What the heck are NFTs?
What NFTs are and why you should actually take them serious.
March 21, 2006.
Twitter C.E.O. Jack Dorsey had just made his first-ever tweet while developing his microblogging platform alongside co-founders. He had typed out the words “just setting up my twttr”. Most likely in an overly excited state.
Little did he know he had built the SMS of the Internet. Even more shockingly that his tweet announcing his multimillionaire dollar idea would sell off for 2.9 million dollars as an NFT fifteen years later. An amount he’d eventually give to charity.
I had just heard the news of this sale and that was my what the heck are NFTs moment.
I’d go on to do my little research and although I didn’t fully grasp the concept yet; I still wrote an article explaining NFTs to some friends of mine. Why?
Looking back I just wanted to geek about it. Also to let them know I had learnt something new. I couldn’t keep so much value to myself.
Months after that article, I know better and could have started rightly had I found just the right resources to cut through all the noise I found while trying to grasp the mystery behind someone buying a tweet for as much as $2.9million or this 10-second video for $6.6 million.
In this post, I’ll try to break down NFTs in the simplest way possible so you don’t spend months beating about the bush as I did.
So NFTs.
NFTs simply stand for Non Fungible Tokens, and I’m sure you’ve heard this one a couple of times and the new question on your mind is; what the heck is Non-fungible?
To make this easier one thing you should have in mind when you hear the word fungible is interchangeable. So Non-fungible would mean non-exchangeable.
When I lend you a 100 dollar note; you could return two 50 dollar notes. Or you could even choose to return a 100 dollar note.
Either way, the value remains the same = no loss, no gain even though the 100 dollar note wasn’t the same unique note I gave to you.
Why? They’re exchangeable. The value doesn’t change.
That’s Fungibility.
Now non-fungibility is the exact opposite; non-exchangeable.
Two non-fungible assets can’t be exchanged one for one. Non-fungibility can be found in things like your aeroplane ticket or even your school fees receipt.
Let’s take an aeroplane ticket for example; It has my name, seat number and even my destination on it. Everyone boarding that plane has a ticket but no one else on that plane can have a ticket with every detail on it being the same as mine. Else we’ll both have to lap each other the entire flight.
That’s non-fungibility.
Back to NFTs
These are non-fungible assets but now backed with crypto; stored digitally on a blockchain providing a record of ownership and authenticity.
These assets could be anything from images to videos, music, writings, gifs, in-game items, domain names e.t.c.
The tricky part; these images or even videos can easily be saved by anyone on the net but what happens when people buy NFTs is the transfer of record of ownership from the seller to the buyer.
This transfer of ownership process is always executed on a blockchain.
Take da Vinci’s Monalisa painting for example; you could download the images from the net, there was even a time I saw a sticker of it on Whatsapp.
Well all this still doesn’t give you true ownership of the art.
Even physically there are lots of counterfeits hung in homes around the globe.
But there’s the status quo that comes when you have the original Monalisa painting in your house. Decide to sell and you’ll be swimming in millions. No wonder your physical museums value rare artefacts.
If Leonardo da Vinci was alive today he’ll surely have integrated his works on one of the major blockchains as NFTs.
NFTs are no doubt the best innovation yet in the history of arts. Changing the game for artists and their fans alike.
So when people spend money on these same NFTs you could easily right-click and download;
● It’s first-hand access to exclusive events and offers they’re buying.
● It’s the social status that comes with being a part of the community they’re buying.
All alongside proof of ownership.
Let’s get more practical.
On Rarity, Scarcity, Access, Social status, Tokenization and Real Life Uses of NFTs.
This is where the game is.
I’ll drop these three illustrations to give an insight into this.
Illustration 1: music lovers. 🎵
Let’s take the Grammy NFTs which is already being created as an example. Supposing the recording academy decides her NFTs would be images of all past Grammy award winners.
Two things would play out;
- If the collection has 1,000 past Grammys winners; an NFT of Beyonce who has 28 Grammy awards to her name would be worth more than that of African giant Burna Boy who has just one.
- Grammys organizers could decide having Beyonce’s NFT from the collection would mean a one time VIP access to Beyonce. Then demand for this particular NFT skyrockets and Philemon from Africa could finally fulfil his dream of seeing Beyonce live. Or if like me he doesn’t love the idea; sell the NFT to the highest of the numerous bidders likely to come forth. But remember; he’ll be selling off the future exclusive offers too.
Illustration 2: Football lovers. ⚽️
Supposing FIFA decides to follow suit like Grammys. She rolls out her NFTs making it images of past world cup icons. Again two things would play out.
- Let’s say there are a collection of 2000 different icons as NFTs. Pele’s NFT is likely to be the costliest and can’t go for the same price as an NFT of Diego Forlan. Pele is easily distinguished from others creating a higher demand for that NFT. Same with that Messi or Ronaldo.Again rarity.
- FIFA could as well decide having any of these NFTs would mean free VIP treatment at next year’s world cup. Then demand skyrockets and if like my mum you’re not a football geek sell to rich football-loving bidders who want that VIP experience and future exclusive offers of the NFT. Smart money. 💸
Illustration 3: Crypto punks
The first full-blown experiment into NFTs and perhaps the most successful NFTs collection to date. A collection of 10,000 uniquely generated pixelated characters.
The developers while experimenting decided to use an algorithm to combine diverse human characters randomly. With a few of them being aliens, zombies, and even apes.
They were initially given out for free and all the owners had to do was claim them by paying almost negligible gas fees on the Ethereum blockchain.
If I’ll guess; 100 dollars at most.
Today the lowest priced one of them is worth around 409 thousand dollars.
While the most expensive sale to date went for $7.58 million in March this year.
Why then did one sell out for more than ten times the other?
I’ll let you guess.
Yes, you’re right, rarity played out again. The ones with unique human features and culture-based accessories like nose piercings, hoodies, and even coloured hair stood out causing their price to skyrocket even among their contemporaries from the same collection.
Final Thoughts
Now that you know the basics of NFTs and how they work.
How then do you discover the next crypto punk collection?
How do you even get to know first hand when FIFA decides to make her NFTs?
With thousands of NFT projects existing?
The drill is in having the right community of fellow NFT collectors and getting more in-depth and practical info on NFTs.
I’ll recommend this guide on NFTs by my mentor Ogochukwu Obiajulu O . A Practical Guide and an awesome community to get you started the right way.
My little Gift for you 🎁
ICC is launching an NFT collection soon and the site is now live.
ICC stands for International Cricket Council — the biggest cricket body in the world.
Think of them as FIFA but this time for cricket and not football.
Check out how the free ICC NFTs work.
Get in and get access to claiming free NFTs when they eventually launch.
Be sure to get a legendary pack drop when presale starts if you want to own a part of Cricket’s most memorable moments.
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