Wednesday, June 16, 2021
Blockchain What are NFTs? Booming blockchain-based movement, explained

What are NFTs? Booming blockchain-based movement, explained

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These aren’t your grandpa’s trading cards.

NFTs, or non-fungible tokens, have taken the world by storm this year. When Christie’s auctioned off an NFT for more than $69 million in March, it propelled the concept squarely into the public spotlight — with everything from iconic sports moments to memes being memorialized into NFTs and sold often for staggering prices.

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But the movement can seem daunting and confusing to outsiders. Here is what it’s all about:

What is an NFT?

Fundamentally, NFTs are one-of-a-kind, verifiable digital assets that are traded on blockchain technology. 

That’s a high-tech way of saying it’s a bit of data representing something unique, or at least scarce, that allows the owner to prove the asset is theirs.

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In that way, they’re a bit like limited-edition sneakers, or collectable stamps. But instead of receiving the physical objects, buyers of NFTs receive a digital file that claims ownership of some asset, whether it be a piece of digital art, a sports highlight, song — or even a fart. 

NFTs differ from cryptocurrency in that there are many bitcoins and they’re all interchangeable, whereas NFTs each have a unique identifying code that exists on the blockchain. Put another way, NFTs are not interchangeable. 

The idea is that NFTs create a degree of scarcity on the internet, where most things currently exist in infinite supply. Just because something is turned into an NFT, though, that doesn’t mean all copies of it will disappear from the internet — just that there will only be one authentic original of the asset.

How does an NFT work?

Digital artist BEEPLE's collage called "Everydays: The First 5,000 Days."
Digital artist BEEPLE’s collage called “Everydays: The First 5,000 Days.”
REUTERS

NFTs are recorded on blockchain technology, which you’ve likely heard of as the underpinning infrastructure for cryptocurrencies. Fundamentally, a blockchain is a decentralized public ledger that records transactions.

Various blockchains have features that may or may not support the creation of NFTs tied to that ledger. The Ethereum blockchain, which is home to the digital token ether, allows multiple software developers to build apps on its network, making it a particularly attractive home to NFTs, although there are other blockchains that support the necessary tech. 

The digital file of whatever asset has been minted as an NFT is recorded on the blockchain, making it easy to verify ownership and trade NFTs. 

Is it the same as cryptocurrency?

While NFTs are built and recorded using the same technology that powers cryptocurrencies, they’re different in important ways. 

The biggest difference is that cryptocurrencies are, by design, fungible, meaning that they can be traded or exchanged for one another. Digital coins are also supposed to be equal in value, which means that one bitcoin is always equal in value to another bitcoin.

That’s part of what makes digital coins similar to traditional currencies like the US Dollar, and an important feature that crypto zealots believe will help digital coins replace centralized currencies. 

NFTs are different in that there’s no guarantee that any one NFT is equal to another. Whereas cryptocurrencies are designed to behave like physical currencies, NFTs are more like physical collectables such as art. 

How can I buy an NFT – and should I?

In order to buy an NFT, you’ll have to first find a marketplace. There are many, but a few dominate the scene. 

Twitter CEO Jack Dorsey sold his first tweet as an NFT for nearly  $3 million dollars earlier this year.
Twitter CEO Jack Dorsey sold his first tweet as an NFT for nearly $3 million dollars earlier this year.
REUTERS

OpenSea, Rarible, Mintable and Nifty Gateway are a few such marketplaces, but there are plenty of others. More niche marketplaces have emerged, too, such as NBA Top Shot for basketball video highlights-turned-NFTs.

Before you purchase from a marketplace, it’s worth figuring out what type of digital wallet is required to store the asset and what kind of currency you’ll need to complete the sale. Some marketplaces will require you to pay in cryptocurrencies like ether or bitcoin, while others will accept US Dollars, but might charge you a fee for converting it into crypto. 

As for whether you should buy one, there are a few different reasons people find the market attractive, and proponents point to futuristic uses that could prove valuable. 

