Exploring NFTs — What’s the actual F!

19 Apr 2022


The F stands for Fungible! NFTs are the thing that everyone has been talking about lately. So what is it exactly? a fad? a scam? I recently started exploring and experiencing non-fungible tokens (NFTs), debunking a few myths in how they’re being described and used. I hope the below Q&A would help answer some of the many questions you might also have. Consider this a consolidated and easy-to-read view that can help save you the hassle of multiple searches. You’re welcome!
What is an NFT?
NFTs are unique tokens that can be used to prove ownership of almost anything: a digital piece of art (this includes music, GIFs), a digital collectible, a ticket or coupon, a limited edition clothing item or in-game item, or even an essay (we all remember having to do plagiarism checks in school/college).

So consider NFTs as the ultimate proof of ownership of anything of value and can be even used for real-world items such as legal documents, signature deeds of a car or house, etc.

What’s the difference between NFTs and Cryptocurrencies?
Each NFT is unique in the value it holds (referred to as non-fungible) and each has its own set of features that might be valuable to a user,
whereas every unit of cryptocurrency is identical to the others in value (referred to as fungible tokens).

What’s the difference between showcasing the digital art via NFT and viewing it from Google Images?
The answer is simple. It’s all about the concept of ownership. As a user, you don’t own the Google image and will never have the chance to monetise it.

Why in the world are prices of NFTs going through the roof?
Whether it’s NFTs, Modern Art, SUPREME clothing or Pokemon trading cards, the same principle applies: the value is derived from the scarcity in supply (e.g. limited edition), a certain value held by the user and the buzz around it
Would I be tempted to buy this Bored Ape Yacht Club NFT that is selling for 56 Ethereum equivalent to USD 149K? Does it derive its value from the fact that 0.72% only have a Laurel Wreath hat…maybe?

Bored Ape Yacht Club NFT on opensea.io
While the above would sound a bit crazy (to me at least)any reason the below Mark Rothko painting is worth USD 86.9M? Both the above & below images are orange, but one has an Ape and the other has some rectangles.
Sunset coloured painting by Mark Rothko

Which one would I buy?
Personally, I would buy the Bored Ape NFT. The whole point of an NFT is that it’s unique in nature so I can be certain that I am the only one that holds this digital piece of art. Some NFTs might be one-of-a-kind, while others might just be limited in supply (i.e. only 100 available for sale) which then might have an impact on the listed price.
Why not the Mark Rothko painting? Well, no one can guarantee that it was him who drew this or his granddaughter or whether this is even a fake. But in an NFT, you would have the history of all the previous owners of the asset (in this case digital art), and have the full certainty that it hasn’t been copied or tampered with. If you think this is an overstatement, I highly recommend you check the story behind the Salvator Mundi painting.
An NFT can be considered as a digital bill of authenticity for the asset that you just purchased with a full ownership history. The ownership history cannot be altered or changed as it is powered by blockchain which makes altering it practically not possible.
How can you get involved in NFTs?

  1. Marketplace: There are multiple sites to check, I started using https://opensea.io/ .
  2. Wallet: Set up a wallet to actually be able to store your crypto currency in which you want to start bidding for NFTs and where you would be able to store your NFTs.
  3. Research: Search the themes you’re interested in and make a bid using the cryptocurrency that you have in your wallet. If you don’t hold crypto yet, it can be easily purchased with your Visa/Mastercard.
  4. Create: You can then start creating your own NFTs. This can be as simple as uploading your own picture, minting that collectible for a fee, and/or listing the item for sale.

Want to make a quick buck with NFTs?
In my opinion, there are many artists that are displaying art pieces and have some crazy valuations behind them. I recently visited an art gallery (free of charge, for now) and walked around. While it was an interesting concept, I don’t think I would be paying to visit another one anytime soon. Maybe it’s another avenue for some metaverse marketing that can benefit art galleries and artists.
The economics behind NFTs?
Too early to tell around what drives the actual value for certain NFTs as there are no clear valuation models behind it. However, we can draw similarities with rare sneakers (check out GOAT or STOCKX).; Sneakers that are rare and hyped up are priced 10 to 20 times or even higher than their initial retail value.
A selection of Bored Apes NFTs and their pricing. some go as high as 73.5 ETD ~USD 188K

Once I create or own an NFT, what can I do with it?
As a content creator, you can decide the scarcity of the content you’re creating and have the opportunity to continuously get royalties on the trading activities as and when your content gets traded.

As a user, you would know that your piece is unique and can later be put on display in your metaverse space or can have the physical equivalent digital piece purchased and delivered to your house.

What does the future of NFTs hold?
One great analogy is to compare buying NFTs to buying Internet domains at the start of the 90s. These domain names still get traded today and have the potential of making their respective owners a pretty decent return.

So why not apply the same concept for NFTs? If you’ve watched the “Billion Dollar Code” on Netflix, you would know that people used to laugh at the idea that anyone was going to use the internet, let alone need online maps. Maps are now one of the most essential tools that individuals and businesses rely on on a daily basis. While NFTs are starting with a simpler use case of digital art and collectibles, the opportunities stretch to any digital or physical good that requires to be authenticated instantly and with certainty.

NFTs go beyond just digital art; its properties can be applied across different industries. One of the most recent examples is its application in the Super Bowl where the NFL issued commemorative virtual tickets in the form of NFTs. In addition to acting as a proof of authenticity of the ticket, it can also be retained and traded as a collectible item.

Going with the same logic, governments can start adopting NFTs to issue and renew passports without going through any hassle, paperwork and waiting times (Some of us still have to go through tons of paperwork to get a loan from the bank or authenticate documents to get a visa — yes this is still a thing if you hold a Lebanese passport!). Just picture that f all of that tedious effort gets eliminated by just having an NFT document backed up which can be instantly confirmed by any reviewer.
(https://cointelegraph.com/news/platform-aims-to-revolutionize-the-ticketing-market-with-blockchain-and-nfts )

While the “tokenisation” of physical items isn’t as developed as digital content, it may have a much more powerful impact on daily activities. The opportunity is definitely beyond digital arts and the tech scene is quickly catching up!

I guess in the next remake of Charlie and the Chocolate factory, the Golden ticket won’t be found in a Wonka chocolate bar, rather it would be a limited edition NFT drop.

For some great additional references and deep dives into this topic, I highly recommend checking out this link https://ethereum.org/en/nft/#nft-use-cases

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Great article! I love how you point out that NFT use cases so much more than digital art, the ticket use case is such an interesting one, and I reckon many industries will start to have its own use cases!
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