If you’re new to the world of cryptocurrency, you’ve likely heard the term “NFT” thrown around quite a bit lately. But what exactly does it mean?
In this post, we’ll break down what NFTs are, how they work, and why they’ve become such a hot topic in the crypto world.
The Basics – What are NFTs?
First of all, let’s start with the basics: NFT stands for “non-fungible token.”
A “fungible” asset is something that can be exchanged for something else of equal value – like a dollar bill, for example.
NFTs, on the other hand, are “unique” and cannot be exchanged for something else of equal value.
Why are NFTs unique in the crypto space? Why should I care?
So what makes NFTs so special?
In short, they allow for the creation and ownership of digital assets that are truly one-of-a-kind. In the past, digital files like images, videos, and music could be easily copied and shared, which made it difficult to assign any real value to them.
NFTs attempt to solve this problem by using blockchain technology to create a permanent, verifiable record of ownership for a specific digital asset.
Here’s how it works:
- An artist, musician, or other creator decides they want to sell a unique digital asset as an NFT. This could be a piece of artwork, a song, a video clip, or anything else they’ve created.
- They mint the NFT on a blockchain platform like Ethereum. This essentially creates a unique digital certificate of ownership for the asset, which is recorded on the blockchain and cannot be duplicated or altered.
- The NFT is then put up for sale on a marketplace like OpenSea or Nifty Gateway. Potential buyers can bid on the NFT just like they would for a physical item at an auction.
- Once the NFT is sold, the buyer receives the digital certificate of ownership, which proves that they are the sole owner of that specific digital asset.
So why would someone want to own an NFT?
This is a great question, and one that’s at the center of the NFT debate!
There are a few reasons:
- Unique ownership: NFTs allow collectors to own digital assets that are truly one-of-a-kind. This can be appealing to people who want to own a piece of history, or who want to support a specific artist or creator.
- Investment potential: Just like with physical art or collectibles, NFTs can increase in value over time. Some people see NFTs as a way to invest in emerging artists or new technologies.
- Access to exclusive content: Some NFTs come with special perks, like access to private Discord channels, exclusive merchandise, or even in-game bonuses.
Of course, with any emerging technology, there are plenty of questions and criticisms surrounding NFTs. Here are a few of the most common:
- Environmental concerns: The process of minting NFTs requires a significant amount of energy, which has led to concerns about the environmental impact of the technology.
- Accessibility: Some people worry that NFTs will further divide the haves and have-nots, with only wealthy collectors able to afford to own unique digital assets.
- Copyright issues: NFTs don’t necessarily solve the problem of copyright infringement – just because you own an NFT of a piece of art doesn’t mean you have the right to reproduce or sell that artwork.
While I don’t generally watch long-form YouTube content like this, there is an excellent video from Folding Ideas called “Line Goes Up” which details a lot of the criticism of NFTs and is quite convincing.
Check it out here:
So, what’s the bottom line on NFTs?
As with any new technology, it’s important to approach them with a critical eye and to weigh the potential benefits against the potential drawbacks.
But there’s no denying that NFTs have opened up a whole new world of possibilities for digital artists, musicians, and creators – and they’re sure to remain a hot topic in the crypto world for the foreseeable future.
That being said, in late 2022 NFTs found themselves in a tight spot, with trading values cratering quite a bit. To me, this makes the future of NFTs quite uncertain. From a legal perspective, there are lots of novel issues involved, but also some very classic legal principles related to copyright, trademark, contracts, and other legal theories.
Have a question about NFTs or want to integrate them into your game or website? Looking to start an NFT marketplace or license out your intellectual property for use in NFTs? Head to my contact page to set up a free consultation here!
Frequently Asked Questions:
What can be sold as an NFT?
NFTs can be used to sell any type of digital asset that can be uniquely identified – this includes things like artwork, music, videos, and even tweets or memes. Essentially, any digital file can be turned into an NFT.
How do I buy an NFT?
You can buy NFTs on a variety of online marketplaces, such as OpenSea, Nifty Gateway, or SuperRare. To purchase an NFT, you’ll typically need to set up a digital wallet and connect it to the marketplace. From there, you can browse available NFTs and place bids or make purchases with cryptocurrency.
How much do NFTs cost?
The cost of NFTs varies widely depending on the asset being sold, the artist or creator behind it, and the current demand for the asset. Some NFTs have sold for millions of dollars, while others are available for just a few dollars.
Can I make my own NFT?
Yes! There are a number of blockchain platforms, such as Ethereum, that allow users to mint their own NFTs. However, it’s important to note that minting an NFT typically requires a significant amount of cryptocurrency, as well as a certain level of technical expertise.
Are NFTs a good investment?
As with any type of investment, it’s impossible to predict with certainty whether NFTs will increase or decrease in value over time. Some NFTs have seen dramatic increases in value, while others have failed to attract significant demand. It’s important to do your research and approach NFTs as a speculative investment, rather than a sure thing.