NFTS and Blockchain — What Is the Hype All About?
There has been an immense rise in the term NFT investments and how some random cat GIFs are being auctioned for millions of dollars. In fact, one day I asked for investment advice on Twitter and some of my followers suggested to start investing in NFTs. I was aware of the term NFT but didn’t really know anything about it. That’s when I started researching about it and here I am trying to explain it in the best way possible.
NFT stands for Non-Fungible Token. I know right! That doesn't make anything clear. Now, what does fungible mean?
In simple terms, Fungible = Replacable
“Non-fungible” more or less means that it’s unique and can’t be replaced with something else. For example, a bitcoin is fungible — trade one for another bitcoin, and you’ll have exactly the same thing. A one-of-a-kind painting or signed sneaker, however, is non-fungible. There is no replacement to that exact instance of the object. With money, you can swap a 10$ note for two 5$ notes and it will have the same value.
However, if something is non-fungible, this is impossible — it means it has unique properties so it cannot be interchanged with something else. The painting of Monalisa is non-fungible. Think of NFTs as digital irreplaceable art backed by Blockchain.
How much are they worth?
On 19 February, an animated Gif of Nyan Cat — a 2011 meme of a flying pop-tart cat — sold for more than $500,000. A few weeks later, musician Grimes sold some of her digital art for more than $6m.
It is not just art that is tokenized and sold. Twitter’s founder Jack Dorsey has promoted an NFT of the first-ever tweet, with bids hitting $2.5m. The biggest one to date is Beeple’s digital art collection of 5000 artworks. Beeple — real name Mike Winkelmann — creates a new piece of digital art every day, and was selling the first 5,000 days (13 years) of his work. The first digital-only art auction by Christie’s auction house has netted $69m (£50m) for the artist Beeple. In fact, even NBA has stepped in and is auctioning Shot of the day videos as NFTs!
Where does Blockchain come in?
One of the most distinguished features of Blockchain is distributed or decentralized ledgers. A distributed ledger is a database that is consensually shared and synchronized across multiple sites, institutions, or geographies, accessible by multiple people. It allows transactions to have public “witnesses”. The participant at each node of the network can access the recordings shared across that network and can own an identical copy of it. Any changes or additions made to the ledger are reflected and copied to all participants in a matter of seconds or minutes.
In simple terms, the blockchain ledger holds the information of each NFT with its unique identifier and assigns it to some unique person or company like a transaction on the distributed ledger that is served by the blockchain. At a very high level, most NFTs are part of the Ethereum blockchain. Ethereum is a cryptocurrency, like bitcoin or dogecoin, but its blockchain also supports these NFTs, which store extra information that makes them work differently from, say, an ETH coin. It is worth noting that other blockchains can implement their own versions of NFTs.
How could this benefit you? What is the point?
The answer to the above question depends on what you are. Are you an artist OR are you just a buyer?
As an artist, NFTs could prove to be really fruitful to you as you don't have to find a marketplace to sell your art or run behind tech giants to sell a cool sticker that you drew. You can just register it as an NFT and let the buyers bid in a legitimate manner with the help of Blockchain and make good money! 💰
Also, NFTs have a feature that you can enable that will pay you incentives i.e a percentage every time the NFT is sold or changes hands, making sure that if your work gets super popular and balloons in value, you’ll see some of that benefit.
As a buyer, or let's say, as a collector, you can invest in NFTs to get the rights on an artwork, to be able to post it on social media, or indeed set it up as your profile picture. Like art, the value of NFTs could appreciate over time and it could return you some profits if your goal is to sell it and make some money.
Where can I find NFTs?
Well, there has been a rise in a lot of marketplaces where you can search for available NFTs that you can buy or even sell your own art. Some of them are:
Trust me, there are a lot more. The above three are the most popular and genuine ones that I could find.
If you are still confused and want to dig a little deeper on how are these managed over Blockchain, the environmental impacts, and how are NFTs different from cryptocurrencies, refer to this article by Ethereum. For now, let’s end it here. Reach out to me on Twitter if you want to give feedback or have any queries. Peace 👋
