Simple explanation_
Non-fungible tokens (NFTs) are blockchain-based tokens that can be linked to anything from digital art to physical assets. Currently, the majority of NFTs are tied to one-of-a-kind digital collectibles (ex. art, playing cards). But the possibilities for NFTs are vast, and creators of all types have already started taking notice.
Slightly more technical_
Within their code, NFTs contain:
- 1) uniquely identifying information like the creation date and metadata that defines characteristic of the asset
- 2) smart contracts that allow for seamless, friction-free transactions
This data adds value by 1) preventing forgery/copies 2) displaying a transparent, verifiable, immutable (unchangeable) history of ownership.
Non-fungible vs fungible_
Non-fungible things are distinctly unique snowflakes. Everyday examples include plane tickets and your pet dog. Fungible things include subway tickets, US dollars, Bitcoin. In each of the fungible examples, any one of these can be easily exchanged for another one from the same category.
Skyrocketing valuations_
NFTs can be linked to assets from diverse categories of collectibles – from virtual pets like Cryptokitties, to 3D artwork, to digital football trading cards. All around the world, thriving markets are rapidly evolving centered on highly sought-after assets. Through digital collectibles markets like OpenSea and SuperRare, creators, collectors, and traders meet to purchase and sell assets. Speculation, scarcity, supply, demand, and desirability are all factors that determine the value of pieces. Similar to traditional collectibles (like original Pokeman cards, Beanie Babies, and Picasso paintings), an NFT is worth as much as anyone is willing to pay for it.
Let’s explore some impressive valuations being set by early adopters in this niche.
- $21,350: for a digital artwork created by 17 y/o artist Fewocious
- $47,500: for a tokenized video clip of a LeBron James dunk highlight
- $65,000: for a Sorare trading card representing footballer Kylian Mbappé
- $777,777: for a portfolio of work by digital artist Beeple
- $9,000,000: for a collection of 16,000 pieces of NFT art on the Hashmasks platform
The digital work above sold for 420 ETH (~$650,000) on Feb 4. Since blockchain is fully transparent, you can easily view the entire history of this digital artwork. The Switzerland-based Hashmask platform hosts a collection of 16,000+ unique NFT portraits created by 70+ artists.
Underlying tech_
NFTs are made possible by smart-contract-enabled blockchains. The first platform to support non-fungible assets was Ethereum’s ERC-721 standard. This tech was adopted earliest by CryptoPunks and popularized by CryptoKitties in 2017. Other platforms are emerging with NFT support, including FLOW, EOS, NEO, and TRON.
How to buy NFTs_
As this sector expands, a flurry of NFT markets is emerging. Examples include Rarible, OpenSea, and Enjin Marketplace. Once a user is registered to these platforms, the buying process is super straightforward. The user interfaces are clean, straightforward, and user-friendly. One small hurdle is that you will need an Ethereum-enabled wallet to complete transactions. This is how you will purchase and store your tokens. There are hardware and software wallets that work for this process. My favorite hardware wallet is Ledger Nano. If you use my link you can get one for 20% off. #shamelessplug
What is next for NFTs_
Let’s save that for another post, another day. But until then, let me know what you think about this nascent and growing market for crypto collectibles.
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