You’ve probably heard a lot in the news lately about people buying “stuff” on the Internet.
Somebody “bought” Nyan Cat for $600,000, a Tweet by Jack Dorsey for $3M, and a picture of Lindsay Lohan’s face for $50,000.
These people don’t own the copyright to these items, nor do they receive anything physical. So what exactly are they buying? And how? And why?
The answer lies in an understanding of NFTs, or non-fungible tokens.
Let’s investigate the strange madness of NFTs.
Table of Contents
What is an NFT?
An NFT, or non-fungible token, is a data point stored in a blockchain that certifies a digital piece of media to be unique.
When you buy an NFT, you’re essentially purchasing a “certificate of ownership” of a meme, gif, piece of art, video clip, or other digital assets. You don’t own the copyright, but it’s yours, like an original painting.
There’s a lot to unpack there, so let’s start with the basics. First off, why do you often hear “NFT” and “crypto” in the same sentence?
What do NFTs have to do with cryptocurrency?
Aside from NFTs being bought with cryptocurrency, both NFTs and cryptocurrencies live on the blockchain.
NFTs, like cryptocurrencies, are stored on the blockchain
A blockchain is like a giant online ledger that records cryptocurrency transactions and other data.
Satoshi Nakamoto designed Bitcoin and blockchain at the same time; in his 2008 white paper Bitcoin: A Peer-to-Peer Electronic Cash System, he describes how Bitcoin cannot exist without blockchain. The blockchain is where Bitcoin transactions are etched in stone – legible, but also irreversible and unhackable.
An incorruptible, unified global ledger is a pretty big deal, and soon developers began asking what else can we record on there?
Such thinking gave rise to many of the “altcoins,” or non-Bitcoin cryptocurrencies. Namecoin, for example, stored IP addresses to the blockchain to stifle Internet censorship. Ethereum, launched in 2015, took a more general approach – let’s use the blockchain to record crypto transactions and…other stuff, like stocks and property records.
An altcoin called Ethereum made NFTs possible
Ethereum uses a technology called “smart contracts” to allow users to record unique strings of data to the blockchain. This enabled users to store “non-fungibles.”
You see, cryptocurrencies are “fungible” i.e. interchangeable. Every bitcoin, litecoin, and dogecoin is exactly the same. So in simple terms, the blockchain could only record amounts.
Ethereum, however, allowed you to record “notes.” These digital notes are 100% unique, making them “non-fungible” so they go by the term non-fungible tokens.
NFT technology doesn’t let you store an image to the blockchain (yet). What it does do, however, is allow you to create a unique line of data that represents a piece of art. This “proof of ownership” cannot be copied or hacked. It’s safe, unique, and resellable.
That, in a nutshell, is what an NFT is.
Why are NFTs such a big deal for artists?
Imagine for a second that you’re a successful artist like Andy Warhol. Because you paint physical paintings, you can sell your art in two forms:
- You can sell unlimited prints of a painting for $50 each.
- You can sell the original painting itself for $50,000.
Now imagine you’re a successful graphic artist. Because your art is digital, there’s no “original” you can sell. All you can sell is licenses – the virtual equivalent of copies or prints.
NFTs change all that.
Now, as a digital artist, you can certify one of your works as “original” and sell it as an NFT. You can keep selling licenses just like you were before – but only one person holds the “original.”
Creating NFTs as “proofs of ownership” has already paid off big for some artists. Mike Winkelmann aka Beeple sold an NFT for his piece “Everydays: The First 5000 Days” for over $69 million. Countless lesser-known artists have sold their NFTs for hundreds, even thousands of dollars.
NFTs aren’t limited to images and gifs, either. NBA Top Shot sold a short video of Lebron dunking for over $200,000. Musical artist Grimes sold $6 million worth of her music videos.
Zoë Roth, the star of “Disaster Girl”, recently sold her meme as an NFT for nearly $500,000. Now age
Read more: Nft cat – Krypto-NFTs