Here are the five most important things you should know about NFTs as well as a short list of NFTs making history, which you can drop into the conversation to show you wouldn’t get lost in Decentraland!
What are NFTs?
Fungible goods or assets are those, according to the Cambridge Dictionary, something such as a currency, share, or goods that can easily be exchanged for others of the same value and type. Fiat currencies (for example, the South African Rand) and cryptocurrencies (for example, Bitcoin) are fungible because they can be exchanged like for like – so, R100 for another R100 or US$8 depending on the day, and one Bitcoin token for another Bitcoin token or cryptocurrency depending on existing agreements.
It stands to reason, then, that nonfungible goods are assets not easy to exchange or mix with other similar goods or assets, and nonfungible tokens – NFTs – are blockchain assets that are designed not to be equal.
Blockchain? Blockchain is essentially a system used to make a digital record of all the occasions a cryptocurrency is bought or sold, and that is constantly growing as more blocks are added.
An example of a blockchain asset is an aeroplane ticket. An aeroplane ticket isn’t a ticket on any flight at any time – it is for a very specific flight at a very specific time (in a very specific seat).
NFTs are unique and non-reproducible – and they are not real in the way that you would imagine. They are digital assets and exist only as computer code, a prime example being Estate 331 located in Genesis Plaza. This is not real estate that you can visit, dig your hands into its soil or walk under its trees – it’s virtual land in a digital world that you can only visit on a computer.
According to forbes.com, fashion, art and entertainment are the hottest NFT commodities; and people are also buying virtual trading cards and digital lands as investments for the future.
Importantly, the concept of purchasing something non-tangible isn’t new – take shares in a company or unit trusts, for example. In years gone by, you’d be given a physical stock certificate proving ownership but that certificate never actually had any physical link to a physical asset, it simply indicated you owned a portion of the business.
Who is buying them?
A recent article on forbes.com quoted, logically, some US statistics:
- 40% of US millennials are both familiar with NFTs and likely to buy one (Harris Poll)
- 38% of US consumers say NFTs are worth investing in (Harris Poll)
- 27% of US consumers are already investing in NFTs (Harris Poll)
- 25% of collectors of physical items say they also engage with NFTs (Morning Consult)
According to ARK Invest, the virtual good ecosystem is expected to reach $400 billion by 2025.
How do you buy them?
You’d think that you can only interact in the crypto world of NFTs using cryptocurrencies, but many companies or individuals selling NFTs accept Fiat currencies. All the better to reduce barriers to entry and grow the market, yes?
And, while big money has certainly been spent on several NFTs, not all come with huge price tags. Beeple, an artist on Instagram, started by selling his digital artwork as NFTs for as little is $1. OK, he did also – through auction house Christie’s – sell a single piece for nearly $3 000 000.
How do you prove ownership?
As ‘tokens’, NFTs possess a unique ID which distinguished them from other NFTs. And trade in NFTs is recorded ‘on-chain’ – that is, on blockchains – just as cryptocurrency deals are so, once ownership is transferred, it cannot be reversed.
Think of a blockchain as a list that cryptographically records a series of events, or transactions – like a chain with each linking to the one before and the one after. This makes it nearly impossible, after a certain number of new transactions have occurred, to change an old one. Importantly, too, blockchains are ‘open’, that is, anyone can view the history of transactions.
Are NFTs only for art, fashion and entertainment companies, brands or celebrities?
NFTs offer a new way for brands to engage with their customers. For example, a video promoting fashion brand THE DEMATERIALISED’s NFTs suggests owners display their assets on their blockchain profile, that they wear their assets on social media and that they port their asset into a game or metaverse.
So, consider this: how long before Toyota Gazoo Racing creates an exclusive car for use only in online racing games. Before fashion houses and possibly even clothing retailers create collections only available as NFTs for use by avatars in Decentraland?
Or if you owned an apartment on Estate 331, wouldn’t you want it stocked with the same (or maybe better) appliances and furniture as you have in the real world? Which brands would be in your fridge, which wines would you serve for dinner?
And about that art of the walls, would that now be a Beeple?!
NFTs you should know
- ‘Everydays: the First 5 000 Days’ – digital artwork by Beeple sold by Christie’s for $3 000 000.
- Star Trek’s William Shatner has released NFTs of photographs of his personal life and film career on the WAX blockchain.
- Argentinian designer Andrés Reisinger sold 10 pieces of virtual furniture on Nifty Gateway, the most expensive for almost $70 000.
- Decentraland, which opening to wider audiences in 2020, recently sold a piece of virtual land for $900 000.
- Estate 331 (‘The Secret of Satoshi’s Tea Garden’) comprises 64 adjacent parcels of land making up a perfect square in Genesis Plaza. It sold for just over $80 000 in 2019.
- Cryptokitties, a game described as a mix of trading cards and Tamagotchi, nearly took down the blockchain it was sold through and its most expensive kitties sold for upwards of $10 000.
- A meme of a flying cat, Nyan Cat, sells for $600 000.
- CEO of Twitter, Jack Dorsey, auctioned his first ever tweet.
- ‘Jacob & Co.’s Epic SF24’ – the world’s first luxury watch NFT, a 3D animation of the Epic SF24, sold by ArtGrails.
Kirsty Bisset is managing director of HaveYouHeard Durban. Ex-founder at STIR, and shareholder in several technology companies, including SwiftX, Fraxeum, Sirvis and AZUZA. She was named as one Fast Company’s Top 20 South Africans under 30 and featured in Destiny Magazine’s Power of 40. She was one of the three FAIRLADY Women of the Future in 2018.
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