Those are just pictures. Those are silly slime profiles. Those are glowing, rotating cubes.
Different people have different perceptions of what an NFT is, but they would be forgiven for mistaking exactly what they are.
When a form of technology is invented, it can lead us into a totally new world. But like most shiny new things, they can seem pointless or useless to those who don’t quite get what all the fuss is about. Remember, the internet didn’t have many fans when it first came to life either. And look at us now.
We’ll take a walk through NFT’s to demystify them for you.
What is the blockchain?
In traditional banking, the bank sits at the center of everything. When you want to buy groceries, you swipe your credit or debit card at the checkout counter. Your bank moves the money from your account to the merchant’s account. They’re responsible for keeping track of how much you have, how much was moved, and all the details of the transactions. This gives the bank a lot of power and responsibility.
Some tech lovers came up with an interesting idea: what if banks weren’t at the center of the financial world? What if we kept our own records as a group? You know, power to the people? But of course, how can we do that? What if everyone had their own records and they didn’t match up? We needed a secure way to keep records we could all agree upon.
The solution is crowd-verified recordkeeping.
That is, the answer the cryptocurrency pioneers came up with was to have us all keep a copy of the ledger, and to check transactions with each other before officially recording them. When enough parties agree, the record is encrypted and becomes a block of data. We then move on to create the next block, chaining them together endlessly. They called it, unsurprisingly, “blockchain” technology.
This technology used cryptography (a fancy term for coded activity) to enable financial transactions. The money moving on these blockchain networks became known as “cryptocurrency,” of which the most popular example is Bitcoin.
Verifying transactions takes quite a bit of processing power. To incentivize users to help keep the system running, platforms pay each processor a bit of cryptocurrency for their service. This is known as “mining” crypto and can occupy a single computer or a whole data center full of them. With all of this technology in place, the system runs 24/7 like clockwork.
Are NFTs cryptocurrency, then? I’m confused.
No. Currency is fungible. One dollar is as good as any other dollar. You can trade one for the other and lose no value. But an NFT is a non-fungible token. Each NFT is unique and special. With that change, you create a platform that can support the trading of all kinds of non-fungible assets, like digital art, real estate, and other asset classes. As long as the asset is linked properly to the NFT, you could trade the real-life asset by trading the NFT.
Of course, this is a big “if” and something you absolutely must be 100% sure about before making a big NFT purchase. Just having an NFT that someone says is representative of an asset is not enough to prove legal ownership of said asset. After all, people have been trading assets for ages without NFTs, and there are established ways to transfer things. Namely, contracts.
For real estate, for example, there is a purchase and sale contract drawn up by an attorney. The seller agrees to sell and the buyer agrees to buy. Both parties sign their names on the contract. The land is deeded to the buyer, and the transaction is recorded the old-fashioned way – with a government land office in the relevant locality. Without that traditional process being respected, you need to tread carefully when buying NFTs.
So what can I buy?
Well, the most popular NFTs so far have been digital art. Originating artists offer ownership of given images. This could include the related copyright or not. You need to read the fine print on an issuance to know what you’re buying. Getting in on an NFT minting, as an initial issuance is called, can offer the opportunity for rapid profits that are sky-high. The famous digital artist Beeple has become an overnight legend by selling a minting for $69M.
Yes, sixty-nine million dollars of value. Sold by Christie’s. Here it is:
There’s also the investment angle. Cryptocurrency has had a major shakeup in the past year (at the time of this writing in 2022), but in general, has offered tremendous profit potential. People have made fortunes investing in crypto, and we suspect that they will continue to do so for some time. The same can be true of NFTs. Countless crypto millionaires owe their fortunes to modern payment platforms. And now, many NFT millionaires are rolling in dough as well.
We know that, if nothing else, some folks are out to find the best opportunities for big financial gains, no matter where they are. It could be an investment in a rental property. Or, it could be getting in on a mint of cartoon kitties (and picking up a new Twitter profile in the bargain).
They may look silly sometimes, but no matter what you think of them, NFTs offer huge chances to get paid returns that investors simply can’t find anywhere else.