WTF is an NFT?

Google Trends search for NFT

Google Trends search for NFT

NFTs have been around since 2015, but it hasn’t been until this year that the term started popping up everywhere. 

And like with any other emerging digital trend, there seems to be a lot of confusion and misinformation that comes with NFTs. So I decided to write a quick piece about what they are, and why you should know and care about them.

So what are they?

Simply put, NFT stands for Non-fungible token. Something that is not fungible is an asset that can’t be replaced, or it's unique in its nature. For example, a painting like the Mona Lisa derives a lot of its value from it being an irreplaceable piece, meaning there is only one original. On the other hand, something fungible is any asset that can be replaced by anything of the same type. Currency is a great example of a fungible asset, you can trade a five-dollar bill for another one and the value stays the same, there isn’t any uniqueness to the value of each individual dollar note.

At a very macro level, most NFTs (or Nifties) exist within the Ethereum Blockchain, a massive network of digital ledgers. People use it to build applications and trade assets like cryptocurrencies and NFTs. These non-fungible tokens can be anything digital like an illustration or a music album. The band Kings of Leon made headlines recently for selling their latest album as an NFT and making over 2 Million dollars just from the sale of the limited edition album. And understandably, a lot of the confusion stems from this, how can something digital which can be copied, pirated, and downloaded an infinite amount of times for free, be so valuable? The simple answer is that the value stems from the proof of ownership as recorded in the blockchain. Anybody can have a print of the Mona Lisa, but only one person can be the owner of the original. Scarcity is the name of the game.

A lot of the excitement surrounding NFTs comes from the art world. Artists and art buyers alike are turning towards NFTs as a transactional medium for art pieces for several reasons as explained by Scott Belsky, Adobe’s Chief Product Officer.

  • Crypto Art can’t be counterfeited since it only exists in the blockchain where its ownership is recorded and visible forever.

  • NFTs have immense portability and liquidity since you can trade any cyptoasset within minutes in most NFT marketplaces.

  • NFT art also permits the artists to gain royalties in perpetuity for every future transaction of the piece. Imagine the families of dead artists being able to receive compensation for the artwork in perpetuity, the same way it happens for the families of famous music artists like The Beatles.

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All of this brings me to Mike Winklemann, also known online as Beeple or Beeple Crap.

He recently made headlines for selling an NFT art piece for 69 Million dollars at Christie’s, through one of its first NFT art auctions.

This puts him within the top 3 most valuable living artists of our time. The piece is called Everydays: The First 5000 Days, and it is a collage of 5000 digital art pieces Beeple created over the years. 

NFTs have also sparked a renaissance for the sports trading card communities. The NBA launched NBA TopShot, a marketplace for selling and buying game highlights sold as NFTs. One of these highlights sold for a whopping $200,000, it was a dunk made by Lebron James against the Houston Rockets back on February 6. The news caught my attention and I bought myself a couple of NBA highlights worth around $50 each and I don’t even watch basketball. Similarly, there is another platform for fantasy soccer, where a Cristiano Ronaldo trading card sold for $290,000.

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Art and sports are just where NFTs are the most prevalent right now but they are slowly popping up everywhere across the digital landscape. From Twitter’s CEO, Jack Dorsey, auctioning the first tweet ever for over $2.5 Million to Taco Bell selling a limited collection of taco-themed GIFs, NFTs can be anything that is digital. 

NFTs allow for anything digital to be minted and traced through the blockchain, so I believe we are just beginning to understand their real potential. But for right now, I believe they are pure hype fueled by get-rich-quick schemes. Everybody is starting to mint every single kind of digital product, from cryptotitties to cryptotweets, which leads me to think that the market will be hypersaturated by all sorts of NFTs and consequently they will lose their uniqueness or their perceived value. 

A lot of NFTs are also only tradeable in specific platforms that host the digital files, so for example, if someday NBA TopShot goes bust, all your NFTs become worthless. Regardless of whether people still think NFTs are cool in 5 years, they will still play an important role in society as they will help with smart contracts, proving ownership, and creating a more democratic market for digital products.

If you want to make your own NFTs I recommend starting through Mintable. And if you want to buy NFTs I recommend the following marketplaces to start dipping your toes in the waters:

This is a new space that will slowly but surely take more form as more people explore it and find value from it but if you are trying to get rich through NFTs, let me just tell you it is probably going to be very hard.

Lucas Crespo