NFT 101

WHAT IS AN NFT? WHAT DOES NFT STAND FOR?

Non-fungible token.

That doesn’t make it any clearer.

Right, sorry. “Non-fungible” more or less means that it’s unique and can’t be replaced with something else.

For example, a bitcoin is fungible — trade one for another bitcoin, and you’ll have exactly the same thing. A one-of-a-kind player trading card, however, is non-fungible. If you traded it for a different player trading card, you’d have something completely different.

Say you gave up a 1993 Michael Jordan Topp’s Card, and got a 2020 Lebron James Visual Dunk, which Lebron fans might call the Mona Lisa of NFT’s ” (I’ll take their word for it.) The point is the perceived value is different.

How do NFTs work?

At a very high level, most NFTs are part of the Ethereum blockchain. Ethereum is a cryptocurrency, like bitcoin or dogecoin, but its blockchain also supports these NFTs, which store extra information that makes them work differently from, say, an ETH coin. It is worth noting that other blockchains can implement their own versions of NFTs. (Some already have.)

What’s worth picking up at the NFT Marketplace?

NFTs can really be anything digital (such as drawings, music, your brain downloaded and turned into an AI), but a lot of the current excitement is around using the tech to sell digital art.

Dogecoin isn’t an NFT. But this GIF of a dogecoin is. GIF: NyanCat on OpenSea

You mean, like, people buying my good tweets?

I don’t think anyone can stop you, but that’s not really what I meant. A lot of the conversation is about NFTs as an evolution of fine art collecting, only with digital art.

(Side note, when coming up with the line “buying my good tweets,” we were trying to think of something so silly that it wouldn’t be a real thing. So of course the founder of Twitter sold one for just under $3 million in 2021.

Do people really think this will become like art collecting?

I’m sure some people really hope so — like whoever paid almost $390,000 for a 50-second video by Grimes or the person who paid $6.6 million for a video by Beeple. Actually, one of Beeple’s pieces was auctioned at Christie’s.

Whoever got that Monet can actually appreciate it as a physical object. With digital art, a copy is literally as good as the original.

But the flex of owning an original Beeple...

What’s the point?

That really depends on whether you’re an artist or a buyer.

I’m an artist/actor/musician/athlete .

First off: I’m proud of you. Way to go. You might be interested in NFTs because it gives you a way to sell work that there otherwise might not be much of a market for. If you come up with a really cool digital sticker idea, what are you going to do? Sell it on the iMessage App Store? No way.

By the way, the most important feature of an NFT is that it enables the creator to charge a percentage every time the NFT is sold or changes hands, making sure that if your work gets super popular and balloons in value, you’ll see some of that benefit.

I’m a buyer.

One of the obvious benefits of buying art is it lets you financially support artists you like, and that’s true with NFTs (which are way trendier than, like, Telegram stickers). Buying an NFT also usually gets you some basic usage rights, like being able to post the image online or set it as your profile picture. Plus, of course, there are bragging rights that you own the art, with a digital authenticated blockchain entry to back it up.

No, I meant I’m a collector.

Ah, okay, yes. NFTs can work like any other speculative asset, where you buy it as a digital asset that the value of it goes up with time, so you can display it in your NFT portfolio or sell it for a profit.

So every NFT is unique?

In the boring, technical sense that every NFT is a unique token on the blockchain. But while it could be like a van Gogh, where there’s only one definitive actual version. Or let’s use the example of a digital sports trading card, where there’s 50 or hundreds of numbered copies of the same artwork.

Who would pay hundreds of thousands of dollars for what basically amounts to a trading card?

Well, that’s part of what makes NFTs so messy. Some people treat them like they’re the future of fine art collecting (as a playground for the mega-rich), and some people treat them like Pokémon cards (where they’re accessible to normal people but also a playground for the mega-rich). Speaking of Pokémon cards, Logan Paul sold some NFTs relating to a million-dollar box of money or cryptocurrency…..same thing. He sold NFT video clips, which are just clips from a video you can watch on YouTube anytime you want, for up to $20,000. He also sold NFTs of a Logan Paul Pokémon card.

Who paid $20,000 for a video clip of Logan Paul?!

There’s a buyer for everyone.

Can I buy this article as an NFT?

No, but technically anything digital could be sold as an NFT (including articles from Quartz and the New York Times, provided you have anywhere from $1,800 to $560,000). deadmau5 has sold digital animated stickers. William Shatner has sold Shatner-themed trading cards(one of which was an X-ray of his teeth).

Gross. Actually, could I buy someone’s teeth as an NFT?

There have been some attempts at connecting NFTs to real-world objects, often as a sort of verification method. Nike has patented a method to verify sneakers’ authenticity using an NFT system, which it calls CryptoKicks. NTTeeth is currently in the works.

Look? Where?

There are several marketplaces that have popped up around NFTs, which allow people to buy and sell. These include OpenSea, Rarible, and Grimes’ choice, Nifty Gateway, but there are plenty of others.

What Started NFT’s.

NFTs really became technically possible when the Ethereum blockchain added support for them as part of a new standard. One of the first uses was a game called CryptoKitties that allowed users to trade and sell virtual kittens. Thank you, internet.

I love kittens.

Not as much as the person who paid over $170,000 for one.

See, the kittens show that one of the most interesting aspects of NFTs (for those of us not looking to create a digital dragon’s lair of art) is how they can be used in games. There are already games that let you have NFTs as items. One even sells virtual plots of land as NFTs. There could be opportunities for players to buy a unique in-game gun or helmet or whatever as an NFT, which would be a flex that most people could actually appreciate.

Could I pull off a museum heist to steal NFTs?

The blockchain is both transparent and anonymous. Part of the allure is that it stores a record of each time a transaction takes place, making it harder to steal and flip than, say, a painting hanging in a museum. That said, cryptocurrencies have been stolen before, so it really would depend on how the NFT is being stored and how much work a potential victim would be willing to put in to get their stuff back.

I want to maximize my blockchain use. Can I buy NFTs with cryptocurrencies?

Yes. A lot of the marketplaces accept Ethereum. But technically, anyone can sell an NFT, and they could ask for whatever currency they want. Cash, PayPal, Credit Card, CashApp, Venmo, Eth, Doge, Bitcoin, rice, chicken,….you get the picture.

Will trading my ABA Player Trading Card NFTs contribute to global warming and melt Greenland?

It’s definitely something to look out for. Since NFTs use the same blockchain technology as some energy-hungry cryptocurrencies, namely Ethereum which works off of a Proof of Work (POW) protocol they also end up using a lot of electricity. Which also sometimes make it expensive to mint NFT’s on the Blockchain. Many new Cryptocurrency have arisen to mitigate that issue. We are now transitioning to a Web3 protocol. What that means is it will now move cryptocurrency to a Proof of Stake (POS) protocol. Which makes it inexpensive to put NFT’s on the blockchain. We are no longer relaying on the fast Energy burning computers to verify transactions, but we are relying on trust of individuals, who are mostly called Stakers, to verify each transaction. Tokens like Matic, and Tezos are being used to mint NFT’s because of the low cost.

Fully transitioning to Web3 is going to take a few years though so, most NFTs are still tied to cryptocurrencies that generate a lot of greenhouse gas emissions.