You’re forgiven if the numbers of new abbreviations people are supposed to be familiar with these days is a little much for you. Adding to all of this is the fact that emerging technologies are increasingly front and center in our lives, and many of these abbreviations apply to these technologies. Such is the case for something you may have heard a lot of buzz about lately – NFTs. One big-ticket news item these days is cryptocurrency, and while nearly everyone will have heard of Bitcoin there’s other that are also claiming similar fanfare and go by abbreviations themselves – XRP being a good example.
The reason we mention those two is there’s a connection between them and NFTs. That being that all three of them are ‘tokens’ that exist only in digital form. But that’s where the similarities end for the large part, and from there NFTs become a lot more unique and a lot more intriguing. At least for most people, and that’s likely a fair thing to say.
All of this stuff tends to interest people like those of us here at 4GoodHosting, as being a good Canadian web hosting service provider has us in the front row for observing all of the newest developments in the digital world. It tends to be interesting stuff, and NFTs in particular are really something that even the most digitally illiterate person may take an interest in just because of their newness and uniqueness.
We figure it’s worthy of a topic of discussion for the blog this week, so here goes.
A Mutual Exchange
NFT stands for Non-Fungible Token. Right, you’re also forgiven if you have absolutely no ide what the word fungible means, so let’s get to that without delay. ‘Fungible’ is the most uncommon of terms, but it is an adjective that means whatever it is describing can be mutually exchanged. To add to that somewhat, it means that two parties can exchanged whatever good it is we’re talking about, and neither of them gain value by doing so.
So non-fungible would then suggest that there IS value to be gained in the exchange of what it is – in this case, tokens. What’s making NFTs so newsworthy these days isn’t so much that they can have monetary value, but rather that they are a fully digital and thus non-tangible item that gains value in the same way collectibles can. To put this in everyday perspective, anyone who has a Wayne Gretzky rookie card, for example, is going to be pretty darned thrilled to have that in their possession simply because A) it’s incredibly rare, and B) it’s worth an incredible amount of money if they decide to sell it.
Yes, not necessarily in that order either.
NFTs add to this by being capable of being uniquely identified and authenticate yourself as the owner of that collectible. They are tied to blockchain, and blockchain is really just a big, encrypted ledger. As you’d expect, NFTs need to be purchased with a cryptocurrency and Ethereum is usually preferable to Bitcoin. When an NFT is purchased the buyer has the ‘key’ to it and can exchange it, sell it, or do pretty much anything they like.
It’s the scarcity of NFTs that makes them expensive and requires you to part with plenty of cryptocurrency if you want to obtain. Look no further than a few months back when one named CryptoPunk 2890 sold for 605 ETH (Ethereum tokens). That works out to more than $760,000 USD!
As of now, the biggest mainstream NFTs are in the art and sports spaces. Deep-pocketed individuals are both purchasing AND investing in them – with former NBA megastar Michael Jordan being one of them and related to NBA top shots.
One NBA Top Shot NFT of LeBron James dunking the basketball sold for just over $200K USD.
Never in Your Hands
Sticking with the sports theme as we continue discussing NFTs, if someone has an exclusive digital clip of Sidney Crosby scoring Canada’s golden goal in Vancouver, for example, it becomes a very unique and incredibly permanent collector’s item. Unlike cards or prints, it’s not going to become ratty or faded ever. It’ll still be as crisp and vivid 100 years from now as it is today.
Art NFTs are popular too, and one unique aspect of NFT art is that creators are able to make money from secondary sales. Anyone purchasing an up-and-coming artist’s NFT is both supporting them and getting in on the ground floor in case that art explodes in popularity later on.
Part of the reason why NFTs are so hot right now is because there’s plenty and plenty of inventory. Making NFTs isn’t difficult if you are the owner and have rights to the source material, and there’s a chance they can earn royalties in perpetuity too.
For artists they are particularly beneficial, as they take away many of the traditional hurdles that prevent the artist’s work from being made visible and promoted. This medium hasn’t existed before, and artists and other types are quite keen to take advantage of it.
Accessibility Equaling Popularity
NFTs are all the rage right now simply because they’re immediately accessible to anyone. Whether or not you can afford them – or have the (crypto) currency form required to do so – may be an entirely different story. People are also drawn to the way that they can be reflections of what a particular individual may have seen as a noteworthy moment or experience, as compared to what a table of people in an office may decide on.
This really applies to pro sports NFTs, but will expand into other categories for sure. It’s also serving to add to the ‘coolness’ factor for cryptocurrencies in general, and may serve to further the inroads these types of currencies are making.
Some Risk Though
There are risks to NFTs though, and specifically because they are heavily speculative. Most people who look into buying them know they need to be extremely familiar with the long-term prospects for that particular token. Doing your research is a must, and especially looking to see what sorts of NFTs are available in your particular area of interest. Find cool projects and get involved by joining their chatrooms and check discord servers and other resources connecting the community. Understand what you’re buying into.
It’s going to be very interesting to see where NFTs go and to what extent they become a mainstream commodity for collectors and the like. The appeal is certainly easy so see, and it’s almost certain that there will be people who make extremely fortuitous investments in NFTs early on and then see the resale price for their token be a serious windfall.
All the best to you if that’s something you’re considering after putting yourself very in the know about the best approaches to buying NFTs.