Some people might be drawn to the market for practical reasons, such as being able to make an image your profile picture on social media without fear of a copyright infringement. And increasingly, there are video games that incorporate NFTs, giving users special features.

Others view the market in the same way collectors view the luxury art market: a place for value speculation. These buyers believe that the value of the NFT they want to purchase will rise over time, though some investors have scoffed at the idea.

Matt Liu, co-founder of Origin Protocol, a marketplace that launches NFTs, equated their value to traditional art.

“There’s a million copies of the Mona Lisa circulating, either as physical or digital images, all over the world, but everyone knows that there’s only one,” Liu said. “Even though there are still other digital copies, there’s one that’s basically been authenticated by the creator of this content.”

How to sell an NFT

The process of selling an NFT can vary based on the marketplace, but there are several user-friendly options.

You’ll typically upload your asset — noise, video, image or whatever it may be — to the marketplace, then follow the instructions to “mint” it, or turn it into an NFT. You’ll often be able to include a description of the work and suggested pricing. 

Then the marketplace will usually host an auction at a set time and connect the winner of the auction with the creator of the NFT. 

What are some examples of NFTs?

NFTs come in all shapes and sizes, as demonstrated over the past few months of sales. And more forms are likely on the way as the community develops fresh uses for NFTs.

Internet-Age Art

CryptoPunks was one of the earliest NFT projects and its art has risen in value as collector’s items.

The project included a total of 10,000 small pixel-art portraits of people, zombies, aliens, and apes. Larva Labs, which created the CryptoPunks project in 2017 on the Ethereum blockchain, says on its website that the series “inspired the modern CryptoArt movement.”

CryptoPunks made headlines when a set of nine was sold at a Christie’s auction for nearly $17 million, about double their expected value.

Memes

Years-old memes have become an NFT favorite of 2021.

The iconic "Disaster Girl" shot with Zoe Roth at 4 years old.
The iconic “Disaster Girl” shot with Zoe Roth at 4 years old.
Courtesy of Zoe Roth

The woman in the iconic “Disaster Girl” meme, for example, sold the image that made her famous 16 years ago for a mind-boggling $473,000 in April, the Post previously reported.

Others have followed suit, including the boys from the iconic YouTube video “Charlie bit my finger.” The boys will auction off the video as an NFT and remove it from YouTube once the sale closes.

Social Media Posts

Several celebrities and tech pioneers have auctioned off various social media posts as NFTs. Twitter co-founder and CEO Jack Dorsey sold his first tweet as an NFT for just over $2.9 million dollars in March.

Model Emily Ratajkowski's NFT of herself (right) sold at auction for $140,000.
Model Emily Ratajkowski’s NFT of herself (right) sold at auction for $140,000.
Getty; Emily Ratajkowski/Christie’s Images Ltd

And model Emily Ratajkowski sold her first NFT, which was a photograph of Ratajkowski — standing in front of a photograph of Ratajkowski — from Sports Illustrated that was posted on Instagram on Feb. 18, 2014.

That head-scratching piece of meta art went for $140,000 at Christie’s.

Virtual Houses

In March, artist Krista Kim sold a virtual house she designed for about half a million dollars. The files that make up the futuristic-looking pad can be uploaded as a showy Zoom background for remote meetings or to a buyer’s “Metaverse,” a “Sims”-like computerized world that can be accessed via virtual-reality goggles, such as Samsung’s Oculus set, Kim told the Post.

Artist Krista Kim sold a digital house for the equivalent of $500,000.
Artist Krista Kim sold a digital house for the equivalent of $500,000.
CNBC

Sports Highlights

The National Basketball Association has thrown its weight behind the NFT movement, too.

The NBA launched Top Shot in 2019 to pave the way into NFT collectables in the sports world. The business sells video highlights as minted NFTs, sometimes fetching prices as high as hundreds of thousands of dollars.

Music

Rappers and bands have also begun to release their music as NFTs.

Kings of Leon in March became the first band to release a full album as an NFT, according to Rolling Stone.

And Eminem partnered with NiftyGateway back in April for an event where the legendary rapper debuted numerous NFTs, including an original beat.

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