When we learn about Ethereum, topics that surface first can be wide in scope, from Vitalik’s vision outlined in his white paper to the intricacies of smart contracts and DeFi. For many, though, there’s an eagerness to skip a few exits and drive right towards the bright and quirky world of .jpg primates that sell for $24 mill at Sotheby’s — to learn solely about NFTs and their role in decentralization, cryptocurrency, or the art world.
Sometimes, we may even skip over the “learning” part altogether; I found myself asking questions about the basics of NFTs long after I had even purchased one.
While NFTs exist on blockchains beyond Ethereum (as I’ll detail below), this is often where the journey begins…because of the early innovation that stemmed from this technology and the popular platforms showcasing work backed by Ether. But no matter where these creations live or what kinds of NFTs you’re looking to explore, I think it’s helpful to outline a few core observations that make this creative space so unique and worth pursuing.
So without further ado, let’s tackle some common questions that may pertain to the NFT n00b or the avid collector who’s just here for the fun of it.
Break it on down for me! What is an NFT?
NFT stands for Non-Fungible Token. Just like other tokens in the digital world, NFTs are assets that can be bought, sold, held, and used. The non-fungible part refers to the fact that they are non-interchangeable; they cannot be exchanged for an identical item of the same value. In this way, NFTs carry value in their uniqueness.
These assets live on the blockchain, and as we’ve discussed before, this technology records and stores information on a distributed ledger. In this case, the transaction of the NFT sale and ownership of said item is kept on the blockchain — establishing the person holding the NFT as the sole, true owner of it.
NFTs can appear in the form of images, videos, tickets, certificates, information, and a whole host of other collectibles and goods. They also act as a vehicle for this particular item or piece of art.
When an NFT is created, it is minted. Minting is the process where the digital art is tokenized on the blockchain — ready to buy, sell, trade, or enjoy.
Why would someone want to own one?
Think about the ways collectibles have operated in the tangible world over the years — maybe imagine someone you know who is a big collector of something. Pokemon cards? Beanie Babies? Warhols?
Sometimes it’s a small hobby, and other times it’s a big part of their life or work. The items they collect may have a personal significance for the owner, or perhaps it’s purely an aesthetic choice or flex. Often, these collectibles are worth money or have accrued value over time. Their value is derived from a combination of scarcity and demand. This works the same in the NFT world, too.
Perhaps the monetary value doesn’t really matter as much to the owner, but the artist, creator or story behind that particular thing is where they derive meaning. The community surrounding it could present the greatest inherent value of all.
A person might collect something for any of these reasons — or all of them! It’s similar with NFTs. People create, buy and sell NFTs for different combinations of those motives mentioned above, except the territory is so new and vast that a lot of these elements are amplified. The stakes may be a little higher and these collectibles are an entirely novel concept.
A key reason that people might care about NFTs so much is that they’re changing the meaning of ownership to something entirely different — with an emphasis on creative sovereignty. Historically, many artistic endeavors have been known to represent a personal or even spiritual pursuit that doesn’t always translate to dollars.
What’s more, artists may feel their work is appropriated, misrepresented or misused (think of aaalllllll of Taylor Swift’s re-releases). Since the ownership of an NFT can’t be mimicked, this can provide a way for creators to truly own the content they’ve dreamt up…without a middle man or agent in charge of the marketing and bidding. This is especially the case when the platform where the art is produced or sold has some degree of decentralization*.*
But are they useful?
If someone buys the NFT with a cryptocurrency, it can go up (or down) in value. In this way, NFTs can be seen as investments. The total sales volume of the NFT market in the third quarter of this year was estimated at roughly $10.7 billion, according to DappRadar.
Beyond monetary value, many people love to show off their NFTs in different ways or various arenas. They can serve as avatars, often in the form of a profile picture for social media and gaming.Twitter bannersinspired by bold or heart-warming elements are yet another example of NFT reach and scope.
