On 11th March a painting by Beeple – an American digital artist sold for $69 million at Christie’s.
Since then NFTs is the new mystery term that everyone is interested in. a lot of you are confused as to how NFTs are created, how they work and how can someone earn from them? And where can you buy them?
Today we will find out the answers.
NFT stands for Non Fungible Tokens. But what are they?
In simplest terms, NFTs are unique digital assets. They are already present in a variety of industries like digital art, virtual real estate, collectables, gaming and more. Any type of media can be minted and turned into an NFT. be it digital art, cards, memes, gifs, tweets, video clips, audio clips, written articles, anything.
Once minted these assets can be bought, sold and traded using cryptocurrency.
Fungibility means interchangeable; any two items which can be exchanged are fungible. For instance, you have five $1 bills in your wallet, all of these five $1 bills have the exact same value and thus are the same.
On the other hand, non-fungible means something unique and can’t be replaced with anything else. Like Pokemon cards. If you have a Bulbasaur card which you exchanged for a Charizard, the two cards don’t have the same value and are different from each other. They are not interchangeable because their value is not similar for all intent and purposes.
It’s like the famous piece of art – Monalisa, there is only one original Monalisa. Many other copies have been made and printed but still, none of them can match the value of the original masterpiece. Just like this original tag, an NFT is a digital certification of authenticity representing one of its kind assets.
But how do we distinguish between the original ones and the copies?
Even if two items are identical, they are separated by the metadata on the non-fungible token.
Still, confused? Let’s see how NFTs work?
In the digital world, it all starts with content. Any piece of content, be it a photo, a video, written words, anything. It could be original, like something you make or something already posted online like the autographed first tweet of Jack Dorsey which is on sale as an NFT.
After the creation of a content piece, it is “minted” on the blockchain, i.e. it is turned into an NFT. The equity and transaction history of NFTs are stored on the Ethereum blockchain.
A blockchain is a record-keeping technology, an official ledger network of thousands of computers. For a better understanding of blockchain – check this detailed guide by Investopedia.
Once the NFT is created it lives in the digital wallet of the owner on the Ethereum blockchain. This doesn’t mean that your NFTs cannot be downloaded or replicated on the internet. It is just that the official records at the blockchain prove the authenticity of the original NFT. Just like we discussed before, the value of the original Monalisa can never be similar to any copy of it, no matter how exact.
After the token is created on the blockchain, the NFTs are accessed using a digital wallet. The owner can access this account with a seed phrase. The account address and contract of the NFTs live on Ethereum.
Yes, and no.
Technically every NFT has a token on the blockchain which makes it unique. Like there could only be one actual version of Leo nardo da Vinci or Van Gogh. But it could also be like a trading card, where there are many copies of a single artwork.
Why do people buy avatars, skins or other virtual merchandise in video games?
Why do people buy membership cards or credit cards?
Why do people buy tickets to VIP access only events?
Why do people buy T-shirts with their favorite brand logo on them?
If you understand this, you know why people would want to buy NFTs. it’s the same. They want to be a part of a world they care about or want to brag about or discuss while having coffee. That is why people buy luxury cars, designer clothes, posters of famous people to stick on the wall.
NFTs are going to add the value of the social currency to everything we do online.
To sum up, the real value of NFTs is based on utility, access and social currency.
Years down the line, you can expect to see a world where everyone has NFTs and digital wallets the same way we all have social media accounts right now.
Let’s go 30 years back when the internet first came into existence. Or in 2009 when Uber was launched. What was the major impact of these technologies? They take out the mediators connecting the consumer with the service provider directly.
That is what NFT will do for artists. The artists of the digital world don’t have to suffer the losses which the big publishing houses and art galleries take up in profit.
The time when artists are paid an initial amount for the sold art in thousands and the gallery will make millions selling the same piece of art after 11 years will be history.
With NFTs, every time an art piece or content piece is sold on the blockchain, the creator gets a percentage of the price as royalties. NFTs are the revolution of the art world as the internet was for technology.
Hope this article clears up the air around NFTs for you. Keep reading our blog for more interesting insights in the future.