NFTs for dummies (written by a dummy)
NFT — it is a word that has been on everyone’s lips for the past few months, more precisely since March 2021 when the auction house Christie’s sold one of Beeple’s digital pieces of art for $69 million, thereby making him “one of the most valuable living artists”. And I still do not have any idea what it means!
If I had to explain to my baker today what an NFT is, I think I would tell him that it is a unique virtual object that can be purchased online — but does that tell the whole story?
So, I figured that this article (my first one, above all!) could be an opportunity for me to learn more about NFTs and serve as a humble introduction for other dummies who also don’t know what NFT means.
What does NFTs mean?
NFT stands for Non-Fungible-Token. They are digital assets (images, videos, GIFs, drawings, games, music, …) that cannot be replaced and are unique. The counterexample that often seems to be taken when it comes to NFTs is cryptocurrencies, which are fungible. For example, if you exchange a Bitcoin or an Ether with another Bitcoin or Ether, you will have the exact same thing for the exact same value.
If you have no idea what Bitcoin or Ether means — even if you should or you have been living in a cave for way too long, here is another example. Let’s say you ask my baker (yes, the same as above) for change for your €100 bill. He gives you 5 bills of 20€ in return. Your initial bill was fungible and could be divided into several bills, to form the same value.
What makes NFTs unique?
NFT are characterized by the fact that they are “linked” to a unique digital identity, like an authenticity certification, which guarantees their unicity. How can this virtual ID be unique and authentic? Thanks to the blockchain. If you don’t know what it is, here is a video that may help you understand it better:
Each NFT holds specific information such as its owner(s) and the seller(s). Yes, an NFT can have different owners and sellers. A digital asset will be sold for the first time by its original owner and creator, but it can then be duplicated and sold again as many times as people want and since NFTs are unique, each duplicate is linked to a new unique digital identity.
What is the point of buying something that can be duplicated then?
Since they all have their little digital ID card, each NFT you buy comes with its authenticity certificate. Just like the physical work of arts, they are seen as speculative assets you can buy and hope for them to become more valuable over time.
Blockchain makes it possible to track NFTs ownership and licensees. When you buy an NFT, you indeed acquire some rights regarding the piece of art. For example, whoever bought the Nyan Cat GIF NFT version can now use it freely, but the intellectual property remains to its creator, Chris Torres.
It seems even more interesting for artists: it is a way to make a ton of money (spoiler alert: it’s in the millions) and it also enables you to get your intellectual property recognized and easily provable online.
How can I create NFTs and where to sell them?
I could explain the different steps of NFTs minting in this article, but it appears one of my classmates already did it — really well by the way — right there.
Instead, I would like to raise awareness about something I discovered — and that I already suspected actually: just like cryptocurrencies, NFTs are very energy-consuming and have a disastrous environmental impact. Considering the exponential hype around NFTs, we can already start to wonder what would be more environmentally friendly alternatives. And I think I just found the subject of my next article…
Please do not hesitate to comment with your thoughts about this article!
About this article
This article has been written by a student on the Grenoble Ecole de Management’s Advanced Masters in Digital Strategy Management. As part of a content creation assignment, students are given the task of writing articles based on their digital interests and disseminate the articles online. Articles are marked but we make minimal changes to the content. Thanks for reading! James Barisic, Programme Director, MS DSM.