With all the buzz around metaverse realities, identity is certainly part of this wild ride…and the fact that people may come to identify with an NFT has so many implications (especially if they want it to represent them forever).
Play to Earn games utilize NFTs by allowing users to interact with different types of NFTs in-game. You can have an NFT that acts as a “land key”, giving you ownership or access to a digital property — or it can act as a virtual wearable item, like sneakers or jewelry.
From art and music to governance, gaming to virtual real estate, or tickets for sports games or concerts — the list of spaces for NFTs does not yet have an endpoint in sight.
Does owning an NFT mean I have the commercial rights to it?
The rights to distribute or commercialize an NFT are not necessarily included with the purchase of this digital art. So if someone wanted to use their NFTs to build a business with them, they would likely need specific licensing to do so. Intellectual property rights are occasionally part of the ownership package when a person buys an NFT, but oftentimes they’re not — and this is important info to be sure of.
Are all NFTs on the Ethereum blockchain?
Nope. Although popular marketplace OpenSea carries NFTs that live on the Ethereum blockchain (remember those gas fees we mentioned? They’re part of that purchasing process for Ethereum-backed NFTs, too), there are other blockchains like Wax (via atomichub.io) and Avalanche where a person can mint an NFT as well.
NFTs are also being explored on top of Bitcoin, a landscape that’s coming to fruition through exciting projects likeDIBA (Digital Bitcoin Art). These endeavors aim to build on Bitcoin’s layer 2 protocols, which we’ve touched on here.
Interoperability is a term you may hear thrown around here, too, which basically means different blockchains working together. As we look to the future, interoperability could become more desirable in the world of creating, selling and owning NFTs.
Where are NFTs bought and sold?
Popular marketplaces include Opensea, Rarible, AtomicHub and more. There are smaller, more curated spaces like Nifty Gateway, MakersPlace and SuperRare. Then you have brand-led experiences (like NBA Top Shot) that function as creator, inspiration and marketplace all in one.
A lot of NFT action happens in-game, meaning people can buy or trade NFTs within the world of a game while they’re playing it. Experiences and items can be tokenized to become part of that environment, and this is something we’re seeing more as the metaverse develops.
I’m an artist and I want in. How do I create an NFT or my own collection of them?
Graphic designers and individuals with technical expertise (such as coding in Solidity for Ethereum-based NFTs) can collaborate to make NFTs from scratch. Generated art provides a way for NFT creators to replicate one element into many, displaying varied traits with the help of AI.
But if an artist has digital work already created and can convert these pieces to .jpgs, they can go right to a marketplace like OpenSea to mint this artwork and make it a reality.
Launching or purchasing an NFT of your own could be an entry point into a new community — or several. For many artists, this sense of belonging and kinship is a life-changing result of joining these collectives. Converting your .jpg to an NFT may be the first step to fulfilling a creative pursuit or purpose that’s delightfully different from corporate-run, government-sanctioned or fiat-driven constraints that are becoming a thing of the past.
The Wrap-Up
From Bored Apes to Weird Whales, we’re seeing creativity reinvent itself in a new medium right before our eyes…and it’s a beautiful thing.
NFTs redefine ownership in the context of our rapidly changing tech landscape. They can also bring people into the world of crypto, introducing individuals to the possibilities of the blockchain and decentralized currency — much in the way that art and music has traditionally served as a gateway for communities and cultures to define themselves and adopt new practices, beliefs or attitudes.
So the next time someone asks what a .jpg with a price tag can really do, who knows — you might feel compelled to wax poetic about your favorite artist or collectible and the unique value it holds *just* for you.
NOTE: The comment about the Sotheby’s Bored Ape in this intro is an example of recent pricing around a set of NFTs from this collection, and is not meant to represent actual up-to-date price info. My avatar for my HackerNoon profile is a Crypto.Chicks NFT that I purchased and currently own at the time of writing this. None of the information in this post is financial or investment advice.