Are you a boomer asking what these kids are talking about when they talk about NFTs? Are you just another person who doesn’t get what NFTs are all about?
Don’t worry, I will try to explain what they are in the simplest way possible. The world is changing at a very rapid pace. Just 10 years ago, very few people knew anything about cryptocurrencies, blockchains, or the new buzz now - NFTs
So, today, let's look at what NFTs really are. NFTs or non-fungible tokens are essentially digital artwork or collectibles.
Understanding NFTs is very easy if you understand how sports trading cards work. For example, a Michael Jordan sports card from the mid-80s can sell for hundreds of thousands of dollars today on auction sites. Just like old paintings or sculptures, there are collectors who find these trading cards to be very valuable.
But do they create any value to the buyer or to society at large? Nope.
However, the collectibles market operates on the notion of the value attributed to anything. So if enough people feel that something is valuable, they will pay big money for it. That's how old paintings are sold for millions of dollars at auction houses like Christie's.
NFTs work exactly the same way. As long as people attribute value to a piece of art, they would buy it for as much money as they can.
Now this being the digital world, NFTs exist on blockchains, meaning they can't be destroyed or replicated. Each NFT has a unique number (token) that can be verified by anyone. Also, unlike a piece of painting, NFTs can be broken into smaller pieces and sold to different collectors. Each collector owns a small piece of the digital artwork which can be verified by a token number on the Blockchain.
So you can think of buying an NFT the same as buying an original Picasso or Van Gogh artwork only that it is digital. And since they are considered assets, their value grows over time. This is perhaps one of the biggest reasons why collectors buy them — with the hope that their value multiplies over time and they can flip them for profit.
NFTs also provide a big advantage to the artist or creators. If an NFT is sold, the creator gets to receive 5 to 10% of the secondary or tertiary sale. So if I sell an NFT for $100,000 and the buyer flips it for $500,000, I get to earn 10% of their sale. This is a great recurring stream of income for artists or creators of NFTs.
Some of the biggest sales of NFts include;
- Mike Winkelmann who goes by the artist name Beeple. His artwork titled “Everydays; the first 50000 days” sold for $69 million at Christie's auction house. Another artwork of his called CROSSROAD, sold for $6.6 million on the Nifty Gateway marketplace.
- Musician Steve Aoki created a high-value NFT which he sold for $888,000 in March 2021 on the Nifty Gateway marketplace.
- Jack Dorsey, the founder of Twitter, sold his first-ever tweet for $2.5 million dollars last month as well.
It's crazy to think what people would consider as art, however, art has always been subjected to the taste and value given by the collector. So, will you buy into this new buzz or will you pass?
Let us know in the comments section below.