Understanding NFT’s – Twitter CEO Jack Dorsey recently made headlines around the globe when he announced that he would be auctioning the very first tweet ever posted to the platform. Taking that very first chirp on Twitter and turning it into a non-fungible token, Dorsey auctioned the tweet and shocked the world when it sold for 1630.5825601 Ethereum (ETH) – or $2.9 million dollars. Dorsey immediately converted the Ethereum into Bitcoin and donated the fortune to the organization GiveDirectly for its Africa Response.
The concept of spending nearly three million dollars for a tweet saying ““just setting up my twttr” can cause one’s head to spin into orbit. How does one even “own” a digital asset like a Tweet? The answer lies in the NFT – a unique digital token asset that is stored on the Ethereum blockchain and sold for ownership. From famous works of art to confusing memes, NFTs have taken the investment world by storm.
Read on to learn more about NFTs, and why these digital assets have quickly become one of the most popular – and strangest – investments on the market.
What Is An NFT?
Before you can wrap your mind around the concept of buying a tweet for just under three million dollars, it can be helpful to understand just what a Non-Fungible Token is.
In essence, a Non-Fungible Token (NFT) is a digital asset that holds a determined value in cryptocurrency. Consider NFTs as a kind of “digital art piece” – a high-value, one-of-a-kind collectible that one might purchase and hang in a gallery for others to view. A value-holding asset, NFTs are often purchased and maintained for long-term investment and appreciation.
So what sets an NFT apart from other non-fungible, physical items such as real estate and artwork? The key difference is that NFTs are known as cryptographic assets – meaning they are maintained on blockchains and have unique identification codes and metadata that give them their identity and value.
While existing in the crypto world, NFTs don’t operate in the same way as cryptocurrency. Cryptocurrencies like Bitcoin and Ethereum are known as fungible tokens due to their identical nature and ability to be used for transactions. As NFTs are a single, unique entity, they cannot be traded as currency but are instead held and tied to a particular value.
How Do You Hold Digital Assets?
The confusion surrounding NFTs arises around their holding. Unique NFTs are stored on the Ethereum blockchain as tokens with data. The data stored in the token allows for an NFT to hold the form of a variety of digital file types, such as MP4s, GIFs, MP3s. In the case of Dorsey’s famous first tweet, the NFT token contains the extra information on the tweet file itself, and the image that shows when the tweet is viewed.
So what’s to stop someone simply saving a copy of Dorsey’s tweet to their computer and claiming their own NFT? With the original NFT data stored securely on the blockchain, any attempt to copy and save would be similar to someone printing off a copy of Monet’s Water Lilies. It may have the appearance of the original, but doesn’t hold the value of the actual work of art!
Examples of Real World NFTs
As NFTs rise in popularity as tangible assets, more NFTs are being created, bought and sold on the market. Dorsey’s first tweet isn’t the only token selling for astronomical prices currently, with
Beeple: Artist Mike Winkelmann – also known as Beeple – recently sold an NFT of his art for $69 million through the online marketplace Christie’s. The sale shocked the art world, with critics saying that Mr. Beeple may have turned the page on the next chapter of art.
Nyan Cat: A meme GIF of an animated cat running with a rainbow flying behind was recently turned into a unique NFT token to celebrate the GIF’s 10 year anniversary. Creator Chris Torres put the Nyan-NFT up for auction and recently sold the artifact for $580,000 worth of cryptocurrency.
Paris Hilton’s Cat Drawing: Teaming up with the charity digital art company Cryptograph, actress and model Paris Hilton created an NFT of a drawing of a cat. The NFT was auctioned and sold for 40 ETH, or nearly $17,000.
Beastly Ballers: In a fascinating story of the power of NFTs, artist Ryan Maloney drew a series of trading cards known as Beastly Ballers. Maloney originally planned to print his cards physically and sell them in $5 packs of ten. However, upon learning about the concept of NFTs, Maloney decided to sell his non-fungible versions of his Ballers on the marketplace OpenSea – and made over $700 on 14 cards alone.
As NFTs enter the mainstream, companies and brands are getting involved. The Associated Press recently put up an NFT version of the 2020 US Presidential Electoral Map, and toilet paper brand Charmin is selling digital NFTs of TP-inspired artwork online.
How Do You Create An NFT?
With so many NFTs hitting the digital auction block, the question remains: How do you create an NFT?
While the concept of NFTs may seem complex, the process to create one is relatively simple. NFT marketplaces have sprung up across the web, with online auction sites such as Rarible, OpenSea, and others allow you to quickly create and put your own NFTs up for auction in a matter of minutes.
In order to start creating NFTs, users connect their crypto wallet to the market where they will create their NFT. The crypto wallet will act as the login for that market, ensuring that your unique data is tied to the creation of that particular NFT and is stored on the blockchain. This means that you – and you alone – are the sole owner of the newly-created NFT until you sell the asset.
NFT markets will have a creation section where you can upload your particular digital asset and load it to the marketplace – creating a brand new NFT. With just a few clicks, you will have created a brand new non-fungible token that a buyer can purchase and own themselves.
NFTs – Fad or Future?
The explosive popularity of NFTs has caused many to take a second look at the power of the digital asset market. What was one a niche market that seemingly appealed only to fans of viral memes and
While not entirely equal, the future of NFTs may be closely tied to the future of cryptocurrencies themselves. While Bitcoin was once heralded as a waste of money by those looking to buy into an unknown currency fad, those who got in on the ground floor with cryptocurrency are now enjoying the fruits of their labor with prices rising into the tens of thousands for a single token.
For NFTs, the same fate may be true. In fact, there are many real-world uses for NFTs emerging outside simply owning a piece of digital pop culture.
By moving physical objects into digital assets, processes can be streamlined to meet higher demands and expectations. For example, moving physical passports into NFTs could potentially make the processing of individuals crossing international borders faster than ever before – potentially eliminating the need for long lines at customs.
The rise of NFTs could also have an impact on investing. While splitting up assets such as real estate physically can be difficult, fractionating an asset through NFTs can allow multiple owners to hold pieces of a property digitally.
The future of NFTs lies in its potential as a way to securely hold and monetize unique tokens on the blockchain. However, critics point out that the electric power needed to run blockchain technology is quickly becoming one of the leading causes of carbon emissions. As NFTs rise in popularity, the power necessary to run the system they are stored on will only increase. For the digital asset world to survive in a climate-conscious economy, advances in the technology will need to be made quickly.
Whether considering the jaw-dropping reality of buying a tweet for nearly 3 million dollars, or imagining the future possibilities of digitized assets, NFTs are changing the marketplace – and how individuals view the concept of ownership. Only the future will tell whether or not NFTs will become commonplace in the modern economy, but right now they are enjoying the limelight in a way few fads ever have.