What the heck is an NFT?
You may have seen the hype around NFTs lately. Jack Dorsey, the founder and CEO of Twitter is selling his first tweet to the highest bidder, but what the hell does that mean, whats an NFT, and should you even care?
You may have seen the hype around NFTs lately. Jack Dorsey, the founder and CEO of Twitter is selling his first tweet to the highest bidder, but what the hell does that mean, whats an NFT, and should you even care?
What is an NFT?
NFT is short for Non Fungible Token, or essentially: a virtual and unique thing that's easily verifiable. These tokens live on the blockchain and can be owned by others. A token is similar to the deed to a house. A whole bunch of people agree that you own it, so you do. No one else can own it, unless you sell or trade it.
Fungible tokens are tokens which can be traded; they are interchangeable. Think dollar bills. It's incredibly easy to trade dollars for other goods. Non-fungible tokens are the opposite. They're difficult to trade because they're not a commodity. The good ones are very rare and they're all unique. In the case of NFTs, this is the attribute that makes people trade crazy amounts for them.
What kinds of NFTs are out there?
Digital pictures of cats, unique sneakers, video game digital goods, a ticket to an event, virtual trading cards, and more. The idea is that it's provable that someone owns one of these unique tokens. It's impossible to fake it.
CryptoKitties
Art is popular with NFTs. Companies like Sotheby's spend a lot of money to verify original works of art. If the Artwork was backed by an NFT, or it was an NFT, it'd be very easy to verify authenticity and ownership. This is how CryptoKitties, CryptoPunks, and more. Normally, an art broker like Sothebys would control auctions and usually take a hefty commission. With NFTs, the power shifts back towards the creator with it being possible to receive royalties automatically for sold NFTs.
This video by Beeple sold for $6.6M. This CryptoPunk art sold for 4,200 ETH ($7,566,173.88 USD). As I was editing this, a jpeg from Beeple just sold for $69M.
Should I invest in an NFT?
It's a new space and like anything related to blockchain investing: if you can afford to spend the money and do not care about ever getting it back: yes. If you go in with the exception of making it big, making money, or getting rich quick: absolutely not. Collectors might be interested in NFTs.
Personally, I'm not interested in buying any NFTs that represent virtual goods. I don't collect much actual stuff and even less virtual stuff. If I did, it'd be to make money on it at some point in the future.
Are there other use cases for NFTs? Absolutely! Event tickets make sense. They're easily verifiable, you can sell them, and you know exactly what you're getting. Plus, it gets rid of scammers and fraud.
I'd totally be interested in buying NFTs that represent physical goods. I've always thought the blockchain could replace buying large assets like the deeds in traditional homes, titles to cars, boats, and planes. The closing process for a house and title/deed search, and all that stuff could easily be replaced with the NFTs. It would reduce time to prove ownership plus significantly reduce transfer delays from weeks to minutes with less middlemen and far less errors. Plus, the most important part: everyone can verify ownership without needing a central hub like a bank, broker, or government.
Who can do it?
The beauty of NFTs is that they're borderless and anyone can get involved. Whether you want to acquire NFTs or create your own and sell them, it's possible. Â They're sort of like a digital lemonade stand. It's not as easy to get started, and it's hard to make a lot of money, but anyone can do it as longa syou know how to make lemonade and have an internet connection.
Jack Dorsey, as mentioned earlier, is selling ownership rights to his first tweet as an NFT. This is a bit strange, because technically you can't delete that tweet if you buy it's NFT, so do you really own it? Bidding is currently at $2.5M. I guess it's sort of like owning the only signed Michael Jordan rookie card in mint condition, except without the picture.
Is this good for artists?
I think it might be. It gives artists a way to make money, so as long as people are willing to pay. NFTs are definitely popular now. Instead of Sothebys getting all of your money if you're selling art through them, you can get paid. Plus, if the NFT is resold, they have a feature that allows you to get paid royalties every time the NFT changes hands. This seems good for artists, if people are using NFTs to transfer ownership.
Where I see the value
To me, realestate is an antiquated process and everyone charges a fee to say, "Yes you own this house." NFTs and the blockchain could make this elongated process significantly shorter and cost much less. Plus it could be decentralized so you don't have to worry about government shutdowns, office hours, title companies, brokers, etc. You could trade an NFT representing ownership of your property whenever you wanted to 'round the clock and without anyone getting in your way.
The weirdest thing about NFTs to me is that you're really just buying a reference to something digital. Digital things are often easily copied. It's as simple as right click, save image and you now have a copy of the CryptoKitty above. No one would pay anything for it, though. The perceived value is in the NFT that says, "I own this thing." So for the person buying Jack Dorsey's first tweet: they get to claim they own it. Everyone else can still see it.
Or could just watch this SNL skit: