- NFTs have been around since as early as 2012. They gained popularity in the crypto community in 2017 when a company, Dapper Labs, started selling NFTs linked to unique digital cat cartoons known as CryptoKitties, and people went crazy for these cute digital kitties.
NFT’s record prices are being reached for NFTs linked to different underlying assets. For example:
- Beep’s digital artwork “Everydays — The First Five Thousand Days” sold for a record US$69 million by Christie’s auction house.
- Twitter’s CEO, Jack Dorsey, auctioned an NFT of his first-ever tweet, “just setting up my Twitter,” which sold for over US$2.9 million.
- NBA Top Shot crossed the US$500 million mark, making it the biggest NFT marketplace as of the date of publication.
What are NFTs? And why are they being sold for so much money?
What is NFT?
NFT stands for “non-fungible token,” It can technically contain anything digital, including drawings, animated GIFs, songs, or items in video games. Non-fungible means it is individual. NFTs are cryptographic assets on a blockchain with unique identification codes and metadata that distinguish them from each other. Unlike cryptocurrencies, they cannot be traded or exchanged at equivalency. How do NFT’s Work?
NFTs are digital certificates, or “tokens” stored on decentralized ledgers popularly referred to as the blockchain. NFTs use software code, referred to as “smart contracts,” to transfer the digital certificate of ownership, ensuring proof of ownership in the process. It also uses the blockchain to record transactions. Cryptocurrency creates interchangeable (or “fungible”) tokens; NFTs create unique, noninterchangeable “tokens” with distinct identifiers.
Proof of Ownership as NFT?
- Proving you own an NFT is similar to proving you have ETH in your account. For example, let’s say you purchase an NFT, and the ownership of the unique token is transferred to your wallet via your public address. The “token” proves that your copy of the digital file is the original. When someone buys an NFT from the creator, they obtain ownership because it becomes their property. After all, an NFT is a digital certificate of ownership representing the purchase of a digital asset traceable on the blockchain.
Value to Creators?
- Some NFTs include a structure for automatically collecting royalties each time a sale of the NFT occurs. For example, an artist of a work represented by an NFT may receive a 10% royalty each time the NFT sells on the blockchain.
Do you own your content?
Suppose you’re Marc, a talented comedian. You upload a new comedy talk show to YouTube, and it gets 1 million plays (a viral). Unfortunately Intermediaries take most of your earnings: YouTube only pays between $2000 and $4,000 for 1M views.
Intermediaries own your content rights: Like many new artists, you gave up your show’s rights to the record label. Without your show’s rights, you can’t even perform it live to fans without your label’s approval. Intermediaries control how many fans see your content: YouTube can change its discovery algorithms or even take down your content at any moment. Intermediaries help you create content, reach fans, and make money. But they also capture most of the value from your content. Even the real Joe Rogan had to re-record his show to own her show.
How can NFTs help YOU?
- You create an NFT (URL to show ) for your comedian talk show, and you are selling for $30,000.
- A fan buys your NFT for $30,000. The marketplace takes 15%, earning 85% or $25,500. After a month, she resells it to another fan for $40,000 (you make 10% or $4,000 in royalties). Instead of only making $800, you’ve earned $29,500 from just two transactions. Why will someone buy NFT’s?
- Most people buy NFTs to make money
- NFTs make it possible for super fans to make money by owning content that can appreciate by the creator. Suppose you paid $30,000 to buy an NFT from an unknown artist. If that artist became famous a year later, you could sell the same NFT at a much higher price.
- Like stocks, NFTs let fans make a bet on the creator’s potential.
The NFT world is relatively new. In theory, the scope for NFTs is anything unique that needs provable ownership. Here are some examples of NFTs that exist today to help you get the idea:
- A unique digital artwork
- A unique sneaker in a limited-run fashion line
- An in-game item
- An essay
- A digital collectible
- A domain name
- A ticket that gives you access to an event or a coupon