You might have heard the new term NFT and wondered what it meant. NFT stands for Non-Fungible Token. Which doesn’t help explain much.
Let’s start with the basics
Non-Fungible Tokens are in the most basic sense a digital art form. The majority of them represent real-world things like art or music. They are bought and sold online mostly with cryptocurrency. Non-Fungible meaning they cannot be replicated, and it is unique in itself. Unlike something fungible (like Bitcoin) which can be traded for more or less of itself, and all has the same value. You can trade one Bitcoin for another, and it would have the same value, but NFTs are all different. NFTs are very similar to trading cards in the sense they are both non-Fungible. Some would say NFTs are a very complex version of Baseball cards or Pokémon cards.
How do they have value?
The same way everything has value: People give them value. It might sound a little too simple but that’s the law of supply and demand. As long as someone is willing to pay the price then the item is worth that price, and hypothetically if you cut off the supply the value will raise as long as there’s still a demand.
But how is an NFT any different than a copy?
Some of the most popular and most expensive NFTs are clips or pictures that are already well known. For example, clips of NBA games or the Mona Lisa NFTs. Anyone can screenshot or take a picture of an NFT, so why are people spending upwards of millions of dollars for something they could look at for free?
Because NFTs have the rights. It allows the buyer to own the original rights to the item. It also has authentication built-in which can prove ownership. It’s a new thing to collect and flip for profit or keep and have digital bragging rights. Most collectors value the bragging rights of the NFT more than the NFT itself it seems.
Is an NFT like a cryptocurrency?
NFTs and the Ethereum blockchain go hand in hand, but they aren’t the same thing. NFTs are built using similar programming as cryptocurrencies but that’s pretty much the only similarity. Ethereum is a cryptocurrency, similar to bitcoin, its blockchain helps support these NFTs.
What are NFTs used for?
NFTs provide a whole new platform for artists and content creators. It’s a simple way to claim their work and monetize their products. Artists would no longer have to rely on art galleries or auctions to sell their art instead they can make an NFT and sell it directly to consumers. They keep all of the profits and on top of that can have royalties so if the NFT is sold again they receive a percentage of the profits.
NFTs are a great way for artists to sell and claim their work. They are also a great way to invest in something more tangible than say a stock. They are the perfect collector’s item, and anyone interested should try and buy one if they can.
© 2020 Omar N Azar
