A Blockhead’s Guide to Blockchain Technology — Here’s everything you need to know about NFTs.
Meet the Lovechild of Art Collectors and Crypto Investors.
“So it’s like a more sophisticated trading card for adults disguised under the umbrella of digital investing,” was my initial thought when I received a vague description of what an NFT was. With the confident delusion that I could open my computer, make a design, and sell it for millions as an ‘NFT,’ I knew I needed to learn more about what an ‘NFT’ really was before I started planning how to spend my fictitious fortune.
What is an NFT?
A Non-Fungible Token, better known as an NFT, is a unique digital asset stored on the blockchain through a process called minting. Minting simply put, tokenizes the asset on the blockchain via a smart contract. Once minted on the blockchain, the asset will then contain a full public proof and record of ownership, full traceability for the asset, along with including all the characteristics of the asset. NFTs are commonly presented in the form of images, videos, audios, and other unique digital files. You may be thinking, is an NFT like owning the copyright of a digital asset? The short answer is no.
The long answer is that an NFT is not the copyright or the reproduction rights of a digital asset, it is simply the certified ownership to the original digital asset itself. This means that anyone can download copies of an NFT as many times as they please, no matter who owns its original digital asset.
As long as an NFT can be seen online, you are free to simply right-click and Save Image As…
This is where purchasing an NFT can get tricky for some people to justify, as it can be confusing to grasp what you’re really buying. However, keep in mind that purchasing an NFT is not about gatekeeping a digital asset from the general public, but is about investing in the original digital asset and supporting the artist, similar to purchasing fine art at a gallery.
Once an NFT is sold, the original digital asset is out of the creator’s hands. Many NFT creators include resale royalties in their smart contracts in order to ensure that if the NFT is resold, a royalty is paid to the creator.
What makes an NFT valuable?
NFTs have become valuable collectibles within the short 6 years of their existence. NFTs that are created as part of a digital collection have seen a lot of success, because of their high potential to be traded and collected both now and in the future. With artists and designers creating digital collections like CryptoPunks and the Bored Ape Yacht Club, investors can purchase multiple NFTs from a set to build up a collection to trade with others, like a smarter version of collecting Pokemon or Baseball Cards. Since each NFT is unique and can be traced, it is easy to identify which NFTs are rarer than others within a large digital collection by investigating their details through tools available to check their characteristics on the blockchain.
Well-known celebrities and artists have also gotten involved and are seeing great success in creating and selling NFTs to fans, introducing a new type of collectable memorabilia.
The support they have received from fans through NFT sales is not only profitable for them personally, but has created a gateway for users to get started investing in Ethereum. Additionally, similar to the digital collections, this memorabilia makes for valuable NFTs that are more desirable than others because of the creator associated with them.
Damien Hirst, a well-known British Contemporary artist, created a collection of 10,000 NFTs known as The Currency for his first NFT drop. The seemingly simple collection of NFTs made up of strewn colorful circles ended up reaching a total market value of $500 million. Hirst’s already successful art career is attributed to the success of the NFT collection, as there was already a desire for his work before the launch.
Supporting the creator is a key factor to consider when it comes to investing in NFTs, making room for a new form of charitable donation as well. Beeple, a well-known graphic designer and NFT creator, created an NFT titled Ocean Front in sponsorship of the Open Earth Foundation. Beeple sold Ocean Front for $6 million on his platform, and all of the proceeds were donated to the Open Earth Foundation.
Non-Fungible Tokens were only introduced to the crypto marketplace in 2015, and while they are still pretty new they have seen a rise in popularity within the last year. The amount of digital assets online is only increasing, and with that the demand for digital ownership is increasing synchronously. With a newfound knowledge of all things NFT, the get rich quick plan I had in mind is feeling a little less feasible…nevertheless I will probably be trolling opensea.io for inspiration as you read this.
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