Things to know about NFT
In the simplest term, an NFT or Non-fungible token is a certificate of authenticity for a digital file, now that digital file can be anything it can be a tweet, a jpeg, a gif a YouTube video of a basketball player dunking anything there are a million gift on internet of neon cats but an NFT allows one person to own neon cats. NFT’s are printed on blockchains which are essentially unchangeable digital ledgers, that everyone can access and verify. So if for example I dropped 2.9 million dollars on jack Dorsey’s first tweet which by the way someone totally did, that then goes on to a blockchain that everyone who wants to can check and see that indeed I own that NFT. If you are into that kind of thing so its not that complicated and if people were dropping the cost of a cup of coffee on NFT we wouldn’t be writing this article, but since people are dropping the cost of a four bedroom home on NFT’s. Its gonna need some explanation.
NFT non fungible token, so essentially is just a token that’s not fungible easy done. Fungible asset’s are interchangeable with each other. For instance gold, an once of gold is worth the same price whether its from a coin in Australia or a nugget in California. Bitcoin is also fungible, while the price of bitcoin coin is volatile from one moment to the next at any given moment one bitcoin is worth the same amount as any other bitcoin so as you might expect. Non-fungible assets are not interchangeable with each other. For instance take cars, one car is not worth the same amount as another car even if it’s the same make the same model in the same year. Basically if fungible asset’s have a set price, non fungible assets are worth pretty much whatever anyone out there is willing to pay for them. This is why all collectibles are considered non-fungible and its why a pair of limited edition adidas sneakers can sell for thousands of dollars and why a first edition Charizard pokemon card can sell for hundreds of thousands of dollars. you’ve probably seen the headlines already but let me just go through some of the crazier NFT sales.
Just in case you haven’t remember bad luck brain the dude in the photo of that meme sold that meme as an NFT for 36,000 dollars the NFT of the neon cat gif I told you about, before that sold for 590,000 dollars what’s more an enterprising chap in new York recently sold a 52 min audio recording of his farts as an NFT 400 dollars. I know 400 isn’t that much when we are comparing it to the thousands and hundreds of thousands we just talked about before but come on farts. Maybe the most illustrative example of this whole craze is this slightly disturbing art piece that pepe the frog with homer Simpson its sold for 320,000 dollars but the price isn’t what makes this one interesting what’s interesting about it is that the guy who sold it is not the guy who created it, rather he bought it in 2018 for 38,000 that’s a tidy profit 38,000 to 320,000, who wouldn’t and that’s exactly why most people are playing this game. Its important to note here that owning an NFT is not the same as owning the piece of by the NFT does not grant you ownership or copyright. Its just grants you the NFT which is kind of bragging rights, some of the people buying non-fungible token are legitimate blockchain enthusiasts who see that technology as the defining technology of that era they see NFT’s as an early application of this revolutionary technology but most of the people flipping NFT’s are doing it to make money a very familiar motive.
That’s not to suggest that NFTS are completely useless they do have some utility and like most technologies they are not inherently good or bad. It’s really just how they’re being used, the biggest NFT sales yet is people’s everyday’s a class of 5,000 digital paintings that were sold as a collage via a christie’s auction for 69M dollars. 69M million dollars for an NFT, yeah that’s crazy to me but its only slightly more crazy that 40M million dollars for a blank blue canvas which is something that also happened at a high art auction.
What NFT’s do if they do anything is create artificial scarcity they take something that you and I could see for free on google and turn it into something that someone out there is willing to pay money for, that’s great for an artist like beeple who’s a real artist with a real following and he’s done work for real companies like apple, louis Vuitton and the super bowl. That’s also good for a whole bunch of other digital artists whose work has historically been hard to monetize because it can mostly be download for free off google. Again when NFT’s are being used to sell foods you know everything isn’t quite right on the internet that leads me to three things you need to be aware off.
Firstly, scams just like cryptocurrency where scams are ubiquitous there are going to be scams everywhere in NFT’s so that could be someone pretending to be an artist selling an NFT for works they don’t actually own it could be someone selling an NFT for something of which there is already another NFT. Point being if you’re seeing all the headlines and you want to get in the NFT game to flip a few and earn a few thousand dollars, just be aware that there’s a pretty significant chance you’ll lose your money.
Secondly, it is really bad for the environment. Blockchains are really inefficient they take a lot of energy to do pretty much anything and its for that reason that more CO2 is emitted from computers mining bitcoin and other cryptocurrencies, than the CO2 emitted by the entire countries of say Argentina and Switzerland.
Thirdly, the hype a lot of the hype that’s surrounding NFTS can be credited to people who already own quite a lot of cryptocurrency. For instance jack Dorsey he sold his first tweet as an NFT for a headline grabbing 2.5M dollars jack Dorsey owns square which owns around 8,000 bitcoins which are worth over 400M dollars, and the guy who bought bpool’s everydays for 69M dollars he is a professional cryptocurrency investor now there is nothing wrong with any of that but just know that the NFT bubble that’s currently is being pumped up advertently or purposefully by probably a relative small amount of people. So are NFTS a flash in the pan? that’s exactly what people said when the bitcoin bubble of 2017 when the price was around 15,000 dollars burst and the price went to 1,000 dollars now some years later. Bitcoin hovers between 50,000 and 60,000 thousand dollars with a market cap that exceeds a trillion dollars but within cryptocurrency there’s a whole bunch of thousands of thousands of what are called altcoins. These altcoins are basically cryptocurrencies that are not Ethereum or bitcoin they’re essentially penny stocks for cryptocurrency except they don’t really do anything even within the community they’re often called shitcoins because of how useless they are, but despite that every week handfuls of these currencies rocket and then plummet based off community sentiment alone, just recently I saw one go from two 2,000 dollars all the way up from 4,000 dollars within the space of about 10 days. Its sounds like a game claimed with flippity, floppity and monopoly money but the real world consequences is that some people get very rich when these coins rocket and then the lose lots of money when they inevitably plummet like that one did from 4,000 dollars all the way back to 2,000 so despite the fact that NFTS make no sense with people spending six figures on YouTube clips you and I can watch for free that doesn’t mean you should expect them to go away anytime soon either.