NFT. You’ve seen those three letters all over media recently. But, what are they, how do they affect you, and should you care?
Here’s what we’ll cover.
NFT stands for non-fungible token. Okay, but what does fungible mean? Even though you may not use the word fungible often—or ever before 2021—you’ve used fungible goods and items countless times.
Fungible items can be easily interchanged without effect. Let’s take glassware. Like the responsible thriving adult you are, you own a matching set of drinking glasses. You can use any single glass within the set interchangeably. They’re all the same size and have the same function. No matter the glass you choose, the effects of it remain the same. These glasses are fungible.
In financial terms, currencies, securities, and commodities are also fungible. An ounce of gold can be exchanged for another ounce of gold with little to no effect. The same goes for USD. A one-dollar bill can be exchanged for another one-dollar bill with no effect. Or, 100 one-dollar bills can be exchanged for one 100-dollar bill.
Another way to remember what fungible means is to look at its etymology. Fungible comes from the Medieval Latin term fungibilis which means “serve in place of.”
Now that you can explain what fungible means, you can guess what non-fungible things are.
Non-fungible items cannot be duplicated, therefore, they are inherently rare and can’t be interchanged easily. Think art and collectibles. There is only one Mona Lisa. Even an exact replica of the painting made in painstaking detail can never replace or be as valuable as the original Mona Lisa.
Tokenization means they exist cryptographically on a blockchain. In the case of NFTs, they live on the Ethereum blockchain.
Okay, so NFTs are like Bitcoin or Ether? No, they are the opposite of cryptocurrency. NFTs are unique, indivisible, and scarce. Anyone can buy BTC or ETH, trade them, and divide them into smaller units known as satoshis or gwei respectively.
As of writing this, the primary application of NFTs has been for art and collectibles. Let’s get into how it’s going.
Open your mind because this will challenge your belief of what’s valuable. Let’s start here: What if you could own a moment in sports history? I don’t mean own a video clip or an image, but own the actual moment—an officially licensed segment of time from a professional sports league.
What would you pay to own the moment Muhammad Ali stood over Sonny Liston after knocking him out in the first round?
What would you pay to own Tiger Woods’ miraculous chip shot on the 16th hole of the 2005 Masters?
What would you pay to own Lebron James’ historic block on Andre Iguodala in the Cavaliers’ 2016 championship run?
This is what the NBA has done with NBA Top Shot where NBA moments are sold in packs. Each moment has a unique edition number and size to verify its rarity. Your moments are stored online for you to showcase in a collection or to be traded on the marketplace.
Eventually, the moments will be gamified and your NBA moments can be used to give your team an advantage during competition.
It’s like if video games, fantasy sports, sports highlights, trading cards, and Pokemon birthed a child on the internet.
But wait, there’s more! Check out how much they’re selling for.
As of writing this, packs are sold in two varieties—Base and Premium. Base packs are $9, and Premium packs are $99. By the way, good luck getting one. Demand for either type of pack has been bonkers. There was no advertising, no paid media, no marketing campaign around the launch of NBA Top Shot and the waitlist is in the tens of thousands. For those lucky enough to get their digital hands on a pack, there is a lot of money to be made. The top moment on the marketplace right now is a Ja Morant dunk listed for $250,000.
I see NFTs as the evolution of sports memorabilia. Don’t get me wrong, NFTs won’t replace the feeling a superfan gets from owning an autographed game-worn jersey, but it will be a huge part of the fan experience in the future. And, I say this as a person who owns zero sports memorabilia. It’s never intrigued me in the slightest. I could never justify the cost of it. But even I can see how powerful this form of fan interaction will be.
His name is Mike Winkelmann and he makes “art shit for yer facehole.”
Jarring, yes? That’s par for the course for Mr. Winkelmann more famously known as Beeple.
Beeple joins the NFT conversation because he is arguably the most famous digital artist right now. How famous? In December 2020, he made $3.5 million in one weekend selling his artworks. It was only the second time his art was available for purchase. Now, renowned fine art auction house, Christie’s, is auctioning off Beeple’s Opus—a massive collection of Beeple’s work spanning 13 years.
This body of work is what Winkelmann coined as his Everydays. For 5,000 consecutive days, Winkelmann created a drawing. They started out as physical drawings but would eventually be created digitally using powerful animation software such as Cinema 4D. Over the last few years, his pieces have taken on a reflection of media and culture. They are wild, dystopian, often graphic, weird, hilarious, sometimes uncomfortable, and incredibly accurate when viewed in the context of when they were made.
This is the first time Christie’s is auctioning off solely digital art, which comes with an array of new challenges. How do you mint, verify, sell, store, and protect digital art? This is where NFTs shine. An artist can mint their works on the Ethereum blockchain through a variety of websites. The artwork now has a unique identifier and can’t be modified, duplicated, or divided.
Another amazing thing that NFTs allow for in the world of art is for artists to earn money from the secondary market. In Beeple’s case, he earns a percentage of every sale in perpetuity. This is possible because the art exists on the blockchain and serves as a permanent ledger of the transfer of ownership.
If you’d like to peek into the mind of the world’s most popular digital artist, then Beeple’s Instagram is a trip.
Yes, it is. The television was ridiculous when it debuted. You’re telling me I can see picture movies in my living room? Wow, Frank! Get your space suit on—the future is nigh.
Like all emerging technology, it seems ridiculous when we first lay eyes on it, but good innovations make perfect sense as culture, technology, media, and commerce evolve.
Whenever I bring up the subject of NFTs, I’m usually met with laughter, doubt, and speculation. The number one clap back is why would anyone pay so much money for non-tangible things such as an NBA moment or an image or video file by a renowned artist.
However, you have to apply that same criticism to all art and collectibles. Why on earth would anyone pay $100 million for a painting or $3.12 million for a baseball card? Because they are rare, they are historic, and they are a store of value.
We live in an age where more and more of our history and culture are digital, so naturally, those items will be bought, sold, curated, viewed, and protected online. Imagine when more media entities begin minting their intellectual property on the blockchain. In the future, someone might own the NFT for Elsa from Frozen, Mario from Super Mario 64, or Thanos from Infinity War. These are all works of art that only exist in their final form in the digital world.
NFTs also fix many of the rising costs and problems with physical art and collectibles. The physical items require verification of authenticity, special storage, security, and transportation, usually an expensive brokerage to auction them, and the exchange of fiat currency. All of those steps have costs that are rising. Even getting a trading card graded can cost more than $100.
You cannot counterfeit an NFT, it can’t be destroyed by the elements, it does not decay over time, and it can be easily transferred to anyone around the world within minutes at little cost.
The potential for this technology is yet to be fully realized. It could be applied to anything where keeping a permanent, incorruptible, inimitable record needs to exist. Perhaps this will be the future for vehicle titles, home deeds, and identity theft protection.