I'm sure you have heard the term NFT more in the last two months than you would like to admit. It’s been described as this new digital art thingy that somehow creates millions of dollars in value for inanimate objects such as a tweet or pixelated cyberpunk drawing. It’s not exactly crypto, but it leverages the blockchain, and Gary V. won't shut up about them...huh?!?
After trying to explain NFTs to my dad for 30 minutes, his only response was, “I’m not f*cking tracking.”
This raises the question: WTF is an NFT?
NFT stands for “non-fungible token.” Which essentially means that it is a unique, one-of-a-kind digital object. There is only one and it can never be duplicated — unlike Bitcoin, which is fungible, meaning there are millions of identical bitcoins floating around. As a matter of fact, at the time this article was written there were 18,677,162.5 bitcoins in circulation. (An estimated 900 new bitcoins get created every day!)
Anything digital can pretty much be turned into an NFT. A concert ticket, a drawing, a video game item, even a picture of your cat. These NFTs can be created, stored, and shared on the Ethereum blockchain. In other words, your personal NFTs are stored in your own blockchain wallet, identical to the way you store Bitcoin or Ethereum today.
Now that we (kind of) understand what an NFT is, the real question is: Why are they valuable? Couldn't you just screenshot the digital piece of art and get it framed yourself? Well, sure you could, but that digital copy wouldn’t hold any value. You couldn’t go and take your printed-out CryptoPunk and sell it to anyone.
Still confused?
Imagine you go to the Louvre Museum to see the Mona Lisa. You can take a picture of it, buy a print, or even try to have someone recreate it. But at the end of the day, you still do not own the original Mona Lisa. Your copy could look identical and hang with the same weight on your living room wall, but it doesn’t hold the value of the true Mona Lisa. The easiest way to think about it is that the NFT is the artist-signed piece. One of the best parts about NFTs’ relationship to artwork is that the ownership can be easily transferred without any formal paperwork. The blockchain makes this public for everyone to see, completely removing any and all copies.
Recently, a digital artist known by the name of Beeple sold an NFT for $69,000,000. Could you go and take a screenshot of the piece and keep a copy hidden away in a secret folder? Absolutely. But would the Louvre approach you to purchase it for millions of dollars? Definitely not. Why, you ask? Because it is not an original piece of art.
Our world is changing. Artists used to rely on cloth canvases to capture their artwork. These canvases were traded and sold, but now that today’s artists are going digital, they need a reliable digital canvas; NFTs turn this into a reality by giving them a way to protect themselves from digital pirates sacking their work.
Yes, there is a big boom right now and every opportunistic entrepreneur is racing to launch their own NFT. The hype is identical to the way everybody tried to apply the internet to their business, regardless of industry, during the dot-com boom — and we all remember what happened to pets.com...
Most people probably thought the internet was going to be a phase, but look at us now. The reason we bring this up is that there will be some winners, and there will be lots of losers. The fun part is trying to pick the valuable NFTs while everything is so new. It’s almost like trying to choose between buying stock in Google, Yahoo, and AskJeeves 20 years ago.
The bottom line? Some people say NFTs are here to stay. They’re a new piece of technology that we have yet to fully harness. If someone told you back in 2011 that Bitcoin would be worth over $60,000 some day, you wouldn't have believed them either, right?
Additionally, we recognize the inexcusable carbon footprint associated with NFT’s, Ethereum has for years promised to switch from proof of sale to proof of stake, which in theory will reduce the footprint to a tiny fraction of it’s current consumption. And if Ethereum does not act, with so many artists forgoing NFT’s sales due to the associated environmental impact - it’s only a matter of time that another network will outshine Ethereum as the go to network - check out a list of less carbon intensive NFT marketplaces here.
Hope you learned something new today,