WHAT ARE NTFS? HOW DO THEY WORK?
NFTs are digital objects on a blockchain represented by digital artworks such as pictures, gifs, or videos. NFTs (non-fungible tokens) are a type of cryptocurrency created on a smart contract platform such as Ethereum. Cryptocurrencies can be fungible, meaning that all the currency’s units are uniform and equal. Non-fungible tokens are the opposite in that every token is unique and cannot be replicated. The singular aspect of every token is part of what makes NFT digital art so alluring. NFTs can be created and sold on various platforms, but the majority of NFT sales are conducted through Ethereum. The blockchain with which NFTs are created is immutable, meaning that it cannot be altered. No one can undo one’s ownership of an NFT, or re-create the exact art piece. Another important fact to note about NFTs is that they cannot be directly exchanged with one another like Bitcoin even though they are based on cryptocurrencies. Further key characteristics of NFTs are that they are indivisible, unlike Bitcoin satoshis, and they are indestructible.
WHY NTFS? BENEFITS, IMPORTANCE, AND APPEAL
NFTs can be likened to a rare, classic baseball card. Both an NFT and the baseball card are rare, and this scarcity is what creates demand for these digital artworks and consequently drives up the price. On March 11 2021, the artist known as Beeple sold his NFT titled “The first 5000 days” for $69 million USD at auction (Frank, 2021). This has been the highest-selling NFT to date. Ideally, the value of NFTs should not solely be derived by the theory of scarcity, but an element of personal enjoyment one gains from owning the NFT should also contribute to generating value. An added benefit for artists is that they can get a cut of the selling price if their artwork is re-sold, which is not the case for physical artworks. NFTs also give buyers bragging rights, as they can be sure that they have purchased an authentic, original artwork. Some NFTs can also be valuable in other ways, such as helping players gain prestige or complete difficult objects in an online game.
WHERE ARE THE INVESTMENT OPPORTUNITIES FOR NFTS?
The immense value and numerous benefits of NFTs beg the question: Are crypto artworks a sound investment? The answer is not so simple. Similar to tangible collectibles and artwork, the NFT industry is lucrative but complex. Overall, NFTs are only as good as their underlying asset, which is the artwork, video, or highlight reel. To make substantial amounts of money through NFTs, investors need some unique insight into the assets NFTs represent. As an example, the NBA’s highest-selling NFT is a LeBron James highlight reel, selling for $200,000 USD (Gemmell, 2021). Keen NBA fans could buy cheap highlight reels today of up-and-coming NBA stars, and earn thousands when the star breaks out several years from now.
WHEN WERE NFTS FIRST CREATED? WHERE ARE THEY HEAING?
The idea of NFTs first originated in 2012 with the emergence of Colored Coins, which are small denominations of Bitcoin used to represent numerous assets and uses. Some of their uses include digital collectables, property, and subscriptions (Steinwold, 2019). Colored Coins were a huge leap in Bitcoin capabilities and formed the foundation for NFTs as we know them today. Counterparty, created in 2014, a peer-to-peer financial platform, distributes open-source internet protocol built on top of Bitcoin blockchain (Steinwold, 2019). For many years, the platform allows asset creation, has a decentralized exchange and would serve as an NFT platform. In 2016, Counterparty partnered with the popular card trading game, Force of Will, to launch their trading cards on the platform. Notably, memes began moving to blockchain in 2016, with “rare pepe” frog characters leading the way. CryptoKitties was another NFT that hit the mainstream and helped blaze the NFT trail in 2017. NFT marketplaces like OpenSea and SuperRare are also gaining ground and helping to promote NFTs. The future for NFTs looks bright, and it is predicted that developers will continue to create innovative uses with unique items that will change the NFT game.
WHO CAN GET INVOLVED?
The beauty of NFTs is that they are not limited to wealthy aristocrats as tangible artworks might be. The first step to getting involved with NFTs is to install MetaMask, a browser extension that allows interactions with various facets of Ethereum. MetaMask is also a digital wallet for Ethereum, which keeps tokens safe. It is extremely important to store the MetaMask password and private wallet password somewhere safe. After installing MetaMask, purchase Ethereum through the extension using debit or even Apple Pay (Gemmell, 2021). Once that has been done, you will be able to visit a website that sells NFTs such as NBA Top Shot or OpenSea, connect your MetaMask wallet, and purchase an NFT.
Frank, R. (2021, March 11). Beeple nft becomes most expensive ever sold at auction after fetching over $60 million. Retrieved March 13, 2021, from https://www.cnbc.com/2021/03/11/most-expensive-nft-ever-sold-auctions-for-over-60-million.html#:~:text=A%20non%2Dfungible%20token%20by,NFT%20ever%20sold%20at%20auction.
Gemmell, K. (2021, March 8). Bloomberg.com. Retrieved March 13, 2021, from https://www.bloomberg.com/news/articles/2021-03-08/bitcoin-btc-mania-boosts-crypto-art-such-as-a-lebron-video-are-nfts-worth-it
Steinwold, A. (2019, October 07). The history of non-fungible tokens (nfts). Retrieved March 13, 2021, from https://medium.com/@Andrew.Steinwold/the-history-of-non-fungible-tokens-nfts-f362ca57ae10