“How to sell a jpeg for $6.6 million”. That would surely be a New York Times best selling book, right? If you don’t know what I’m talking about, a guy named “Beeple” sold an NFT for $69 million back in March.
Prices had been frothy prior to this but this event triggered some interesting development as JPEG pictures started to sell for millions of dollars. Twitter founder Jack Dorsey sold one of his tweets (yes, a single tweet) for $2,9 million. Recently VISA acquired a Cryptopunk for a whopping $150 000. Catchy NFT news like this has more or less the norm during the summer of 2021.
On top of this, we see interest from sports stars as Tom Brady and Naomi Osaka recently launched “Autograph”, an NFT platform. It might be hard to understand this hype and what NFT’s really are...
NFT - what is it?
NFT stands for Non-Fungible Token. An NFT represents something unique. It differs from bitcoin, which is a Fungible Token. You can trade a bitcoin for another bitcoin, they both represent the same thing and have the same value. However, an NFT cannot be replaced with just another NFT as you then would get something completely different.
Fungible Tokens: 1 BTC = 1 BTC
Non-Fungible Tokens: 1 NFT ≠ 1 NFT
How it works?
NFTs live their lives on blockchains. Just like bitcoin is living its life on the Bitcoin blockchain, or how Ether lives its life on the Ethereum blockchain, so does NFTs live their lives on various blockchains.
NFTs store extra information, metadata, about each NFT. It’s in the metadata where you can find out the information about any specific NFTs. The metadata is also the place that makes each single NFT unique - this is where their identity can be found.
The most common blockchain to host NFTs right now is Ethereum. However, Solana and Flow have both seen an astronomical rise in the total value of NFTs being based on their respective blockchain.
If you want to have some stats on NFTs, check this out!
Use cases for NFTs
NFTs are terrible as money but fill other purposes. Art and gaming are two specific applications where NFTs are popular right now. Just like Jack Dorsey created an art piece when he created an NFT representing one of his tweets. In gaming, we see Loot and Star Atlas growing rapidly where NFTs represent ownerships of assets in the game. Even fractionalized ownership of various assets such as apartments, shares and whatever your fantasy can come up with is possible to do with NFTs.
There are many more use cases for NFTs. If you want to find out more about them specifically, I recommend you to check out NFTs And Their Use Cases: A Complete Guide.
The NFT world is full of innovation and I’m sure we will hear a lot more about it in the coming years. JPEGs and gaming are what's hot right now, but the key to understand is what will be hot tomorrow?
The first step on getting that knowledge is by listening to the Greater Finance Insight episode #15 where Juliana Passos gives us the clues.