What is NFT
Some people describe NFT as a completely unique digital signature, digital certificate, social currency and even financial investment.
NFT is a non-fungible token. A non-fungible token is a unit of data stored on a digital ledger, called a blockchain, that certifies a digital asset to be unique and therefore not interchangeable. NFTs can be used to represent items such as photos, videos, audio, and other types of digital files.
In easy words, NFTs are "one-of-a-kind" assets in the digital world that can be bought and sold with cryptocurrency.
So how can NFTs be valuable if you can not exchange it for something else? The answer is scarcity.
Think about it. Why are arts expensive? NFT arts are basically the same as classic arts but they are in digital. Some of these classic arts also appreciate their value overtime. For example, why is the world's famous paint "Monalisa" so valuable today ( US$850 million in 2019) ? - because it is one of a kind and there is only one original painting. A lot of the conversation is about NFTs as an evolution of fine art collecting, only with digital art.
But can't you just copy and download the arts off the internet?
Good question! You can, but even if you did, the piece of art wouldn't be the original art. So the point of NFT is to obtain the right to the original art.
Now the question is, how do you know if the art is original or copied?
You know this from the technology used in NFTs. With NFTs, artwork can be "tokenised" to create a digital certificate of ownership that can be bought and sold. So you can keep track of where the original art started with the technology.
Why do we even want to buy the ownership of arts?
The same question can be asked for:
Why do you buy luxury branded bags?
Why do you value the check mark on social media?
Why do you choose what cloth to wear?
Why do you pay a little extra money for stamps and aviators for apps and games?
Why is it possible for people to make money selling products on amazon and ebay…?
People care about branded goods and check on social media for status and expressing their identity.
People choose what to wear to communicate who they are to their friends and people around them.
People sell products online for a profit because there is an arbitrage opportunity between one market to another.
Depending on where you are looking at what we have already mentioned, NFTs are exactly the same thing.
The reason I called NFTs as social currencies is they are tools for communication for some people. Owning “cool arts” that they like and resonate with is one way for people to express what they like and who they are.
Others also buy these arts in the means to support the artists which also means that by supporting the artist, the person who bought this art is still communicating what they stand for which is one way to express who they are!
We are all social animals and we like to communicate with others and NFTs are coming into the play to add digital and future dynamics into the communication.
Finally, NFTs also hold interesting financial dynamics.
Like the MonaLisa in example, arts appreciate their value for their uniqueness and NFT arts are in no exception.
The concept of buy low and sell high in these arts exist strongly and what is interesting about this is that as we talked earlier all NFTs are one of a kind and there are no other products out there that have the exact same value, so you can not trade. This means that the price of the arts are decided by the demands and how much buyers are willing to pay. What is good in arts are so subjective hence this is very interesting.
Example of NFT
The most famous example will be by Mike Winkelmann, aka Beeple.
Called Everydays -The First 5000, it comprises, as the name suggests, 5,000 individual images created every day from 2007 to 2021 and posted on Beeple's Instagram.
An hour after the auction began, the price jumped from $100 to $1 million
How can you get involved
You can be an digital artist and make your original art to publish it on market places like:
You can become a collector and buy there arts ( you can do this for your hobby) or you can also hold them as your investment to sell these arts