NFT for Beginners
A non-fungible token (NFT) uses the technology of blockchain to create something that is unique in the digital world.
The meaning of fungible describes items that are the exact equal value and interchangeable with each other for example, One Dollar is the same as One dollar.
So Non-fungible more or less means that it’s unique and can’t be replaced with something else. Something like a one-of-a-kind trading card or this painting that I painted is considered non-fungible.
NFTs helps establish proof of ownership with only one official owner at one time in the digital world. Because in real life you just have to pass your trading card or painting to someone and that’s it. But online, how do you prove it because most of the time you could just right click and save an image.
The invention of NFTs is a recent breakthrough for the digital world because it allows the owner to prove they own it. It is something like a certificate of authenticity. This means that even if you could right-click and save that image on your computer, only the owner could proof it, and everyone else would be able to verify who is the actual owner using blockchain technology. With NFTs, it’s issued from a source and each transaction or transfer of ownership is recorded in the blockchain so you can basically track the entire history of that piece of NFT since there is no way to modify past records.
NFT could be used to authenticate anything digital or non-digital. It could a non-digital item such as deeds to a property, tickets to a concert, legal documents like your vaccine certificate or it could be a digital item such as tweet, music, and art.
The current excitement with NFT whenever people talk about it is typically art. You probably have heard of this rock selling for $1.3 million or the first NFT art created by Beeple auctioned at Christie’s for $69 million.
The more you try to wrap your head around understanding what is a non-fungible token, the more you get confused.
Well, there are a few reasons why people buy NFTs but first, let us just unpack the properties of an NFT.
An NFT is:
- Unique
Each NFT has unique properties that are stored in metadata as a token on the blockchain. - Indivisible
It cannot be divided into small parts or decimals. So you cannot buy a fraction of the NFT. - Scarce
While you could easily right-click and save the image of the $1.3 million rock, there’s only one definitive actual version that is sitting in this some guy’s wallet. - Guarantee ownership of the asset
An NFT can only have one owner at any one time, when you buy an NFT, you purchase the exclusive ownership of a particular digital asset. It’s a little like buying an autographed version of the jpg, but anyone can view the work, save it on their computer and reshare them on the internet.
But your ownership can be verified on the blockchain - Transferrable
NFT can be transferrable to another person via the blockchain. Which means you can buy and sell it.
Each transaction would be recorded on the blockchain so you would be able to backtrack and trace it
With this, some knowledge about marketing and understanding how the luxury market industry works, you maybe able to understand why people are buying NFTS. How people can be influenced or FOMO into spending money on NFTs.
- Collectability
Some people just like the art and some do want to support the artist.
There’s also a project which is led by dapper labs in collaboration with NBA. It’s called NBA Topshot that allows you to own iconic moments from NBA. It follows how trading card system works where people just like to collect. Like Pokemon cards.
There is no inherent value other than what the market ascribes to them, so it’s hard to determine their worth. As a result, the NFT market is similar to the art market. Like, how much would you pay for this art behind me? Would you pay hundreds or thousands? - Prestige and Bragging rights
On top of collectability, people like to own things in order to brag about it and to be part of a tribe. Therefore profile pic NFTs has been doing quite well. Because once you buy it, you’ll be able to set it as your display picture. On your Twitter or discord.
Just like how people pay for skins in a game. For example on Fortnite, even though the skins you purchase do not function as any additional power-up in the game, people still buy them. Just so they can differentiate from others and to look good online while interacting with others
Similarly, when you buy a Rolex you are looking at showing off your status because if it is just for functional purposes, an Apple watch does the same thing at a cheaper price. - Investing
Some people would also invest in NFTs for the technology and what the artist and developers promise to deliver in the future. For example, NFTs can include a feature that allows existing NFTs holders to be paid a certain percentage every time NFT is sold.
Or perhaps it is one of the iconic projects such as cryptokitties where you could breed valuable kitties and resell them. - Trading — AKA flippers
You can make money just by buying and selling the right projects. But first, you’ll need to learn how to price a project based on attributes such as the art itself, founder, roadmap, utility, community, and so on. You’ll also understand demand supply and human psychology to see whether the project would appeal to buyers.
What are our thoughts about NFTs?
NFTs is reminiscent of how ICOs were like in 2017. Right now as more projects are flooding the market as it’s lucrative, it’s hard to determine which one is a get-rich-quick scheme for the NFT creator and which projects are legit.
It is still at an early and experimental stage as people are learning how blockchain and NFT technology could work. I feel like the narrative surrounding NFTs would continue to evolve as more people discover what are the best use cases for the technology.
In my personal experience seeing behind the scenes where Jingles launched an NFT project, I could see him trying to explore ways to harness and apply the technology in his work. Like how bitcoin used to be a currency and now it’s a stored value. We could see really cool inventions and innovations in this space.
NFTs appeals to high-risk taker investor with an opportunity to make huge profits if you can discern what is a good investment.
Cryptocurrency is already considered quite a volatile investment for many. So if you are someone who likes to play it safe, perhaps NFT might not be your cup of tea as you could potentially lose all the money that you put in.
But if you are still keen to see how you can still participate and have a stake future of blockchain technology, but you are not really sure which NFT projects are good, you can consider investing in cryptocurrency instead.
NFTs are bought and sold using cryptocurrency are usually Ethereum, Solana, Cardano, Terra. These cryptocurrencies can be bought from various exchanges such as Binance, Huobi, Bittrex, and many more. Typically, we would buy our cryptocurrency via exchanges.
source: medium.com