What the hell’s an NFT?
Translated from German using DeepL.
Date: April 2021
Reading time: 3 minutes
Source: This is a screenshot of a GIF... of an NFT. This NFT changed hands for almost 600,000 USD.
But what is an NFT and why are they so valuable?
Non-Fungible Token
There are many collectors in this world. Be it Pokemon cards, sneakers or art. An NFT is comparable to these things. It is digital art.
NFT stands for non-fungible token. A fungible token is a fungible object of value. Our means of payment, for example, is one of them. A 10 Fr. note always has the same value, regardless of its condition or the person who owns it. In addition, you can exchange a 10 Fr. note can be exchanged for another one. An NFT is a unique and forgery-proof collector's item. The value is determined by the owner. It is also not interchangeable, as each NFT has its own value.
Source: Create and sell
If someone creates something digital, they can turn it into an NFT. Here are a few examples:
- Graphics
- Images
- GIFs
- Videos
- Code
- VR worlds
- Computer programs
But how does a GIF become an NFT?
When uploading to an NFT marketplace, such as Opensea (opens in a new tab), an NFT is created from the GIF. To do this, the digital art is saved and stored on a blockchain. A hash value is also attached to the graphic. The NFT is then embossed. This process makes each NFT unique. As with the Mona Lisa painting, forgeries could also occur here. However, these are recognized directly as they do not have this unique ID.
Once the graphic has been recorded in the blockchain, it is placed in a crypto wallet. It can then be sold/auctioned. Payment is made with ether.
If an NFT is sold, the blockchain saves the transactions on several computers in the network. This means that it is always clear who owns the NFT, as every part of the blockchain knows the exact hash value of the "work of art".
Opportunities
NFTs create many opportunities. Demand is already high at the moment. However, I think that the topic will become much more present in the coming years. Especially because famous people such as Elon Musk and Mark Cuban are making NFTs better known.
Content creators
Designers no longer have to work for a client and can therefore do what they want. This results in creative works of art. What's more, they don't just earn a one-off fee. If the NFT is resold, they usually receive 10% of the profit.
And it's not just designers who can earn money. Anything can become art and anyone with a little computer knowledge can sell it.
Musicians
There are also completely new opportunities for musicians/producers. Since their music is automatically protected, they don't have to deal with annoying copyright problems.
Collectors
Collectors can buy digital art and resell it later.
Risks
The inventor of Litcoin believes that there will inevitably be a crash. The reason: unlike real art,
NFTs have no creation costs. Therefore, the market will eventually be flooded with NFTs. Supply will exceed demand.
Prices are therefore enormously overpriced. In a few years, however, almost everyone will probably be creating NFTs. Then prices will automatically fall.
Known creators
NBA Top Shot
NBA Top Shot is responsible for the most collectible sales last month. They sold over 250 million USD worth of sports NFTs last March.
On their own platform you can buy player packs or players. Each pack contains a highlight of a player. These scenes can be watched for free on YouTube. However, the NFT is expensive.
A video of a dunk by the Greek superstar is currently being offered for 145,000 USD.
Beeple (Mike Winkelmann)
The American artist/graphic designer/animator/computer scientist is one of the first creators of NFTs.
This NFT is from one of his collections, which he sold for several million.
CryptoPunks
This account sells pixelated portraits.
CryptoPunk #3330 was last sold for almost 40 thousand CHF.
Banksy
It looks like Banksy is also taking a liking to NFTs.
His NFT would be resold for an average of more than 450 thousand CHF.
