In this Smart Money Club lesson, we will be expanding your knowledge, introducing you to NFTs. NFTs have undoubtedly taken the world by storm, from the NBA to the art world and beyond. We will take you to the Power of X, learning what NFTs are and why NFTs have become so popular. Let’s get right into it.
Non Fungible
To understand NFTs we need to first break them down a bit. NFT stands for Non-Fungible Tokens. When most hear this, they will ask, “what is fungible?”
“Fungible” assets are things that all have the exact same value. A typical dollar bill has the same value as every other regular dollar bill. A Bitcoin or an Ethereum token likewise has the same value as every other Bitcoin or Ethereum. However, Non-fungible means that one asset is not the same as any other asset, for example, a piece of art is not the same as a copy of that piece of art, and sticking with art as an analogy, the first numbered printing of a run, 1st of 500, will even have a different value than the 389th of that 500.
Non Fungible Tokens (NFTs)
NFTs are special kinds of crypto assets, where each token is unique and has a distinct value. Because each NFT is unique, an NFT can be used to authenticate the ownership of digital assets, such as digital artwork, audio recordings, and virtual items, like metaverse real estate or pets.
It is easy to think of NFTs as being similar to a combination deed and certificate of authenticity for digital items. The buzz around NFTs cannot be overstated, as NFTs are currently being used to sell a vast range of virtual collectibles.
As would be expected, companies and individuals that are in the tech space were the first to jump on the NFT bandwagon, including Electronic Dance Music produces such as Deadmau5, who has sold music and video clips in NFT form, Digital artist Grimes has NFT artwork, the “nyan cat” meme has been sold in NFT form, a Metaverse platforms have sold virtual real estate in their world, and Shark Tank Billionaire Mark Cuban has sold NFTs of his Tweets.
NYAN CAT GIF: Chris Torres
Some of these may sound silly, but there is big money being spent on NFTs. The above was sold for 300 ETH at the time, about $600,000. The highest price spent for an NFT was in the purchase of Beeples “The First 5000 Days” selling for a staggering $69.3 million through Christie’s auction house.
E-sports was the first to jump on collectible NFT trading, but the NBA has gotten in on the action and has several collectible/tradable NFTs that have become very popular, selling for small amounts up to tens of thousands.
Courtesy of the NBA’s Top Shot
The Big Question
NFTs have raised questions about the nature of ownership. Digital items can be perfectly copied infinite times, so do NFTs have value? NFT proponents say that most collecting has no inherent value, a comic book or baseball card is just ink and paper, art can be made from junk but worth millions. Taking a picture of the art does not mean the picture is worth anything, but the art still has value. Will NFTs have value in the future? No one can really answer this. When a baseball card was purchased in the 1920s, most kids never thought to hang on to them. People know to hang on to NFTs just in case, so this might limit their future value.
Where to buy NFTs?
Some NFTs can be purchased with a compatible crypto walled, and there are specialized marketplaces for things like art (Rarible, and Opensea), games and sports have their own sites (NBA Top Shot); metaverse competitors have real estate (Decentraland and The Sandbox.)
How do NFTs work?
As we learned in the Ethereum lessons, many cryptocurrencies are built on that network; they use a standard called “ERC-20”. Likewise, there are many NFTs that have been created on the Ethereum network and specifically, these use the “ERC-721” or “ERC-1155” standards.
Summary
NFTs are the newest baby of the Blockchain space, and they are evolving quickly. Once you have in NFT, how you use it is up to you. Some will come with special payouts, and others are just digital items. It will be interesting to see the future. Will they pass the test of time and take you to the Power of X? Only time will tell.
