to it than that, but there’s a lot more to how your car works than the engine, and that hasn’t stopped you from driving. Let’s move on.
Mr. Potato Head — I made you!
Two basic types of NFTs are popping up all over the place. The first is what I will call digital art for art’s sake. It can have motion, music, graphics, etc. It can be fine art or a doodle and can be valued at zero or be worth $69M. Seriously.
This first type of NFT is relatively easy to understand and is often referred to as a 1 of 1. As in, there is just one of these. Whether you think the value of it is $0.69 or $69M is irrelevant. Art is worth what people will pay for it. On this point, I highly recommend Who the F*** is Jackson Pollock available on your favorite streaming service. Very entertaining.
The second kind of NFT is what I call a Mr. Potato Head or a generative NFT. As with the Hasbro toy, the token is created by arbitrarily assembling parts. With these NFTs, a computer program randomly selects traits, e.g., eyes, ears, glasses, expressions, shirts, hats, backgrounds, etc., and puts them on a common face or torso (full bodies are harder, that’s a different post), and “generates” a final version. There might be 100 or 1,000 or 10,000 NFTs in a single collection and while they are all similar in style, just like different assemblages of Mr. Potato Head, each is in fact unique. Their uniqueness gives them value — either because one trait is less common than another, and/or because one person values a particular combination more than another person. And since each token is unique, they are…wait for it…non-fungible!
The Gift that Keeps on Giving
I’m not going to go into how it all works here, but another important thing about NFTs is that they can be designed so the original creator gets a commission every time they are sold and re-sold. Forever. Imagine how Van Gogh would have felt about NFTs!
Another thing to know about NFTs is that people like to display them to the world — Veblen persists even if Vitalik warns against it. An NFT can be the face of an Apple watch or a profile picture on Facebook or Twitter. When NFTS are used this way they’re referred to as PFPs aka “ProFile Picture” or “Picture For Proof.” You can just call it an avatar that unlocks cool stuff for you. Since all NFTs can be verified on the blockchain you can prove to the world that yours is legit and not a copy of a very expensive primate. Twitter recently launched a tool (at $3.99/month) to confirm you actually own that NFT in your profile which is what all the new hexagonal-shaped profile images are all about.
Punks, Apes, Cats…Women
Now if someone asks you “What are Crypto Punks and Bored Apes?” You can answer with confidence that these are Mr. Potato Head — er, generative— NFTs! Crypto Punks and Bored Apes were among the early generative NFT collections, and they’ve gone bonkers on the internet with people spending millions of dollars to get one. Really. Token holders are considered members of their respective communities. [Note: a future article, likely to be titled “WFT is Discord” or “This is Slack on crack,” will get into how community members communicate with each other, but for now just know that token holders gather both online and IRL.] Being in the Bored Ape Yacht Club (BAYC), for example, gives holders access to member-only parties, events, talks with celebrities, etc. The original 10,000 Bored Apes have been sold so as more people want to get into the BAYC community the re-sale price of each Ape goes up and the community becomes more exclusive and valuable. Yes, membership still has its privileges. There are many, many, many (did I say many?) knockoffs of these early collections because, well, there will always be copycats. Caveat emptor!
Setting aside the knockoffs, lots of NFT collections create real value, or in the parlance of this industry, “utility” for their holders. Some utility comes in the form of access (parties, events, discounts, etc.), and many NFT communities also have larger missions. For example, World of Women (WoW), which has absolutely exploded over the past few months (yes, I regret not buying one in December) describes itself as a “community celebrating representation, inclusivity, and equal opportunity for all.” The WoW NFTs are relatable, they look like women (shocker!), and their community actively advances their mission of equal opportunity. Another community, Surge Women, uses its collection to educate women on crypto and help close the (still massive) gender gaps in technology and finance.
Many collections also direct a portion of NFT sales and re-sales toward causes like education or stopping human trafficking. Some communities even allow owners to ‘lend’ their NFTs to those who can’t afford to buy one (all verified via the blockchain of course). How cool is that? Maybe the internet can be for good again?
Read. Read-Write. Read-Write-Own.
NFTs are often discussed in the context of Web 3.0. Humans like to categorize things (see: Boomers, Gen X, millennials, Gen Z, Post-Z or Alphas…I’m starting to feel old), so here’s an easy way to understand Web 1, 2 & 3.
Web 1 began in the mid-1990s when the internet was basically a way to read a digital version of a magazine on your desktop or send an email. Maybe you posted something in a chat room or on a bulletin board (remember those?), but basically, Web 1.0 was “read” and we’re way past that now.
Web 2.0 started around 2004 when Zuck and his brethren launched “thefacebook.com” and services like Twitter followed shortly thereafter. In this era, we could not only read but also create our own content. Soon enough we were commenting, liking, and sharing our thoughts, pictures, and videos — does fluffy have a new litter box?! Sigh. Web 2.0 is “read, write” and pretty much how most of us interact with the Internet today.
That brings us to Web 3.0. A thorough explanation of Web 3.0 centers around decentralization (pun intended), but the bottom line is that in this era individuals are going to own, and eventually monetize, our content as we wrest control back from the corporations that dominate the web today. “Long live the revolution!” Web 3.0 is “read, write, own.” Yes, I know that sounds like magical thinking, and no, Google and “Meta” are not going away anytime soon. Stay tuned.
Now What?
This whole world of crypto, NFTs, and Web3 is just getting started. And just like you probably said, “I’ll never be on Twitter,” or “Facebook is silly,” you’ll probably end up with a Mr. Potato Head of your own, just like the rest of us “degens” (go ahead, look it up)!
If you’re ready to dive in and mint or buy your own NFT, check out this great article by thric3 co-founder, Polly Lieberman. Good luck!
