In our new series, we will take ten topics and explain them to you in the time it takes for your morning toast to cook, 2 minutes, that's all we've got, so here goes…
NFTs in 2 Minutes Flat (feel free to time yourself)
According to the Zinnia docs…
"NFTs are cryptocurrency tokens that represent information of unique or rare digital and real-world assets that, unlike a dollar or a bitcoin, are not interchangeable on a 1:1 basis."
NFTs were initially developed in the early days around 2013-2014 but did nothing to gain attention until 2017 when CryptoPunks and then CryptoKitties launched NFTs into the stratosphere and gained massive global media coverage. But for the next few years, NFTs died slowly until several factors applied the defibrillators at the height of the pandemic, and NFTs bounced back to life on an epic scale. A report by NonFungible.com shows the volume of dollars traded in NFTs went from $82.4 million in 2020 to $17.6 billion in 2021, a mind-blowing increase of 21,350%! Since the crypto market has taken a downturn, so has the crazy world of NFTs. But we're not here to muse over the value of NFTs, so let's get on with what they are precisely.
Something fungible is mutually interchangeable, like a dollar bill, for example. NFTs are the opposite of this and are non-fungible because they have data attributed to them that is unique and can't be replaced like for like. And, because NFTs are on blockchain, this data is secured and can't be duplicated as the network would reject it.
Similar to cryptocurrency, NFTs are stored in blockchains and can be used through NFT-compatible wallets, which allows them to be traded in online marketplaces such as OpenSea. Like other pieces of art, collectibles, or goods NFTs can be worth whatever price somebody is willing to pay. This has resulted in some genuinely staggering sales. For example, a Beeple NFT titled 'Everydays: The First 5000 Days' sold for $69.3 million (38525 ETH), and the most expensive CryptoPunk sold for $23.7 million (8000 ETH).
NFTs have effectively allowed creators to safely share and sell their work online without fear of it being stolen. Currently, many NFTs are collectibles like Bored Ape Yacht Club, fan-based NFTs such as NBA Top Shots, or game related, for example, Revomon. However, many potential use cases are yet to be fully explored, for instance, supply chain management, academic credentials, medical records, ticketing, and more.
It is easy to get confused with new technology and particularly so with NFTs, so as with any investment, it is always wise to do your own research first and make sure you have a thorough understanding of exactly where your hard-earned money is going. A common trap with NFTs is the misconception that the piece of art being purchased is stored on the blockchain, this is not strictly the case. What you are buying with an NFT is a piece of digital art along with a separate digital verification of authenticity, like a receipt, title, or deed, that is secured on a blockchain. And, despite you owning the original copy and the proof that it is, the artist can still retain the copyright and reproduction rights.
As we described above, NFTs are yet to realize their full potential and have the capability to be an intrinsic part of Web3 and contribute to a decentralized digital economy. Fractional ownership opens up a whole new marketplace, and along with development into licensing, certificates, ticketing, and other use cases, NFTs could revolutionize current business models. And, it almost goes without saying that your assets being verifiable on a blockchain allows for greater transparency, security, and trust, a huge advantage in reducing friction in trade.
Well, let's leave it there for the time being. Like with anything in life, the more you look into it, the more complicated it gets.
Further down the line, we will explain NFTs in more depth and look at what part they will have to play in the future of the internet.
But, our time is up!
Next on the radar are Smart Contracts.