Once again, we’ve come across a new explosion of blockchain news, feeling both curious and confused. It’s the same feeling that we had with blockchain itself, with Bitcoin, and now with NFTs. Maybe you, like many others, don’t know exactly what an NFT is, but you’ve probably heard of people paying millions for clip art of cats or Twitter’s owner putting up his autographed tweet for sale.
But why should you even learn what an NFT is? Well, because it has completely changed the way industries, especially those involved in music, content creation, and digital artworks, handle intellectual property. Plus, many are making a fortune selling content that was worth little to nothing just a few years ago.
So, once and for all, let’s just understand what the hype is all about. First, let’s see what an NFT is.
The acronym NFT stands for Non-fungible Token. A token is any digital asset exchanged between the buyer and the creator. Non-fungible means unique or one-of-a-kind. For instance, Bitcoin is a fungible asset, meaning that when you give one Bitcoin and receive another, you’ll get exactly the same thing.
However, NFTs are quite different. It is a unique digital asset operating on the blockchain and has its own unique value. A non-fungible token has a link that usually links to a digital file (image, music, text file, etc.). As of now, you can buy NFTs using cryptocurrencies with Ethereum. The most successful NFTs are on the Ethereum blockchain.
So, when you buy an NFT linked to a digital file, you get exclusive ownership rights to that file. Now, let’s explore the value of an NFT.
As we said before, the value of an NFT comes from providing ownership of a property. The NFT doesn’t contain that property, but it does direct you to its location on the blockchain. That property is usually in the digital realm, like an original artwork or digital content. Just like a concert ticket reflects the value of an actual experience, NFTs represent the value of a property.
In addition to ownership rights, you can set royalties for each sale of the NFT. For instance, if you sell an NFT of your artwork with a 3% royalty, you will receive 3% from each sale in perpetuity. And as your artwork becomes famous, the NFT’s value will go up and the 3% royalty will be worth more and more.
Practicality aside, exclusive ownership is an attractive point for those who like to show off their limited edition mint collections and proudly display them on their social media accounts. In addition, NFTs can earn the right to join secret, exclusive clubs and meet public figures and celebrities at club meetings and parties.
With the advent of the internet, everything physical has been transformed into digital. Today, it's easier than ever to contact people all over the world and have unlimited data storage. Moreover, the cost of disseminating data today is a tiny fraction of what it cost decades ago.
However, ownership and exclusivity of information are the biggest drawbacks of the internet that have troubled users for years. Verifying the authenticity of digital assets is much more complex than authenticating physical ones. In other words, there is no real ownership of assets in the digital world.
That is an extreme cost-benefit for the user but awful for the creators. It’s not easy to trace and determine the exact owner of data on the internet without NFTs. That makes monetization of clip arts, content, music, and even digital text files almost impossible.
This is where NFTs can help users by offering proof of ownership, combining the best of both worlds. In other words, users can now benefit from low-cost distribution, global reach, ownership rights, and authenticity all in a single asset.
In addition, embedded in each NFT is a software code that can be traced to the owner's wallet and confirms ownership of the NFT.
There is also an immense benefit to being an active NFT community member. On the one hand, that community provides you with enough followers to easily sell NFT. On the other hand, many of these communities are essentially platforms where you can sign up and actively participate. In return, you are rewarded with NFTs and even have a say in how the platform evolves.
Back in the day, there was no financial benefit to being an avid fan of the biggest sports team in the world, but that may be changing with the advent of NFTs.
Despite what some may think, NFTs and cryptocurrencies are not the same. But, similar to cryptos like Bitcoin and Ethereum, NFTs operate on blockchain technology to verify their authenticity and ownership. On top of that, all transactions related to NFTs and their associated properties are recorded on the blockchain.
NFTs can exist on many blockchains, but the most successful NFTs operate on the Ethereum blockchain and contain additional data that makes them unique and different from a fungible BTC or ETH coin. That’s why they are also called non-fungible tokens.
NFTs offer massive potential for artists, athletes, and most content creators because it’s a way to monetize their content without having to deal with intellectual property. They can link their content to an NFT and sell the token directly to fans, and even earn from the royalties.
Currently, buying NFT is not as easy as buying crypto or a bag of chips, but many companies around the world are trying to develop platforms where people can buy NFTs using a credit card.
There are numerous ways to create NFTs. You can either do it manually or use systems that exist on the NFT market. In addition to the intricate details of creating NFTs, you need to choose a blockchain for the token from a wide range of options. Each blockchain comes with unique communities and tradeoffs. These communities play a significant role in the future of your token.
One of the more reliable systems on the NFT marketplace is Opensea. Here’s how you can create NFTs using this system:
1. Go to https://opensea.io/ sign up and just use their point and click solution. You’ll just be uploading images, basically. It’s going to be the cheapest and require the least amount of technical skills. NFT purists will find this the least attractive, but it would get the job done. You can create an NFT in 10 minutes.
2. Go to https://www.manifold.xyz/ and set up your own custom contract. This is basically just a point and click solution with a little bit of basic blockchain knowledge needed
3. Hire a developer to custom code everything. This is probably overkill and will be the most costly but also the most flexible.
While we still need to wait and see if NFTs will stand the test of time, it never hurts to jump on board as soon as possible and tap into revenue streams that were nonexistent several years ago.
Also, if you’re planning on purchasing NFTs as an investment, you need to assess the project from all angles. It means that much like buying crypto, the NFTs founding team, the quality of execution and the future direction of the project play a significant role in driving its value up or down.
One of the more complex and critical factors that can determine an NFT’s value is the power of its community. The community is the biggest force that drives the NFT’s value and helps the project power through challenging periods. We’ve seen many cases where the founding team came up short, but the community stepped in and revived the project.
So NFT success is tied to the strength of the community and building it stronger. Hmmm……Penn State 700,000 plus alums, who will be the first to get the Penn State NFT humming?
If you want to discuss NFT’s reach out to Greg@affinityconnection.com as he is all about community building.