NFTs have been a talk of the town for a while now. To me, the jaw dropping moment in NFT's journey was when a digital artist named Beeple (originally named Mike Winkelmann) sold his digital art for whopping $69 million. As part of a project called “Everydays,” he created and published a new digital artwork every day, currently in 14th year. Everydays is a collection of 5000 individual pieces of digital art all in one collage, which got sold for such unprecedented amount.
The event like these, though rare, piques your curiosity towards the mysterious world of NFTs. So what really is an NFT ?
NFT stands for- Non Fungible Tokens. As Jaspreet Bindra explains in this short video (https://lnkd.in/gDVKr9hh , < 5 minutes)-
Fungible, something that is replaceable by other identical item. Non-Fungible means not replaceable. “Non-fungible” means that it’s unique and can’t be replaced with something else. For example, a dollar is fungible — you can trade one for another dollar, and you’ll have exactly the same thing. Each NFT is one-of-a-kind.
You might wonder what problems do NFTs solve ?
Traditionally, Internet platforms like Facebook, Instagram, Twitter etc. monetize the content you share but they keep most (all!) the value generated. If you are a producer of digital product (think image, music etc.) , there are no definite ways that can help you validate the ownership and fairly return you the value you deserve.
In some ways, most of us have been guilty of downloading other people's work without paying for it. Economically, when there is no scarcity of a product, there is no value.
NFTs helps create digital scarcity and scarcity leads to value. It creates the scarcity by making digital products unique. NFTs are simply assets on Blockchain networks and stored in Blockchain as smart contracts. Think of NFTs as numbered tokens, and tokens as a certificate of authority.
One word of caution is that NFTs are in the early stages of adoption. Think websites of late 1990s, something that started with a big bang, outsized valuations but got stabilized after the bubble burst. The story that I started this post with, which created the NFT hype, it turns out that the buyer is actually a business partner of Beeple. OpenSea, the most popular NFT marketplace has a tool for free minting of NFTs. The platform has admitted that 80% of these NFTs are plagiarized works, fake collections, and spam. (Source: https://bit.ly/34IHA1F)
These deviations prove that there is still some time before NFTs becomes mainstream but a more balanced view comes from Paul Graham in his recent tweet-
"NFTs can be used for so many different things that you're inviting history to make a fool of you if you dismiss them. Even if I were sure that most current uses of NFTs were bogus, I'd never dare to say that all possible uses were."
Catch the summary in my Sketchnote.
What do you think of NFTs and its future potential ?
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