What Is an NFT? Your Definitive Guide to How They Are Revolutionizing Pretty Much Everything ~via @137pm and @matthewchaim
If you are still a bit in the dark, or totally, with regard to NFTs, this is a great post and a MUST READ. /Ted
When first explaining NFTs, one usually starts with the following sentence:
NFTs stand for “non-fungible tokens”.
A perfectly natural place to start, no?
But trying to understand an NFT through the expansion of its abbreviation is like answering the question “what is an mp3?” with “it’s a MPEG Audio Layer-3.”
Well, yeah... but that answer doesn't quite get to the meat of the thing.
A better answer? An mp3 is a file type that completely revolutionized entire industries by changing the way we share and consume audio.
Yes, NFTs are “non-fungible tokens”. And sure, understanding what fungibility means is helpful (and we’ll get to that shortly). But it doesn’t quite get to the meat of the thing.
What exactly is an NFT?
NFTs are a type of token that are going to completely revolutionize entire industries by changing the way we share and consume pretty much everything.
A “fungible” asset refers to something that is interchangeable with another unit of that same asset. A good example of a fungible asset is the US dollar. If I exchange my $1 bill for your $1 bill, nothing really changes. While they are two different pieces of fancy paper, both bills represent the same exact value. That’s fungibility.
Conversely, a non-fungible asset refers to something of a distinct value. There are no two exactly the same. A good example of a non-fungible asset is a house or a car.
A non-fungible token is where things get really interesting.
What is the Blockchain?
Blockchain technologies allow us to implement a lot of radically new ideas that weren’t before possible. The first and so far most popular of these implementations is the creation and distribution of tokens. Perhaps you’ve heard of one called Bitcoin.
Bitcoin is a good example of a fungible token. One bitcoin is one bitcoin is one bitcoin.
On the other hand, a non-fungible token allows us to create a digital certificate that represents a unique asset. We can attach these tokens to pretty much anything, including digital files—say, a photo, a video, an audio recording, or even this article.
This allows us to create proofs of authenticity for digital content that can be owned, bought, sold and traded. Because these tokens are stored on an open and distributed blockchain (such as Ethereum), their embedded metadata and transaction history are completely verifiable by anyone in the world with an Internet connection. That means we can all know what digital wallets own what tokens at any given point in time.
The implications of this are truly infinite, and we’ve just begun to scratch the surface of possibilities. So far, non-fungible tokens are being used to create industries around digital art, collectibles, gaming skins, digital land, and many many more.
An intro to NFT art
A great place to begin our journey into NFTs is in the now-exploding world of NFT art. As we now know, we can create a non-fungible token that acts as proof of authenticity for any digital file. So let’s say I jumped into Photoshop and made a really cool picture of a happy face. In fact, I’ve done exactly that…
Pretty dope, no?
Now, this happy face exists as a JPG file that I created in Photoshop, saved onto my computer, and uploaded onto this article’s web page. You, the reader, can easily drag this file onto your own desktop. Boom, there are now two copies of the “happy.jpg” on two different computers. This can be done a million times over by a million more people. Up until the advent of NFTs, this rendered the value of digital files near zero. If everyone owns it, no one owns it.
Enter NFTs, and everything changes
This time, after creating my happy face image, I mint it on the blockchain — a fancy way of saying that I turn it into an NFT. In fact, I’ve done exactly that.
Now there is a 1 of 1 proof of authenticity certificate for “happy.jpg” that exists on the Ethereum blockchain, securely housed in my digital wallet. Anyone can verify this to be true on websites like Etherscan, which pull in the transaction history of everything done on the Ethereum blockchain. I can choose to put this 1 of 1 NFT of “happy.jpg” up for sale, and anyone can bid on it or buy it right away at its listed price.
“But wait! I can still copy and drag the file onto my own computer a million times over. Why would anyone want to buy it?”
This is the initial reaction most people have when they’re first introduced to NFT art. Why would anyone want to own digital art if it can be infinitely copied and consumed by everyone?
Well, as the current owner of the “happy.jpg” NFT, I would like to say: please copy it! In fact, put it all over the Internet! Share it with all your friends! Turn it into a meme I beg of you!
NFTs capture the value of the Internet
“The blockchain is the Louvre” - TREVOR (@WHATDOTCD)
NFTs allow us to completely transcend the supposed conflict between scarcity and abundance. We can now truly have our cake and eat it too. Content now gets to be both scarce and abundant.
By creating a rare 1 of 1 NFT that represents a potentially famous and ubiquitously consumed file, we open the doors to capturing the value of viral content. Not by necessarily monetizing each instance that content is consumed, but by the value of that original NFT going up with the cultural significance of its associated art.
It is like owning a Lebron James rookie card. You don’t own Lebron James. Everyone everywhere gets to watch him play basketball. But as Lebron’s stock in basketball and culture goes up, so does the value of the rare rookie card you own.
The same is now true for memes! How glorious.
Another analogy that lands for some — and helped me understand all this as I first entered the world of NFTs — is that of the Mona Lisa.
So you might say, “I can just screenshot the happy.jpg image!” Yes, you can. You can also take a photo of the Mona Lisa with your phone. But you wouldn’t claim provenance over the Mona Lisa. In fact, the more people share their iPhone pics of the Mona Lisa, the more the painting's cultural relevance continues to grow, and the more value the original painting has.
