What are NFTs (Non-Fungible Token)

William Meller - What are NFTs (Non-Fungible Token)
An NFT is a digital asset with unique properties, bought and sold online, verifiable via the blockchain ledger with a unique token to create a digital certificate of ownership.

If the GIF of a cat was sold for $690,000 and a tweet from Jack Dorsey for $2.9 million, something is happening, right?

Fungibility is when a good's individual units are interchangeable and indistinguishable in value. Currency like dollars is fungible. Every dollar is interchangeable and has the same value as any other dollar, you can even swap a $10 note for two $5 notes, and it will have the same value in the end.

A Non-Fungible Token or good has unique properties, just like a piece of art from Leonardo Da Vinci, making it have a different value from other similar tokens or goods.

NFTs can really be anything digital (such as drawings, music, memes, etc.), but a lot of the current agitation is around using the tech to sell digital art. 

These NFTs can work like any other speculative asset, where you buy it and hope that the value of it goes up one day, so you can sell it for a profit. NFTs work like cryptographic tokens even stored in digital wallets, but, unlike cryptocurrencies such as Bitcoin or Ethereum, NFTs are not mutually interchangeable, hence not fungible. 

While all bitcoins are equal, each NFT may represent a different underlying asset and thus may have a different value.

Traditional artwork like paintings is valuable precisely because they are one of a kind. But digital files can be easily and endlessly duplicated. With NFTs, artwork can have a unique token to create a digital certificate of ownership that can be bought and sold.

But it is important to know that is the same mindset as buying a painting of a famous artist. If you buy it, it does not mean you now have the copyright (as the author) of that art, you are just the owner, a unique owner of a unique piece of art.

The ownership of an NFT works in the same way! It does not grant copyright or intellectual property rights to whatever digital asset the token represents. In that sense, a NFT is merely a proof of ownership that is separate from the copyright.

While someone may sell an NFT representing their work, the buyer will not necessarily receive copyright privileges when ownership of the NFT is changed and so the original owner is allowed to create more NFTs of the same work. 

Anyone can create an NFT. All that's needed is a digital wallet, a small purchase of Ethereum, and a connection to an NFT marketplace where you'll be able to upload and turn the content into an NFT or crypto art. The unique identity and ownership of an NFT are verifiable via the blockchain ledger.

Essentially, any digital representation can be purchased as an NFT. But there are a few things to consider when buying one, especially if you're a newbie. You'll need to decide what marketplace to buy from, what type of digital wallet is required to store it and what kind of cryptocurrency you'll need to complete the sale. 

Some interesting facts:
  • The first tweet from Twitter boss Jack Dorsey was sold for $2.9 million
  • NFTs are traded since around 2017
  • The first known NFT was created by Kevin McCoy and Anil Dash in May 2014
  • The market exceeded $10 billion in transactions, in the third quarter of 2021
  • The GIF of a cat (Rainbow Cat) was sold for $690,000
  • A NFT marketplace, OpenSea, had $2.6 billion of sales just in October 2021
  • A single LeBron James highlight NFT fetched more than $200,000
  • The world’s largest NFT museum is opening in New York (111 West 57th Street)

Non-fungible tokens are an evolution of the relatively simple concept of cryptocurrencies. Modern finance systems consist of sophisticated trading and loan systems for different asset types, ranging from real estate to lending contracts to artwork. 

By enabling digital representations of physical assets, NFTs are a step forward in the reinvention of this infrastructure. 

Of course that the criticism of NFTs comes from the traditional art world because it’s scared of the disruption

Okay, what are NFTs in one paragraph?

An NFT is a digital asset with unique properties, bought and sold online, verifiable via the blockchain ledger. With NFTs, artwork can have a unique token to create a digital certificate of ownership (not changing the author copyright) that can be bought and sold.

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