What The Heck Is An NFT?
Updated: Feb 18, 2022
I know it doesn't feel like the world is a real place right now, but hear me out: web3 has the power to give ownership and freedom back to creators.
Non-Fungible Tokens (NFTs) are surprisingly not the actual piece of content used to create them, but rather non-interchangeable units of data that is stored on a blockchain. The blockchain then acts like a ledger on which the NFT can be sold or traded.
Okay, but say that again... in English.
An NFT is a unique cryptocurrency based token that cannot be replicated. Period.
Let's look at this from the perspective of an artist.
You create a piece of art, load it into the blockchain which creates a digital item (the NFT) that you now own. (This is called minting.) The blockchain holds the proof of ownership, basically like a digital database with public access. This means that no one can ever pretend that you were not the original creator and it is legal proof of ownership - which is different from a copyright but let's get into that later...
Okay but girl, you've heard of Right Click + Save As haven't you? .JPEGs are worthless!
That's cool, and true, but NFTs are not .JPEGs - you can make a .JPEG from an NFT but that still doesn't mean you own the NFT. That's like saying you own a famous photograph because you saved a copy of it on your phone. Yes, you have a copy but you can't go out and use it for profit (as part of a marketing campaign, or as the cover of something) - those rights still remain with the creator (or owner if they sold it). In real world, usually they would sell the print or sign a contract in regards to use and distribution (like photographers/creators who do album art and then sell it to labels or artists) and that's it... whereas with NFTs creators will always continue to receive royalties from future sales of their NFTs.
I'm sure you're well aware that there's always stories of smaller artists and creators being taken advantage of or having their work stolen? That can't happen with NFTs. The reason for this is what is behind the NFT and a key factor in the NFT minting process: Smart Contracts.
Smart Contracts & Their Endless Possibilities
A Smart Contract is a self-executing contract where the terms and agreement of the sale between the buyer and the seller is written directly into the code. When you create an NFT, you are combining your piece of content with this Smart Contract, which makes it not only non-fungible, but also means that every single transaction is traceable, transparent, and irreversible.
What's even cooler? Smart Contracts aren't new technology. They were first proposed by Nick Szabo, an American computer scientist, in 1994. Four years later, in 1998, he even invented "Bit Gold", a virtual currency - and to think Bitcoin didn't come about until a decade later...
There is a theory that Nick Szabo is actually Satoshi Nakamoto (the anonymous inventor of Bitcoin) but he has denied it.
By now Smart Contracts are evolving to incorporate utilities - just in the past month I have heard of a home being purchased via NFT, plans to incorporate NFTs into a car, a cool project to help out the Galapagos islands... it's wild!
A Little History...
I do think it's important to note that it may not seem like it, hearing stories of these projects worth $millions, but we are still incredibly early in the NFT space.
The first ever NFTs were incredibly basic. I believe there's evidence of the earliest collections going back to 2013 but personally I first noticed them in 2015. If you were part of Terra Nullius, you were buying in to 'stake' your presence on the Ethereum blockchain and it even allowed you to write a short message, making the NFT customizable. Blockplots (also known as Etheria v1.1) also came out in 2015 and allowed you to purchase tiles on a map that had only 457 pieces. The transfer function on this project was major in creating the NFTs we know today although I am still angry because I knew about this project and instead of joining in... I rolled my eyes.
Woe is me 😭
Traction started in 2017, with projects like Etherum Names Service (ENS - which did a token drop in Nov, 2021) that is basically the GoDaddy of web3, CryptoPunks (yep, those guys), plus a ton of cat themed projects (MoonCatRescue, CryptoCats, CryptoKitties). From there 2018 had a large number of projects, including two metaverse worlds - Decentraland and Cryptovoxels.
In 2021, projects were popping up just for the hell of it and their strength came from their communities. Not many even had roadmaps when they first started. But now as the market is growing and we are in the next phase of adoption by normies, roadmaps and utilities are becoming the differentiators. But do you really need to stack your project with utilities for it to succeed? World renown artist Sabet recently described his upcoming project as "Art is the utility and Love is the roadmap."
"Art is the utility and Love is the roadmap" – Sabet
Personally in my opinion, NFT projects are no different than a business. When you launch a new project, you are competing for consumers. Some people do this by stacking utility upon utility to woe people over, some people do it by hyping up their community, some people do it by creating FOMO, some people do it just because it's their passion, and some people do all of the above. How you want to run your business is your business, and people will align with the projects that speak to them.
Believe it or not, despite all that... we are still nowhere near full mainstream adoption.
Wait, You Mean I Could...
Yes. I have no idea where your thought process is even going, but yes. The most brilliant thing about NFTs is that we are so early into web3 that the possibilities are truly endless.
The best part? We are all learning together.
Think we left something out? Join us on Discord and let us know your thoughts!
GLOSSARY
(You're welcome.)
BLOCKCHAIN - a digital decentralized public ledger that exists on a network
COIN - used to trade currency, store value... basically no different than regular currency, just crypto
FUNGIBLE - able to replace or be replaced by another identical item; mutually interchangeable
METAVERSE - a network of 3D virtual worlds (there is an ongoing philosophical debate about
MINTING - the process of creating an NFT
NFT - Non-fungible token... (honestly, did you skip this whole blog post???) basically a token that cannot be replaced
ROADMAP - in reference to NFTs, it is a document that outlines the goals and strategy of the project
TOKEN - representation of an asset
UTILITIES - assets, access, perks or membership that come from owning a particular NFT
WEB3 - the latest iteration of the World Wide Web based on blockchain technology, which incorporates concepts including decentralization and token-based economics