Why are people spending more than my annual salary on jpegs...?
Consider this NFT 101. What they are, why would anyone bother, why YOU CAN'T JUST RIGHT CLICK AND SAVE IT THAT'S NOT THE SAME THING and maybe even some advice on getting started.
What does NFT even mean?
First thing's first. NFT stands for non fungible token. Second thing's second. What the fuck does fungible mean? Wikipedia put it best:
In economics, fungibility is the property of a good or a commodity whose individual units are essentially interchangeable and each of whose parts is indistinguishable from another part.
For example, gold is fungible since a specified amount of pure gold is equivalent to that same amount of pure gold, whether in the form of coins, ingots, or in other states, whereas a unique item such as gold fashioned into a statue by a famous artist would not be considered fungible. Other fungible commodities include sweet crude oil, company shares, bonds, other precious metals, and currencies.
Non Fungible: not interchangeable or replaceable
Ok, how does it work?
Remember Bitcoin? That was built on technology called a Blockchain. NFTs also live on Blockchains.
A traditional a bank will have a record of every person holding an account with them, and how much money each person has. They'll keep this record private, for security, and any transactions must come through them for approval - this is centralised finance.
Blockchain technology works in the opposite way. Everyone can see the "ledger" of all transactions, and a global network of computers operate to keep this updated.
This operates using a consensus model, so if all computers on the planet agree a set of transactions happened, that's deemed to be true, making it very difficult and expensive to defraud the network. This is decentralised finance (DeFi).
Spending time and computing power updating the blockchain is called "mining", and is rewarded with small amounts of cryptocurrency, which scaled up can be very profitable.
In the same way that Bitcoins sit on a Blockchain, so do NFTs. The only difference here is that Bitcoin number 1 and 21,000,000 are the same (fungible), whereas NFTs aren't.
Summary: there is a publicly available, next to impossible to defraud network, showing which person owns which NFT
It's just a rubbish picture of a monkey in a hat though?
Firstly, how dare you. It's an ape. But fair point. The key thing to note here is that NFTs aren't (necessarily) about the image. So let's get into why someone might buy one:
They both tell the time though?
Showing off
Why does anyone buy anything? a $300,000 car is no more practical than a $30,000 one - good luck picking up a supermodel in a Toyota Yaris though
As we live our lives in an increasingly digital world, digital assets will gain more value - why buy a watch people will only see in person? Why not buy a twitter profile pic to show off to millions of people instead?
How much would you pay for 1 million insta followers? How about a blue tick?
Access
Imagine I start a WhatsApp chat with Bill Gates, Gary Vee and Logan Paul. How much would you pay me to be part of it? NFTs offer access to communities with similar ideals, interests, and bank balances
Google "celebrity Bored Ape Yacht Club holders" and see if it changes your mind - they host literal yacht parties for their members
Speculators
There is undeniably money to be made in the NFT space - who cares what the picture is if someone plans to pay more for it than I did?
Projects are working hard to make their holders money. If you hold our NFT, you get first access to our next NFT, which you can sell for a profit
Can't I just right click and save the image?
Sure can. You can also catch a flight to Paris, run to the Louvre and take a snap of the Mona Lisa. Doesn't mean you own it, and with the Blockchain it's even easier to see who's bluffing - no fake designer handbags here.
This is sick, I'm convinced, where do I sign?
The first question to answer if you're considering moving into NFTs, is why?
There is money to be made FOR THE EDUCATED AND EARLY ADOPTERS, but much like other crazes, if you're looking to make a fast buck, you'll likely get burned - most activity happens on Twitter and Discord, so that's not a bad place to start, but don't let your FOMO cloud your judgement and make you rush into anything. There are many good projects with good teams and interesting ideas. There are also many shit projects and scams.
Thanks for reading if you got this far, and if you have any more questions feel free to leave a comment or email and we'll get them answered in another article coming soon.
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