Have you ever imagined you can sell your high school pokemon card or your first Instagram post in thousands or even a million dollars?
Well, that is what you might be able to do in today’s time and become rich to buy your dream car! Thanks to the blockchain! Whether you are into bitcoin & cryptocurrencies or not, you would probably have heard and come across NFTs and wondering what these NFTs are? Why are NFTs trending all over the place? Why are your favourite celebrities talking about NFT?
Recently Jack Dorsey, the founder of Twitter put up his first tweet on auction and the highest bid was 2.5 million USD. From tweets to Instagram posts, digital art to music albums, sports highlights to gaming, anything that digital is now selling as cryptocurrency collectables is called NFTs. Electronic music producer 3LAU — pronounced “Blau” — sold the world’s first digital tokenized album on Sunday, generating over $11.6 million in online sales in under 24 hours.
What are NFTs?
A non-fungible token (NFT) is a unique, individual token existing on a blockchain such as Ethereum. Unlike cryptocurrencies like bitcoin, each NFT token contains unique data, meaning non-fungible tokens are not interchangeable with each other. This non-fungible nature of the tokens means their use cases differ greatly from their fungible counterparts.
Let’s take an example. You and I have 2000 INR notes. Even if we exchange the note, the value remains the same for both INR notes. But in the case of NFTs, suppose, I have a painting and you also have another painting, still, it won’t be the same considering the variation in creation date, design, and the quality of the painting. Meaning, NFTs are unique.
Anything we can think of can be made as NFT. Until today most NFTs are digital tokens, art, music, videos, etc. Some day you can also put your land, house, and other physical objects into NFT. NFT allows creators, artists, writers, and anyone to sell their art and creation to make a living with crypto.
But do you think an NFT, a single tweet, or a graphic design can worth so much? It may not! It is valuable only because people think, just so as we think a paper note is valuable. Imagine you are living during the time of ancient Egypt, the king and other royal nobles of the kingdom collect crafts and valuable precious items because they believe it was collectable, rare, immutable, unique and can be exchanged to save their noble families who are held hostages during wartime. The only difference today with NFT is that they are digital.
History and the rise of NFTs.
Since time immemorial, ancient men have used crafts, art, services, and products for barter exchanges. Collectable things have always held value for man. Before fiat money was issued, anyone could exchange something valuable for something they need or want. The paper notes you and I hold have real value only because it is issued by the government. If precious stone holds value during the ancient and medieval period, for sure a digital art, a music album, a piece of content surely holds value in our modern time.
A new market, a new opportunity
Our life is now experiencing one of the worst unprecedented pandemics in human history since 2020. With the crises and collapse of the economy, new opportunities are born, human ingenuity thrives to find new ways for their life and upbringing. NFT rise during the crises, gave birth to the new economy rising from some $20s Billion in 2017 to nearly $400 Billion worth of economy in 2021. Things that could not be traded before can now be traded as NFTs. Artists can now sell more albums, designers can now sell their creations that may even worth millions of dollars, athletes can now sell their highlight videos, influencers can sell their posts and contents, and even memers can sell their memes.
NFTs and Ethereum
NFTs are powered by smart contracts on the ethereum blockchain that prove your ownership. It means you put your digital signature on the ethereum blockchain which makes it nearly impossible to hack and that you own complete copyright of your NFT. Through the ethereum network, you can trade your NFT peer-to-peer where you don’t have to risk your trust on some third-party platform. You can buy Ethereum here. Having your NFT on the ethereum blockchain proves your ownership. Other blockchain ecosystems like ADA (Cardano) also power NFTs.
What gives an NFT its value?
There are a ton of reasons to buy NFTs.
- Unique — Each NFT is unique, it is the only one of its kind. You cannot make another NFT that has the same token number on the same smart contract. Meaning, there will only ever be one of that token. This is verified by the blockchain and can be seen by anyone. You may argue that digital NFT can be easily downloaded or saved on your personal computer, but you won’t be able to get the ownership that is held in blockchain.
- Copyright — Most if not all NFTs come with copyright. The idea is that you have an ownership right for your NFT in a way that you have your digital signature on the blockchain. They exist as numbers and strings on the blockchain ledger which contain the information of the owner and NFT asset. So just like a bank ledger, this blockchain will record when the blockchain was created, when it was sold, and who owns it. This information is encrypted to ensure NFT is authentic.
- Rare — Since they are unique and cannot be copied, they are rare. Most of the time, there are very few NFTs from an artist or seller — very rarely do they have 1000s of NFTs. Therefore, you can safely assume you would be one of the few people in the world that owns a collectable item that can be resold.
- Collectible — These NFTs/items are collectable. You can hold onto them, and their value will generally only go up in price since there are no ways to dilute the collection. Buying them to resell them can earn you thousands of dollars. There are plenty of people who do it every day and earn a living from it.
- Downloadable — In most applications, only the current owner of the NFT can download the file attached to it, making it accessible to the owner. If your NFT has something like, game assets, music, a PDF, or more assets locked inside it, you might want to buy the NFT just to download that song/PDF/etc.
- Immutable — No one can change the metadata on the token, no one can remove your image or the name of the token. This means it will never change, it will never be removed, it cannot be taken down off the blockchain. This is what gives it so much value and collectibility.
- Forever — NFTs are forever. Because the data doesn’t change, and because the blockchain is forever, you will always have that token if you buy it. You can always resell that token if you want. It’s like buying a bar of gold — you own it, and you can do what you want with it.
- Resellable — You can always resell your NFT. You SHOULD resell your NFT and trade it. You can make some serious cash trading NFTs. Some NFTs have gone for 20,000+ USD when the original buyer only bought it for a few thousand dollars making them over 15,000 USD in a short time in ONE trade!
The NFT market is going crazy for some weeks now. It’s up to you whether you are convinced that NFT is valuable or not. But people are buying it and these collectables are rare, unique, and here to stay for some time. The digital world is changing at an unprecedented pace, blockchain today is the world wide web of the 1990s. In some 5 years or so, almost everything you could imagine from retail to anything that deals with data will
be built on the blockchain. Buying an ethereum today is like buying a part of the internet in the 1990s. For sure, there is doubt and questions unanswered around this new upcoming disruptive innovation, but the fear of missing out will grow bigger too. 2021 is a year for crypto and so is for NFT too.
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