Understanding Crypto - NFT

We all know about coins and tokens from blockchains being used for finances. What has now gained popularity is an “NFT”. That is a special token that has information written in it that makes it unique. It can hold the ownership deed of a picture, a gif or a short video. Everyone can see the picture, but you are the one who owns it. That is why it is called an NFT - Non-fungible token. It means that it is unique and not like all the other tokens.

There is another way to look at it. You have seen the famous painting “Mona Lisa”. Some people even have reproductions hanging in their homes and galleries. But no matter how many times the painting is being photographed and the photographs being shared, there is still just one real painting painting “Mona Lisa”, placed in a museum. And even if everyone can see it, the one who owned it would be a rich man.

Just the same is with the NFT token. Yes, anyone can take a screenshot of said picture and post it on their blog. But only the owner has the original with the artist’s signature and affirmation that it is the real deal. It can be then bought and sold to others, always keeping the record of its authenticity. One token of a picture by an artist named “Beeple” has just been sold for 69 million dollars, making it one of the most expensive artworks of the modern day.

What can be an NFT?

Any digital asset can be made in an NFT. Recently this gif of a poptart cat flying through space was sold for more than 500 000 dollars. Musicians like Grimes and Soulja Boy are selling their artwork for millions of dollars.

And you can turn a lot of other things into an NFT. The first ever message on the Twitter platform is being sold by the owner and Twitter creator for 2.5 million dollars. If you visit that website and browse around, you will see plenty of tweets being sold by their original authors.

Even the NBA has joined the NFT market and offers their own “tokenized” assets. And you know, it kind of makes sense, considering the NBA player trading card craze. You got various packs of cards and they were collectibles. Sure, everyone could have taken a photo of your card with Michael Jordan or Nat Holman, but you still own the card itself and can sell it for tens of thousands of dollars. Just like that you can go to their website and buy short video clips of the best NBA plays. Just like the old collectibles, they might be a good investment or just hold a sentimental value.

Should I buy an NFT?

We shall never give you a direct “yes” or “no” about any financial decision that is yours to make. The answer to this question depends on what exactly you are expecting. If you read this and are happy to own a digital artwork because you like it so much or you are just willing to support the artist? Then, by all means, buy the token. If you want to own various NBA plays and create a collection just like people did with trading cards, make it your goal and don’t let anyone stop you.

On the other hand, if you read all this and just said “So what is the point?”, then it is probably not for you. And that is also ok, as not everything can be for everyone. When you buy the token for a song, it does not mean that you own the song now and can use it in your Youtube videos. It just means that you own a signed copy of it. And the price depends on the artist's popularity and how many tokens they have sold. If nothing of that seems even a bit interesting to you, then this is not for you.

If you read this by looking for an opportunity to invest and get money, be very careful. Like with every investment, you need to carefully examine the situation and predict the future. Will this thing be more valuable in the future? When buying an artwork you can hope that the artist will become more famous in one way or another. Or you can buy an NBA trading card of a rookie player, believing in him and hoping that he will get in the big leagues and your card will be worth way more.

Thing is, you are not betting just on the player. You are betting on the player and on the whole trading card system. Hoping that in ten years there will still be people who want said cards and actively trade them. That is the exact same case here with NFTs. Who is to say that people will care about the whole tweet selling platform? If you have bought it because the tweet is important to you, fine. However, if you invested to get more money and there are no more buyers, your plan has failed.

What are NFTs good for then?

As always, the start of every new technology is rocky, uncertain and, sometimes, downright strange. And that is to be expected from the first steps. Still, the future seems very peculiar and interesting.

One of the main benefits is that you can be sure that the item you are buying is not counterfeit. As it is all written on a blockchain, it can not be edited or changed. And sometimes the author can create his NFT in such a way that he gets 10% of the price whenever the token is resold. That is right - you can donate to your artist by just buying his NFT from someone else who owns it.

The ownership of a house can also be tokenized. And instead of being a single token of the house, it can be turned into 100 tokens, each representing a 1% share of the house. This changes the whole real estate market, as it greatly lowers the entry costs. Let’s say you want to invest in real estate in a new city. But the cost of a single house is 100 000 dollars and you can’t afford that. Now, if the owner creates 100 tokens, each costing 1000 dollars and representing a 1 % ownership, you can suddenly buy 5 tokens, thus you own 5 % of the house. When the value of the villa rises, the value of the token rises.

If a house is not what you are looking for, you can buy a wine bottle in a warehouse in France. Then, after a few years, when the wine has matured, you sell it. All the identifying information is engraved in the bottle and, when you buy the token of said bottle, you legally own it and can do with it whatever you want. It is just somewhere there, in France.

So, as with everything in the market of novelties, be careful, but optimistic. Sure, maybe nothing catches your eyes right now, but if you’ll look away, you might miss something that can surprise you.

If you have any questions about the topic or want to suggest a new one, please write an email to [email protected].