For the past few weeks, NFTs are everywhere, it's been nearly impossible to go online without hearing something about them and most of you are probably scratching your heads wondering what it is. Is this all a hoax, or is this the future of the world?
spoiler alert 👇
NFTs in 30 seconds
Jack butcher explains it brilliantly in one of his tweets Continue reading if you're still confused.
In this article, you will learn what NFTs are and why they exist, as well as why nyan cat art (the GIF seen on the article's cover) was sold for $600,000.
To better understand what NFTs are, you need to know what non-fungible means. Consider a 500-rupee note; millions of such are likely in circulation right now. Keep in mind that all of it is original, but its exchangeability makes them fungible. Monalisa, on the other hand, well, you can't exchange it for another Monalisa; it's one-of-a-kind, and that's what non-fungible means. Digital art, however, is fungible because it can be copied or downloaded infinitely, which is where NFT comes into play.
When someone buys a piece of art, it typically comes with the artist's signature or a certificate proving its authenticity. Owning an NFTed version of it does the same thing, but digitally.
It turns out that our cute Nyan cat's GIF got sold as an NFT, which is where it got its actual value. I know it's insane, but stick with me; everything will make sense once I break it down for you.
NFTs can be made for anything, including gifs and audio clips, as well as artwork and digital assets in video games. Formally, issuing an NFT is known as minting, which essentially means that each item is assigned a unique token, which is when the asset becomes non-fungible and is thus known as Non-fungible tokens or NFTs.
This token stores a specific set of data, as well as information about who produced the content, current, and prior owners, and the price paid for it. This way, NFTs act much like authenticity certificates given to buyers or collectors of artwork.
Yes, the goal of NFT is to verify and validate transactions, but there is much more going on behind the scenes. It uses blockchain as an underlying technology, which ensures the integrity of this data.
And if your curious soul wants to get into the roots, here's a great video to watch.
But, hey, I just got that cat's GIF for free! So why would someone spend tens of thousands of dollars to own it?!
Now that's a million-dollar question, quite literally!
Short answer: Hype marketing
NFTs are seen as "the next great thing" on the internet, which has naturally triggered a demand-supply gap, moreover, the hype has pushed their value to the moon. NFTs also give a means for early crypto investors who don't want to cash out their capital to reinvest in crypto (as NFTs are exchanged using cryptocurrencies), which saves them taxes. It's absurd to spend that much for a JPEG or GIF file, but I hope you now see how it can be used to shuffle things around in the same way that millionaires used to do with physical paintings in the past. Though I can see NFTs being used for physical collectibles, artworks, and property purchases in the near future, the possibilities are endless, but for the time being, "NFTs are still very much a hammer looking for a nail."
~Daniel Keller, co-host, 'New Models' podcast