WTF is an NFT?!
The Beginner’s Guide to Non-Fungible Tokens
At this point, it’s pretty safe to say that most people have at least heard of NFTs – though whether or not they actually understand what they are or how they work is another story. After all, how could you miss it?
While NFTs aren’t technically new (they’ve actually been around since 2014), they’ve definitely entered the collective lexicon of the masses in the last year. And if you’re anything like me, the influx of NFT-related news has probably left you wondering:
What is an NFT, anyways?
Or, if you’re one of those entrepreneurial types: How can I make money with NFTs?
Well, friend, you’re in luck. After countless hours of research (and only 2 mental breakdowns) I’ve come up with this nifty little guide to help answer your biggest NFT questions.
What is an NFT?
As you might have guessed from the article title, NFT stands for Non-Fungible Token.
But my spidey senses are telling me that your next follow up question is: What the @#$% is a Non-Fungible Token? (spooky right?)
Alright here’s the breakdown: “Non-Fungible” is just a fancy way of saying that the asset in question is completely unique and can’t be replaced by something else. So let’s take a 10 dollar bill for example. If you trade that ten bucks for another 10 dollar bill, nothing changes value-wise. One 10 dollar bill is equivalent to another as far as its ability to be used as a medium of exchange, meaning it’s fungible.
But let’s say you had an original Picasso. If you traded that art work for another (even another work by the same artist) you would have something completely different. Because there is only one original, it has unique properties that cannot be easily appraised or exchanged for something similar to it – hence, non-fungible.
(And yes, the same goes for your limited edition Pokemon cards).
How are NFTs different from Cryptocurrency?
Like cryptocurrency, NFTs are digital assets that you mint and house on the blockchain – AKA an online digital ledger that records transactions. But that’s pretty much where the similarities stop.
Like physical money, cryptocurrency is fungible – it’s easily traded or exchanged and each respective currency is equal in value to itself; one ADA will always be equal to another ADA.
NFTs, on the other hand, are different. Each NFT has a distinct code or address that essentially acts as a digital certificate of ownership, verifying that you have the original. And because each NFT is an original with its own digital signature, it’s impossible to exchange NFTs as equal value assets (non-fungible, remember?).
Are NFTs Just JPEGs?
I can see why you might think NFTs are just glorified JPEGs that people are willing to spend ungodly amounts of money on, but it’s a little more varied than that.
While all NFTs are technically digital objects, they represent both tangible and intangible items such as:
- Digital art
- Artist Merch
- Event tickets
- Videos and sports highlights
- Trading cards/Collectible items
- Virtual avatars and video game skins
- Designer sneakers
- Real estate
The list goes on. Heck, even tweets are on the table. Jack Dorsey, the co-founder of Twitter, sold his first ever tweet as an NFT for more than $2.9 million.
In essence, NFTs are basically just digital collector’s items with built in authenticity.
But wait – can’t I just copy the digital file?
Yeah, you totally can. In fact, there’s been an influx of trolls on Twitter who have copied NFT images and uploaded them as their profile picture.
Some have even gone so far as to copy the image, mint it as an NFT on the blockchain, then use it to get one of those snazzy hexagonal verified NFT profile pictures on Twitter. Holders of the original NFTs have coined a term for the trolls – they’re called right clickers (oooh nerd burn).
But despite what NFT naysayers would have you think, the true value of an NFT isn’t in the digital asset itself – it’s in the bragging rights that verified ownership can give you. Anyone can buy a copy of The Starry Night, but owning Van Gogh’s original work? That’s pretty legit.
So, What’s the Point of NFTs?
Well, I suppose it really depends on who’s asking…
If you’re an artist, NFTs can give you a new opportunity to monetize your work while simultaneously eliminating the stereotypical middleman. Rather than relying on an auction house to act as the go-between for you and potential buyers, you can sell it directly to the consumer as an NFT.
The same goes for musicians who can upload their songs as NFTs and sell directly to fans. On the other hand, with projectNEWM, musicians can take it a step further and fractionalize their IP rights as NFTs, which gives fans partial ownership of the respective songs – and a set percentage of the royalties every time the song is played.
If you’re a buyer, NFTs give you the opportunity to support your favorite artists. Plus, you get the added benefit of usage rights (having permission to post the image online or use it as your profile picture). And finally, you get the bragging rights that come from owning the art itself.
If you’re a collector, and you’re in it for the cash, then sure, your investment could pay off big (or not). Like any other tradable asset, you can buy an NFT and hold it until the value goes up enough where you can sell it for a tidy profit. Of course, there are no guarantees – but hey, that’s the nature of the game.
How Can I Buy an NFT?
Well, first of all you’ll need a digital wallet where you can house NFTs and cryptocurrencies. What cryptocurrency you’ll need depends on your NFT marketplace of choice, however some platforms such as Coinbase, Kraken, eToro and even Paypal enable you to purchase NFTs using a credit card. From there you can move the NFT from the exchange to your digital wallet.
If you do decide to purchase an NFT from one of the dozens of marketplaces currently available, be sure to keep fees in mind. Most exchanges charge a “gas fee” for processing the transaction (on top of your purchase) which can vary greatly depending on the platform you choose.
But before you go off on a digital shopping spree – a word of caution. Some NFT creators and artists on the platforms have had their work listed and sold by unauthorized impersonators, so be sure to research carefully before buying.
Are NFTs a Good Investment?
Ah, the million-dollar question.
Well, I’m by no means a financial advisor, but I am an opinionated writer who’s invested an absurd amount of time in researching this particular topic – so here’s my two cents:
Investments are always personal decisions – whether it’s buying into the stock market, or purchasing an NFT. The risk is apparent for both. However, if there is a particular NFT that really catches your eye (or is meaningful to you), and you have money to spare, then it’s worth at least considering as an investment.
But bear in mind that an NFT’s value is based solely on what someone else is willing to pay for it, which means it’s entirely subject to demand. So you have no guarantee that you’ll be able to recoup your investment, or even sell it at all.
Essentially, you need to approach NFTs just like you would any investment: with thorough research and risk assessment. Only invest what you’re willing to lose, keep your wits about you, and proceed with caution.
Psst – you don’t have to invest to get digital art. You can get some dope NFTs by becoming projectNEWM stakepool delegator. Get the full deets here.
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