Part of doing this job is extensive research, so when NFTs turned up in my email as an exploding topic, I set out to discover what they were, if you happen to follow me on social media you would have seen me talk about this, and after hours and hours of research, I think I know what, and how they work.
WHAT IS AN NFT?
NFT stands for Non-fungible token. A “Non-fungible” means unique and not replaceable. A unique non-replaceable token. This means you can’t make and circulate fake collectibles because each item can be traced back to the original issuer.
Think of them as tickets to a Konshens event. Each ticket is unique and contains information like the purchaser’s name, the date of the event, and the venue. This data then makes it impossible for Konshens tickets to be traded in for a Willy Paul event.
Here is an example if you are still lost, I know I was. A Sh 1000 note is fungible, you can exchange your note with another Sh 1000 note and retain the same value, however, NFTs are unique with no two tokens being the same.
So a non-fungible token, a token of what? appreciation? No, NFTs are a special type of cryptographic token which represents something unique, NFTs can literally be anything digital. Say a digital piece of art or music, still lost? Here’s another example:
American Youtuber and boxer, Logan Paul, launched an NFT early last month, he turned himself into an NFT Pokemon card and recorded a groundbreaking $1 million in sales in the first thirty minutes and $3.5 million on the first day.
How? he made a limited edition of 44 NFTs featuring a “holographic” image of himself in his boxing gear mocked up as a Pokemon card. I’ll call it the Poke-Logan.
So, How do NFTs work? And Why Are People Buying Them?
So anything can be an NFT, the picture above of Poke-Logan is an NFT, there is no physical copy of the art and I have the digital versi… wait, I have it for free, just like someone who paid thousands of dollars for it. Make it make sense!
It’s just a copy, “wink-wink” NFTs give you something that can’t be copied, the ownership of the work. People are buying NFTs out of the belief that they’ll be able to prove ownership of the virtual item thanks to blockchain.
The vast majority of NFTs are part of the Ethereum blockchain, they are built using one of two Ethereum token standards created by Ethereum that enable software developers to easily deploy NFTs and ensure they’re compatible with the broader ecosystem, including exchanges and wallet services.
Digital collectibles are just like physical art collecting, anyone can buy a Monalisa painting but only one person, France in this case, can own the original.
NFTs like the Poke-Logan, work like any other speculative asset, like Bitcoin, you buy it and wait for its value to go up, and then you can sell it for a profit.
So 2021, we’re buying and selling air. Well, last year, the total value of transactions in the Non-fungible token (NFT) sector surged by 299pc on a year-on-year basis, reaching over $250 million.
Big leading companies worldwide like Nike, Louis Vuitton, and Warner Music, are experimenting with NFTs by creating online collectibles and games.
Just recently, tech giant Microsoft collaborated with Enjin to launch customizable NFTs compatible and transferrable with the sandbox-adventure video game Minecraft.
So what really is an NFT?