In the first few months of 2021, we saw history being made in the world of NFTs. Headlines started popping up all over the internet.
- A virtual kitten- ‘the Nyan Cat’, which was a meme back in 2011, got sold for $580,000 as an NFT,
- A $95k Banksy artwork has been set on fire on a live-stream and turned into an NFT,
- Lindsay Lohan sold a digital image of her face for $17,000
- A tweet from Twitter CEO and co-founder Jack Dorsey sold online for $2.5 million.
- In just one day, Jack Butcher, founder of Visualize Value, created an NFT and shared it on Twitter, demonstrating the difference between a JPEG and an NFT with a verified badge. The next day he sold the same creative as an NFT for a whopping sum of $126 363.88.
You might be wondering what an NFT is? And why is everybody going crazy over these digital assets?
To understand what NFTs or Non-fungible tokens are, let’s start by understanding what fungible and non-fungible mean.
- Fungible means an item or asset with the same value as another item or asset, i.e., they are mutually interchangeable.
For Example- Currency: you lend your friend $10. He pays you back a week later. You’re not going to expect the same $10 bill.
Any $10 bill will do. You’re more concerned about the item’s value than the exact specific item. That means that item is fungible.
- Non- Fungible, on the other hand, means items that are not mutually interchangeable. Non-fungible items are, more often than not, collector items like antiques, but they can also be something like a car.
For Example- If you lent your antique vintage chair to a friend a week later, he returns a similar chair of the same size but not the original vintage chair you lent him. It would upset you because it does not have the same value as your antique vintage chair.
Similarly, if you lend your car to a friend and he returns a similar car same make the same model but not your exact car, you might or might not feel upset depending on the car’s condition. It might be a better or worse car but not equal. In other words, it is a non-fungible item. It is not interchangeable with another similar item.
It is the same with tokens. There are fungible tokens and non-fungible tokens. Bitcoins, for example, are fungible tokens, but crypto art like Beeple’s or a crypto-kitty or any other form of crypto art are non-fungible tokens. The NFTs are created and recorded using blockchain technology.
NFTs are non-fungible tokens – digital-only collector items backed by blockchain technology. NFTs have been pigeon-holed as a way for artists to sell their paintings online. The tokens have unique metadata on a blockchain and cannot be replicated or exchanged. Although widely used for artistic purposes, NFTs can be applied to any area, including identification and supply chain challenges.
NFTs are tokens that live on a blockchain and represent ownership of unique items.
The unique items are represented by a unique fingerprint or hash, a token name, and a token symbol. This token is then stored on a blockchain, and you, the artist or creator, becomes the owner.
But they’re much more than that. An NFT is a unique “token” that provides a digital record of ownership that can provide real-world benefits.
NFTs’ ability to confer uniqueness has led to digital art’s collectability boom. Before, anyone could replicate an infinite image times, making it impossible to create the perception of scarcity or value. There was no way, in other words, to build a market. NFTs offered a solution. There could be infinite JPEG files of an artwork, but only one “real” image specified by the NFT. Or six. Or 100. Whatever edition size the artwork’s creator specified was what it would be. With an almost literal flip of the switch, a market was born.
It’s not just about art pieces; the blockchain technology underpins marketers can leverage NFTs to create new experiences for their customers. How?
- By issuing unique branded tokens that provide access to exclusive events
- By issuing unique branded tokens that provide early access to content
- By issuing unique branded tokens that provide access to special offers or discounts
Customers may decide to hold on to these, or they may put tokens on the market and sell them on. The creator (i.e., brand) can receive a royalty every time a token is traded, creating a new revenue stream. This is what makes NFTs exciting for content creators and marketing teams.
NFTs provide exciting novel ways for brands to monetize their following. In the US, basketball team Golden State Warriors have already put their head above the parapet, creating several NFTs to leverage the idolization of their fans.
Key Takeaway: In the near future, big and small marketing teams will need to create an NFT strategy as a key part of their marketing armory.
To make sense out of this why NFTs are hot right now, here are some punchy stats and thoughts to clear things up:
- Non-fungible tokens can be shared and consumed but not duplicated, creating digital scarcity and proof of ownership.
- People who dislike stocks, and cryptocurrency, can now directly store value in retail digital art, digital land, and countless other NFT supported ideas.
- NFTs are helping international artists sell their work, pay rent and buy food.
- Blockchain technology makes no room for forgery, helping artists set up their show without legal work in setting trademarks, copyrights, and chasing royalties.
- Non-fungible tokens can take the form of music, photos, and any other digital collectible, including books, blogs, or even Tweets. NFTs are unique autographs that a person can own outside the analog world.
- NFTs are supported on the Etherium network, currently driven by proof-of-work, which helps communicate account balances and transaction orders to protect users from double charges.
- The original creators can opt-in to automatically collect royalty from every transaction. Smart contracts enable perpetuated payment for all future transactions.
Ownership is an inherent part of human nature. Kids gladly buy game items with real money. Collectors spend million on baseball cards. And digital enthusiasts buy NFT art. Starting a gallery similar to LondonPunks is exciting for any creative soul.
We’re witnessing the birth of scarce digital art for the first time.
While we are all eager to see what comes out of this New Age, the revolution for the future of digital artists has begun. 2021 is the year of NFTs. The value of the NFT market tripled last year, placing its current value over a mind-boggling $250M, according to a report from NonFungible.com. While the market now is dipping from those sky-high numbers, we’re all finding our roles to sustain this new digital paradigm. Riddled with uncertainty, one thing is sure: NFTs are here to stay.