Chances are, you’ve been hearing the buzz about Bitcoin lately. But there’s a new sensation on the crypto block, and all of a sudden it’s become a market worth hundreds of millions of dollars: non-fungible tokens, aka NFTs. They are much more than the latest hottest gadget. From NBA rookie sensation LaMelo Ball to rapper Post Malone and singer Grimes, the concept of original digital content — think first draft of a masterpiece novel or an original Picasso, but in digital form — has piqued the interest of creatives everywhere. Today’s Daily Dose breaks down this revolutionary concept, the key players and how they will continue to shape our world — whether you buy into the craze or not.
What Are They? The best way to understand non-fungible tokens is to break down the terminology. They are tokens, which should sound familiar, given Bitcoin’s popularity. Like cryptocurrencies, NFTs operate on blockchain technology in a decentralized market and are stored in secure digital wallets. Fungibility describes something that’s easily interchangeable: You can trade a $5 bill for five $1 bills. Unlike cryptocurrencies, however, NFTs are unique and can’t be simply swapped. They can be just about anything you can convert to digital form, but the craze right now is around artwork. Think of them as digital collectibles like trading cards and stamps, where even items that look the same are differentiated by issue date and condition. Instead of a physical certificate of authentication, NFTs use blockchain technology, typically Ethereum, as a verifiable digital ledger.
Why Are They So Valuable? Collectors are going to collect. And aside from the appeal of owning a verified piece of art no one else has — even if they can download a copy — NFTs are turning into a mode of investing, as their market quadrupled to $250 million last year. That’s why you’re seeing day traders and gamblers leap into the space along with die-hard collectors. Creatives with iconic and nostalgic intellectual property drop new collectibles all the time. Think of a freshly made Michael Jordan rookie card hitting the streets. (or rare Beanie Babies). An NFT video of LeBron James blocking a shot sold for $208,000 in January to a group of investors who expect its value to rise because it’s an original, verified and rare piece, even though anyone can rewatch the dunk on the internet. An artist named Beeple recently sold a 10-second video clip for $6.6 million, while the bidding keeps rising for another Beeple that is the first completely digital work to be sold at the famed Christie’s auction house.
Where Did They Come From? Versions of NFTs have been around since 2012, but the concept took off in 2017, like so many things on the internet, thanks to cats. CryptoKitties were being bought and sold on the Ethereum blockchain at such volume that they slowed down the network. From there, the concept evolved so that major sums were being paid for an X-ray of William Shatner’s teeth.
Why Are They Blowing Up Now? Blockchain-driven decentralized finance, or DeFi, surged in 2020 as people moved away from the traditional financial system amid widespread distrust of institutions, common during recessions. But last year a recession coincided with the arrival of digital commerce like never before. That appetite was behind not only the Bitcoin boom but also other new blockchain-based financial ideas like NFTs, which took off after floating around for a few years.
Tokenizing Your Content. Digital content is tokenized — or becomes an NFT — through a process called “minting,” which assigns a coin on a blockchain to any given work, authenticating as many copies the creators see fit. Anything can be made into an NFT, from a recipe to a song. However, to do so you need a crypto wallet and to have purchased some cryptocurrency as it costs to create an NFT, typically anywhere from $2 to…
Read More:Inside the Newest Crypto Craze: The NFT