We just all instinctively trust that the Louvre holds the real Mona Lisa. As @whatdotcd said in a recent Clubhouse room, “the blockchain is the Louvre.” Meaning, the open and distributed nature of a blockchain allows us to verify and trust the history and ownership of digital content, the same way we trust that the Louvre holds the real Mona Lisa.
Taking the mental jump into a whole new world
This is all very new to us, especially since we’ve all grown up in the first iteration of the Internet — an age in which we’ve learned to see digital content a certain way. There is, therefore a mental jump that we all have to take to understand these new concepts and to begin to truly taste their implications for ourselves.
But rest assured, our grandchildren will not have to make this same mental jump. They will grow up in a world where digital content feels as distinct and tactile as physical objects do to us.
What happens then? I for one can’t wait to find out.
Popular NFT Marketplaces to Know
We will do a subsequent post on the emerging platforms in the NFT art world. If you’re itching to get exploring right away, here are some of the most popular NFT art marketplaces to get you going:
1. OpenSea
OpenSea — the world's "first and largest NFT marketplace." They reached $1 billion in trading volume August 2021. Now, their total volume is over $30 billion.
2. SuperRare
SuperRare — Highly-curated 1-of-1 edition NFTs. The “gold standard” in the current NFT space.
3. NiftyGateway
NiftyGateway — Fast-growing NFT market leading the pack in sales volume. Highly sought-after daily NFT drops, with popular visual artists and now celebrities getting involved. One of the few NFT platforms that accept USD / credit card as payment.
4. Zora
Zora — Feed-style NFT site in which the market of each piece is baked into the NFT itself and not run by the platform. Therefore, they don't take a transaction fee on each sale, unlike other marketplaces. Creating NFTs is open to everyone. The Zora protocol is also open for anyone to build on.
5. Foundation
Foundation — Beautifully designed and curated NFT marketplace with reserved bidding that, once met, unlocks 24-hour auctions. Creating NFTs is currently open to everyone, but was previously application-only.
Rarible — The most open and permissionless NFT marketplace. Anyone can create an NFT right away without needing an invite, and a roadmap is in place to make the platform community-run.
7. Makersplace
Makersplace — An invite-only creator NFT platform that accepts both Ethereum and fiat currency. Recently partnered with Christie’s auction house to sell the first fully digital piece at Christie’s, by artist Beeple.
8. KnownOrigin
KnownOrigin — Quality NFT art platform with multiple weekly drops. Offers accepted in ETH.
What types of NFTs are available?
There are many types of NFTs. The uninformed may think it's simply art. It's much more than that. What ties all NFTs: proof of ownership of an asset. All made possible by the blockchain and its universal ledger. Here are some examples:
Event Tickets
Art
Music
Photography
Films and Video
Games
Collectables
Virtual and Physical Land
Virtual Fashion
Sports
Event Tickets as NFTs
As the industry progresses, there's an increasing number of "In-Real-Life" events that integrate Web3 solutions. These solutions help to prove ownership of assets. Or, in this case, tickets. Token Proof is a great example of a company that's innovating in token gated ticketing infrastructure. VeeCon is a prime example of this.
Art as NFTs
This is the most common use case for NFTs. There's much to discuss here. To put it simply: many artists have found their new "creative's playground" through digital art, hosted by blockchain technology. Going from physical galleries to virtual galleries may be a tough transition for some. But, for those brave enough to take the leap, there are plenty of opportunities to make a name for themselves in this emerging industry.
Music as NFTs
People from all sides of the music industry have found their niche through NFTs. From producers, musicians, labels, you name it. Notably, artists are now able to share music royalties with their fans, allowing for a new level of engagement with one's audience, never before possible. More individuals and entities are entering the NFT space by the day.
If you want to learn more about music NFTs, Water and Music is where you want to start!
Photography as NFTs
Photography NFTs are an up-and-coming medium for NFT art. One of the most noteworthy NFT photographers is Drifter Shoots. An emerging NFT photographer, Joey Miller, is someone to watch in the space. A great NFT marketplace for photographers is Quantum Art.
Film and Videos as NFTs
The film industry has seen many interesting use-cases for NFTs. Some notable examples we've covered are Keepers of the Inn and the first Decentralized Movie Studio.
Video Games as NFTs
Video games are a great place for innovation in the NFT space. Some of the best and brightest in the space can be found in our article about the Top NFT Games.
Collectables as NFTs
Collectability for NFTs, in their current form, is core to their foundation. Some of the earliest big-name use-cases for NFTs came from collectibles. This is no exception for the likes of NBA Top Shot.
Virtual and Physical Land as NFTs
You may have heard the term "metaverse" used in the conversation of NFTs. This, like other assets, can have the ownership represented through an NFT. Whether it's physical or digital land, NFTs can be the vehicle through which one can prove ownership of an asset.
Virtual Fashion as NFTs
The way that we represent ourselves in a virtual space is now becoming almost as important, sometimes even more important, as in real spaces. The shift that we have been making over the last several years can be seen in how we present ourselves online through our social media profiles. This same level of curation of the "highlights" of our experiences can and will be expressed through our presence in online spaces. A great thought piece on this can be found here.
Sports as NFTs
You may think: wouldn't it be tough to make something digital make sense in the real world, with real people, playing real sports? Well, when it comes to who owns the team, coaching decisions, and more, NFTs allow for a fantastic opportunity to innovate in the world of sports. Futera United is a fantastic example of this.
