It was the first Sunday of April, and I was with a group of friends for lunch (these guys work in technology and financial sectors, by the way), and they started talking about some called Sina Estavi.
Sina Estavi, the man who bought the first tweet from Jack Dorsey via NFT (this was the first time I ever came across NFT) for $2.9 million.
Like anyone else, this made me get on the internet and started dwelling about “yes, the same exact question that you currently have, what is this NFT?”.
What is an NFT?
NFT stands for Non-Fungible Token.
An NFT is a collectible digital asset that represents real-world art or sports highlights or viral photos or memes. Creators can literally take any virtual content and create a digital asset that is produced limited in numbers to form irreplaceable tokens.
In economic terms, fungibility stands for anything that can be replaceable or interchangeable by an identical item or an item that holds a similar worth, like currency. These NFTs are one of a kind and limited numbers, so the term Non Fungible is used. No NFT is equal to any other NFT.
NFTs are one of a kind and can be bought and sold with cryptocurrency. Similar to many cryptos, these NFTs are also encoded with an underlying software. These NFTs carry a virtual certificate of ownership, and that makes the digital asset rare and irreplicable.
How much is an NFT worth?
There is no empirical data stating the value of an NFT. An NFT creator can tokenise his/her work to an ‘X’ amount depending upon their art category and work.
In the last year, the world has witnessed some NFTs that are sold for mind-boggling numbers.
- ChristiesInc sold beeple piece of digital art for $69 million.
- The Nyan Cat 2011 meme was bought for $500,000.
- Musician Grimes’ digital art was sold for over $6 million.
Until you understand NFTs, all of this will sound very wild.
How do NFTs work?
Like Bitcoin, NFTs also work on a blockchain that has a distributed ledger viewable for the public that records transactions on the Ethereum blockchain.
Unlike Bitcoins, Ethereum blockchains allow extra information to be stored such as art, music, video, which can be stored in the form of JPGs, MP3s, Videos, GIFs. While cryptocurrencies like the Bitcoin/Ehtereum/Dogecoin carry monetary value, NFTs are valued as per their uniqueness, similar to a collector's item.
How to buy an NFT?
NFTs are in high demand. They are released as 'drops' (much like IPL or World Cup matches, when batches of tickets are released on different dates). This means there is wild excitement for all buyers when the drop starts. For the first-time buyer, you'll need to be registered on a particular marketplace and have your wallet topped up before the release.
Every creator needs to list their NFTs on a self-created marketplace or on third-party exchanges for people to trade.
Are NFTs just a bubble?
For the creative community, NFTs are a boon. For designers, artists, and musicians, etc., NFTs have become a new source of income. There is a legitimacy that is being created by the public ledger available in the blockchain, and, for collectors, this is a new way of investing your money on limited digital collections.