Crypto series - WTF is NFT? And why it’s booming?
Before we start, I just want to say I have been doing the research on the block-chain technology and cryptocurrency so much lately. The more content I read, the more grateful and lucky I thought I was. Having opportunity to touch on the topic is a bless. It is super interesting field and I firmly believe it will play a critically important role in the future. Therefore, I will write a series of articles to share what I have known and hope that you’ll walk away with at least better grasp of the tech.
Okay, let’s get back to the topic — NFT. Lately, NFT has gained lots of tractions and some people say NFT is gonna change the whole digital art market. It’s true! Five months ago, there was an auction for a NFT of digital artwork by Beeple at Christie’s and it was sold at 69 million US dollars. So insane! And this trade just makes Beeple become one of the most expensive living artist in the world.
If you don’t think that is crazy enough. Five months ago, Jack Dorsey, Twitter co-founder, sold his first tweet as NFT for more than 2.9 million US dollars. What!? A tweet could be sold millions and there are lots of purchasers? There are countless examples I can list down and they gonna blow your mind. Like Crytopunk, NBA Top Shot, Nyan Cat, EtherRock…
So wtf is NFT? Why does it matter? And why they can be so fxcking valuable?
NFT stands for Non-fungible token. It sounds like a bit quirky and nerdy. Let’s just break it down into two parts: Non-fungible & Token.
1. Non-fungible means non-replaceable. Something is unique and can not be interchanged. Take Mona Lisa as example, it is totally non-fungible. If you ask a talented painter to draw an identical Mona Lisa, this painting still get no value because Mona Lisa is one-of-a-kind.
2. Token is a bunch of code that’s used in programing field.
So now we understand NFT is some codes that are unique and can not be replaced, but why it has something to do with art market? Actually, NFT is not the digital artwork itself, but it is a bunch of codes that represent any kind of digital asset, such as an image, a clip of video or an audio file and it’s stored in the digital ledger (blockchain) that points to where the artwork lives. Therefore, owning NFT means the documentation of ownership of digital asset.
Now you must be super confused why a digital asset could be so expensive? We can see all the digital assets at will online and even we can right click to download them. What were those buyers thinking? Were they out of minds? Actually, they are not stupid. They just know something we haven’t thought about. Before we deep dive into the reasons why they buy it, we need to understand why some collectibles are so valuable.
Let’s take Mona Lisa for example. Firstly, we know it is one-of-a-kind. And there are lots of professional experts to prove its authenticity so we can make sure it’s truly from DaVinci. Secondly, there is specific group of people believe it is priceless and would like to purchase it. The demand exceeds the supply (only one…) so much.
If we agree with the descriptions above, then the NFT just make the digital asset totally corresponding to the descriptions. We know traditional digital asset can be copied and pasted easily online, but NFTs make the digital asset become unique coz you can can decide to only issue one NFT for a digital file. And buying it means you own this one-of-a-kind digital asset.
Also, there are some characteristics make NFT more efficient than traditional collectible.
1. Authenticity: One of the most difficult challenge for traditional collectible is how to make sure it is the original one. It took time and money to validate the collectible authenticity. But for NFT, it’s all stored in Ethereum blockchain which can’t be moved or revised. Every data is transparent and no need to prove if it’s real or not.
2. Transferability: Sometimes, when we’d like to transfer the collectible from one hand to another hand, it’s is super inconvenient and time-consuming. But with NFT, transferring becomes a-few-clicks thing.
3. Immutability: keeping a valuable collectible cost an arm and a leg to safely store them. Collector needs to control the humidity, temperature and maybe use special approaches to make it in good condition. But buying the NFT doesn’t need to care about it, only thing you need to pay attention is how you memorize the token.
NFT is still booming now and the sales of NFT has surpassed 400M dollars, but some people still don’t believe NFT has value and think it is a hype or a scam. (NFT’s value is based entirely on what someone else is willing to pay for it.) From my perspective, I am very optimistic and happy NFT is gonna become another big thing. It’s not about that we have another place to invest, but we provide an opportunity for digital artist to monetize their artworks. Again, if you want to invest on NFT, please do complete research and be cautious in the decisions you make.