Everydays: The First 5000 Days, created by Mike Winkelmann
You’ve probably heard about NFTs in the news. Since Mike Winkelmann’s (aka Beeple) sold his digital piece for $68M on Christie’s auction house to crypto investor, MetaKovan, NFTs have captured the world’s attention and interest.
NFTs aren’t new. They’ve been around for a few years. One of the first uses was CryptoKitties, where users would trade and sell virtual kittens. And the sale of Beeple’s digital piece that mainstream media is buzzing about isn’t the only big purchase that has happened in the past few weeks.
Just last week, Dylan Field, CEO of Figma, sold CryptoPunk #7804 for $7.5M. A record sale for the CryptoPunk digital collection.
CryptoPunks, created by Larva Labs, are 10,000 uniquely generated characters, displayed in 24x24 pixel art images. At one point, they were given away for free, and today, they are being sold for millions.
But what most people find interesting and confusing, is that the new owners of these pieces won’t be receiving a physical piece art, but a digital token called an NFT.
What is this digital token? And why would someone spend $65M on it?
In this article, I will explain what an NFT is, why some people find value in them, and why you should care.
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So what exactly is an NFT?
An NFT, or a non-fungible token, is a unique, digital asset that can be bought and sold. This asset is verified by blockchain, giving the owner proof of authenticity and ownership.
Basically, everyone knows that the NFT holder owns this digital asset.
Now there are several key words I want to pull from this definition and explain individually. This will help you fully understand what it is:
NFTs are digital only: This means that they will never take on a tangible form. You’ll never be able to hold an NFT or hang an NFT on the wall. It will remain in your digital wallet as proof that you own it.
NFTs are mostly limited: This is important. Let’s say an artist created a digital NFT and then made an infinite number of copies of them on the blockchain. It wouldn’t be worth anything because anyone could own it. The limited number is what makes an NFT unique and valuable. It could be one of a kind, or one of 100, but there must be a limited number otherwise it’s worthless.
This is why NFTs are attractive to digital artists. Because it gives them ownership of what they’ve created, and the ability to sell that ownership to another person or, if they were to sell multiple NFTs of that piece, multiple people.
So NFTs is a kind of digital art?
It can be art, but it doesn’t have to be. An NFT can be anything that is digital and ownable, such as a collectable, a domain name, a digital card, a video, and more.
Right now, mainstream media is focused on NFTs in the art world such as GIFs, songs, videos, and digital art, but there is a whole other world of NFTs out there.
NFTs in simple terms are validated ownership of something.
Any digital asset can be an NFT if the creator decides to make it unique or limited.
A great example of an NFT outside of digital art is the company Sorare, which was founded by Nicolas Julia.
Sorare is a platform for creating and trading soccer (or football for the non-American folks) NFTs. Sorare works with soccer clubs to create licensed trading cards that are also digital collectibles. There are three tiers rare, super-rare, and unique.
They sell a limited number of cards per tier. For each player per season there are 100 rare cards, 10 super rare cards, and 1 unique card that are created and sold. Players can buy and sell their cards in the form of NFTs.
There is also a fantasy component, where owners can play their cards in different leagues. The teams are ranked based on the performance of their players in the real-world games they play that week. Each team is ranked, and the top winners are given rewards in the form of Ethereum and random trading cards.
This is not the only online marketplace for sports. NBA Top Shot is another great example.
Founded by Roham Gharegozlou, CEO of Dapper Labs, NBA Top Shot allows users to buy, sell, and trade NBA highlights. For example, someone recently sold a clip LeBron James dunking on Nemanja Bjelica.
It was purchased for $208k.
Why would I want something that’s not tangible?
This is something many struggle with but the answer is quite simple. Aside from the things that you need to survive (food, shelter, etc.) what do you buy? Another way to phrase this question is, what do you value?
Some people value fashion and are willing to pay $20,000 for a Birkin bag. Others will shell out $700 for an original Pokemon card. Or $3.21M on a rare comic book.
Enough people in our world have decided that these items are worth that price tag and are willing to pay for it. The same goes for NFTs.
And let’s not discount the emotional attachment many people have to their NFTs. For many owners, selling their NFTs can be an emotional process. They feel connected to their NFT despite the fact that it's a digital asset.
Listen to Dylan Field’s statement on his sale of CryptoPunk #7804.
You can hear the emotion behind his words. To him it held tremendous value and giving it up was hard.
And many NFT owners share this sentiment. To them, it means something.
That’s value.
I still don’t get it. What’s the point of having something if I can’t use it?
At first it’s a bit of a strange concept to own something without being able to touch it or use it. But it’s not that strange if you think about the things people collect and spend a tremendous amount of money on, but never use.
Do you think that someone would open that mint condition action figure? Or wear a pair of rare Air Jordans? Maybe, but probably not. For most, it’s an investment. The owner hopes that in the future, this product will be worth even more.
Additionally, buying things that are digital only is actually quite common.
If you enjoy video games you might have made a digital purchase that didn’t influence the outcome of the game, but enhanced your experience of it. For example, buying character skins.
League of Legends sells champion skins for up to $25 dollars. They don’t give players an advantage or change the game in any way other than the appearance. Riot Games makes millions from selling skins, and to those who buy them, it’s worth it.
I’m still not interested in buying an NFT
And that’s okay. Not everything will have value to everyone. You won’t find me waiting in line all night in hopes of buying the latest pair of Air Jordans, because I don’t find value in them. And yet it is still a multi-million dollar industry that millions of people are extremely passionate about.
You don’t have to buy an NFT if it doesn’t have value to you.
However, you do have to recognize that there are many people who are excited by this new digital world, where ownership is clear, and the number of copies are tracked.
Sure you could make a copy of the digital file, but that doesn’t make you the owner. But the copy you made has no value because the owner can be easily verified. It’s like creating a forgery of the Mona Lisa. It’s worthless.
The future of NFTs
Our digital world is growing. We are spending more and more of our time online, and NFTs may be a sign of what is yet to come.
Companies are already thinking about bringing in a physical aspect to NFTs.
Can you imagine if this were to expand? If Sorare could one day begin offering discounts on match tickets, what would come next? What if owning a rare card could unlock exclusive merchandise? Or events? Or opportunities? Or experiences?
The possibilities are endless.
Many believe NFTs are only the beginning of how we use blockchain and cryptocurrency. Some people are starting wonder what else blockchain will have an impact on in the future.
And if you really think about it, it could fundamentally change how our world works. What would that look like?
That’s what I want to explore in my upcoming articles. Over the next few months, I will be speaking with various blockchain and NFT enthusiasts and experts to help paint a picture of the future, and what is yet to come.
If you or someone you know are working on something interesting in NFTs, please mention it in the comment section
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Damn, you read this far? Here’s how you can start buying NFTs
First, you’ll need a digital wallet such as:
Now you can go shopping.
The main Ethereum NFT marketplaces are:
Interested in digital art? Take a look at:
Into sports?
And if you want to explore more, just start researching. There are so many interviews being conducted with NFT experts and enthusiasts. More information is coming out everyday as the hype around NFTs continues to grow. It’s easy to learn more.