NFT’s are a new type of digital art that has exploded in the last few months with this image selling for over $69.3M. If you’re completely confused, you’re not the only one. After all, these are just images or videos. They are freely available on the Internet and in-fact. You’re seeing them for free right now. Why would someone pay for these?
NFT stands for Non-Fungible-Token.
it means something is unique and not replaceable.
For example a dollar-bill is fungible… you can trade one dollar bill for another and it’s still a dollar. This is also true for BitCoin’s… you can trade one bitcoin for another and you still have the same value. The Mona lisa is something physical and it’s non-fungible… You can’t make a copy. And that’s what NFT’s are as well. They are digital but also unique. A JPG is just a JPG but mix in an NFT’s certificate of authenticity and now that JPG is unique and can only have one owner.
Still confused? Let’s take the example of Pokemon cards. The value of a pokemon card isn’t in the paper or ink that it’s printed on. It’s in the rarity and collectibility of that card.
NFT’s are exactly the same just digitally. We’ve been collecting digital files like MP3’s for years so the idea that a digital file can have value isn’t something new. In fact Fortnight sold about 2.4 Billion dollars worth of digital files for upgrades and customizations just last year.
Because NFT’s have rarity, they can also have value. The craze started several years ago with These Adorable images called CryptoKitties. Just like trading cards you could buy these digital collectibles as an NFT and then you could breed them together to make new digital CryptoKitties NFT’s.
The same team that developed the CryptoKitties game, recently developed a new NFT trading game with the NBA, called NBATopShots where you could buy and trade digital cards with basketball players showing off their top moves.
The cards were an instant hit because you could buy an NFT but also because the process was as simple as entering in your credit card. Most NFT trading sites aren’t quite so simple, it requires you to buy a crypto currency called Etherium, Install a browser plug-in called MetaMask and then jump through a number of hoops to authenticate, transfer and bid on an NFT. The typical process is still very raw and is very confusing… this may be why TopShots is taking credit cards and some of NFT’s artists are selling their work through traditional auction sites like Christies.
Because NFT’s are pretty new, there’s a lot of buzz around getting rich quick with NFT’s. The market is getting flooded with NFT art and the majority are absolutely worthless. You can see thousands of these NFT’s and more being minted every minute.
So what makes this cryptokitty worth thousands but all these other images worthless? It comes down to the reputation of the artist and the desirability within the community.
One digital artist named Beeble has been making digital art for 15 years. He’s made most of his work freely available online and has been posting an image every day for the last 5000 days. He’s very well known in the digital art community so when he decided to create an NFT, his community took notice. His recent NFT’s have sold for over 6 Million and his most recent NFT is being auctioned off by Christys with a current bid over 3 Million dollars.
In the short term some NFT prices may be inflated but in any market with a controlled inventory, who’s to say what is art and what is should be worth.
