Non-Fungible Tokens (NFTs) - Explained in a Detailed Manner!
People making millions of dollars creating, buying, and selling NFTs and you wonder ‘why and how’ and if you can ever jump on the bandwagon… NFTs explained here in a detailed manner!
Facebook changed its name to Meta last year and the Indian government this year depicted a peek into the meta world in the Republic Day parade and then included the virtual assets in Budget 2022, these two mega-trends are all the rage. Yes, both the events are related to each other and even to the news that ‘12-year olds made millions selling NFTs’ and that digital collectibles like Bored Apes and CryptoPunks rapidly became status symbols for the newly rich.
Now, what’s happening here? Well, in simple words all things physical are getting translated into virtual realms. In the physical world, you'd go to a theater, and purchase a ticket to watch a movie. Virtually, your currency is a cryptocurrency that you have in your wallet- enabling you to make purchases, the movie ticket that you got that enabled you to have an experience is an NFT (non-fungible token), and theater can be any blockchain ecosystem- let’s go with Ethereum blockchain since that is the most popular. What is blockchain now, you may wonder? When you made a purchase and got a receipt in the physical world, that entire transaction was recorded in a ledger with the theater you went to, blockchain is that ledger of the virtual world. Now whether the transaction data should be controlled by the theater or kept anonymous to them and safe with you is a debate of centralization vs decentralization of blockchain in virtual reality. But that’s for another day, today let us focus on Non-fungible tokens, or NFTs as they are known.
What The Fudge Is This Non-Fungible?
Anything is non-fungible when it is unique, and can neither be replaced by any other item nor exchanged or traded. Whereas a token is a representation, a symbol of something significant. Hence a non-fungible token is a representation of a digital asset that is unique and cannot be swapped or traded equally for another NFT of the same type. Essentially, NFTs are like physical collector’s items, but only in the digital world, they can represent digital art, an in-game item, virtual property in a virtual world or actual land in the real, or a real-world asset like a deed or title to a ticket to an event.
Let's go back to the example we started with, the ticket that you buy for a seat at the movie theater belongs to you unless you decide to sell it to someone else, but then only it will have only one owner at a time. The same is applicable here, buyers of NFTs also get exclusive ownership rights. Not just that but its owner or creator can store their information or their signature in the case of artists, in NFTs’ metadata. This unique data makes it easy to verify their ownership and enables digital pieces or content to be authenticated as original or a part of a limited release by its creators.
The Origin Story Of NFTs’ Quirky Colonialism
What started in 2014 with NFT “Quantum”, by Kevin McCoy, a digital artist, exploded the CryptoArt movement in 2017 with ‘Cyptopunks’ after the world got introduced to the Ethereum blockchain in 2015. Given the historical value of CryptoPunks, this story, and scarcity with the NFT surge in 2021, you can understand why one of the Cryptopunk NFTs from the series, was sold for USD 530 M, making it the highest NFT sale yet. Then in 2022, the sale of a tokenized digital artwork titled ‘Everydays – The First 5000 Days’ by an artist called Beeple, went for $69 million, unleashing an ‘NFT bubble’.
At this point, FOMO is what is driving this revolution, numerous artists, musicians, and celebrities have sold NFTs for thousands of dollars and can't keep away from this one-of-a-kind thing existing in an entirely intangible state. It's fair to say that NFTs are starting to become commercial!
NFT Lingo Decoded Before Curiosity Kills The Cat
“GAS”, “Mint”, “DYOR”, wondering what on earth this new language is with all the buzz that is around? While some of the jargon means the same as our dictionary, others are confined within the NFT space
- Mint: To turn your digital token, no matter if it’s a GIF or a controversial tweet, as part of the Ethereum blockchain
- Project: An art project but in the digital world, basically it is a collection of art or digital assets all released together by a creator, as part of the same overall road map or story
- Roadmap: Means the same as in our business lingo, designed to help you understand the scope, purpose, and direction of the underlying project
- DYOR: Always, do your own research (DYOR) before you invest in a project
- GAS: Tax you pay to mint, buy, or sell your digital assets on a blockchain network
- ALPHA: To have access to important insider information that is not known to others
- Farm: To stake an NFT to receive rewards in tokens or stake tokens to receive an NFT as a reward
Is this getting interesting and do you want to know where to get started?
Well, to begin with, anyone can buy, sell, create or own an NFT. But before you proceed, make sure you have a cryptocurrency wallet with some currency in it.
- Follow & Admire NFTs: Are you a fan or follower of an artist, creator or celebrity then follow them on Twitter as most are launching their NFT collections
- Buy & Own NFTs: Participate in an auction to get one for yourself, keep up with the buzz
- Mint & Sell NFTs: Just look for an NFT-centric platform to connect your wallet (depending on which cryptocurrency you own), and upload your image or file to turn it into an NFT. Ethereum Blockchain is the most popular that you can start with.
Why are we getting into such details, you may wonder...Well, NFTs are the key to everything, as the future says!
It is more than meets the eye, NFTs aren’t just a piece of art, they unlock experiences. Remember, watching the movie as an experience from the physical world? Well, exactly that. As more creative entrepreneurs find their way into the NFT space, both the numbers and depth of experiences will be leveling up, not only in the world of art, music, and gaming but exploding in the digital economy.
With transactions easily surpassing a billion dollars, hype from a die-hard community colliding with concern for the tech’s impact, this is just getting warmed up. We are in for a whole lot crazier right about next!