A Simple Explanation of NFT. What Is It?
It seems like every week there’s a new form of technology we have to decode and figure out how to use. Most of us don’t have the time or energy to commit to scouring webpages to explain what’s new in the tech world. And, let’s be real, most of us didn’t graduate from MIT or study robotics or finance, so a lot of what’s out there is difficult to follow. Luckily for you I’ve done the dirty work and laid out all the info you need to know in simple terms. The newest sensation sweeping the Internet is called NFT, and I learned about it so you don’t have to. Let’s start with the basics.
What’s an NFT?
NFT stands for “non-fungible token”. Ok, but that doesn’t make it any clearer. The first thing you need to know is that it is almost always digital, though sometimes can describe a physical, tangible item. The “non-fungible” part means that it’s unique and one-of-a-kind, which places value on something and makes it desirable to own. Take into consideration the US dollar (USD). This is fungible because there’s tons of others exactly like it out there that are equal in value. One dollar bill is the same as the next dollar bill, and they are interchangeable.
As earlier stated, NFTs are (most often) digital files. Furthermore, they are often related to the field of art and creativity, from visual to audio. For example, an NFT could be a digital file of a piece of work created by a graphic designer. It could be an audio file, a website domain name, an animation, an electronic ticket to a concert, or a plethora of other commodities. What is it that these all have in common? Because they exist in the NFT category, they are digitally unique and not a replicated copy of an original.
I heard it has to do with cryptocurrency- What does that mean?
Yes, NFTs are interlinked with cryptocurrency. Cryptocurrency, to summarize, is electronic payment done online. To own cryptocurrency, you would need to purchase it with real money (i.e. USD). While cryptocurrency simplifies the exchange of money by removing the physical element, the bigger appeal concerns the advanced security behind it. This new form of electronic currency (examples include Bitcoin, Litecoin, and Ethereum) is created and tracked using a “blockchain” technology. Blockchains show, publicly, the electronic record of transactions within a purchase using cryptocurrency. For example, the purchase of the graphic designer’s artwork can be verified from seller to purchaser, and is authenticated by countless computer systems rather than one bank or credit card company; it decentralizes the transaction.
Continuing with the benefit of added security when purchasing an NFT, blockchains (remember, these are the systems that execute a purchase using cryptocurrency) do not require the purchaser to input personal information. Because the transactions are one to one, without banks acting as a middleman, they can be done globally, more securely, and are easier to trace and review. Additionally, blockchains follow the unique transaction from start to finish, so someone could see where the purchase went and avoid any issues with stealing or other financial mistreatment.
Why would I want an NFT?
In short, buying an NFT is like art collecting. So, think of the advantages and reasons why anyone would want to be an art collector- personal interest, supporting local artists, pride in owning a unique piece, etc. To translate this to a real-world paradigm, it can be like owning a special trading card. There are unique baseball cards in the physical world, and there are unique baseball cards in the digital space. The added benefit of the NFT version of the baseball card is that you can prove you own it (via the blockchain verification), purchase it securely, and, like the physical card, it can grow in value to potentially one day sell for profit. Finally, owning the actual NFT, rather than a screenshot of the NFT, gives you all the value that it holds; the screenshot is worth nothing.
Why would I want to sell my work as an NFT?
Let’s also put it out there that supporting artists is good. If one day you decided to sell the NFT baseball card, the original creator can gain royalties from the transaction. We love to see it. A big problem that creatives face in the digital age is people taking and copying their work, and passing it off as their own. If you’re on Twitter and you see the same viral tweet, word for word, on multiple profiles, you would have no idea where it originally came from. Twitter CEO Jack Dorsey, however, proved that you can create an NFT out of just about anything; thereby indicating the original creator of even a tweet. He sold the first-ever tweet as an NFT (one purchaser, one owner, one transaction), and everyone can see that the tweet came from his account. Not to mention, this showed that NFTs have major value, since the tweet sold for a whopping $2.9 million. Yep, a digital asset, sold for millions.
As the creator of an NFT, you are in control of everything. If you sold your painting without NFT backing, the person you sold it to could replicate it many times over, and manipulate the system to resell it and profit off of your work. However, if the artist sold their painting as an NFT, they can A) prove that they are the original creator, B) show the path of the transaction from the starting point to final destination(s), C) sell all over the globe, D) profit from royalties of future sales, and finally E) control how many versions of their work they want to be available for purchase. Going back to point C, selling all over the globe, this is a huge benefit for creatives. Without waiting to be commissioned for work, an artist can create something really cool, and sell it globally whenever and however often they want. Previously, what would you do with it? Maybe post one version of it on your website? Post it on Instagram? Add it to your portfolio and hope someone wants to hire you down the road? Now artists can put their work on a larger market for a wider audience of people to purchase, and reap the benefits of the sale throughout its life. Essentially, it offers a new and proven method of monetization.
Cool. Show me what an NFT looks like.
I happen to know a talented artist who showed me firsthand how the NFT process works. My friend Dylan is a graphic designer who was asked by professional tennis player Jessica Pegula (USA) to create NFTs for her. Also, let’s hear it for Jessie to be the first female athlete to break into the NFT world! Check out Dylan’s work here. Jessie’s NFTs are found on a site called OpenSea, which is one of numerous NFT purchasing websites; others include Valuables (cc. Jack Dorsey tweet), Nifty Gateway, and Rarible. The added benefit of creating an NFT athlete card is that you can take it to the next level, adding animations and bringing it to life. If you’re still skeptical about a digital athlete card, check out Rob Gronkowski’s NFT site. Still don’t believe me? This article (linked) details the $1.6 million sale of his NFT collection. Art has value, athletes have value, and both equate to a megastorm of potential success. Other notable examples of NFTs include deadmau5 digital animations and the development of Nike’s patent of CryptoKicks.
Looking Forward: Are NFTs the future of the digital space?
Most likely! Andrew Steinwold, another awesome Medium writer, laid out the history of NFTs in his piece, showing that they have grown in popularity at enormous speeds; as in, less than ten years since the creation. Given that much success in a short amount of time, and the limitless possibility of future growth, NFTs have the potential to become the biggest marketplace. Not only that, but cryptocurrency itself is still growing exponentially. At the time of writing this article, the value of 1 Bitcoin equates to $58,051. Astronomical. The cumulative power of cryptocurrency and NFT has the capacity to represent a majority of all future transactions.
