The first ever published tweet, Pulp Fiction cutscenes, Elon Musk's songs, and memes – all these exist as NFTs and are extremely expensive.
In this piece, the 4K Download team talks about NFTs:
What they mean;
How to create them;
Why people buy them;
The perks of having an NFT.
So let’s cut to the chase and dive deeper into the world of NFTs.
Examples of Non-Fungible Tokens
First of all, let's touch on the specific examples of NFTs to have a better idea of what they are.
Banksy's painting Morons (White) was sold for $100,000 and turned into an NFT. And though the physical analogue was burned, it still exists as a digital art asset.
The most expensive NFT, The First 5000 Days, was sold for more than 69 million dollars.
Twitter founder Jack Dorsey sold his first tweet as an NFT for 2.5 million dollars.
A Pokemon fan bought an NFT of a collectible card with this character for $250,000.
A Dota 2 player bought a rare pink War Dog courier for $38,000.
As you see, NFT buyers and sellers go crazy about prices and the pieces that they turn into NFTs.
But what on earth is an NFT, anyway?
What Is an NFT?
NFT stands for a non-fungible token. Let's divide the term into two parts: a token and non-fungible.
To fully comprehend what an NFT means, you need to know what a token is. To put it roughly, an NFT token is a way to turn unique physical objects into a blockchain. Blockchain is a chain (duh) where each block contains certain data. Unlike servers, where data is stored in one place, blocks are based on multiple devices worldwide and are decentralised. A token is a piece of data in one of the blocks.
Now let's head over to the meaning of the second part. 'Non-fungible' means that the token is unique and can't be replaced with anything else.
Let's consider an example to comprehend the idea better.
A bitcoin, a dollar, or any other currency, whether crypto or physical, is fungible because you can trade it for another currency, and you'll get the same thing in the result. Trade your dollars to euros, and you'll get the same (or nearly the same) amount of money in a different currency – it's fungible.
A piece of art, in turn, is non-fungible: when you trade a painting for another painting, you get a completely different piece of art with a different value. Add to this an exclusive feeling of ownership or belonging to the art collectors' circles, and you'll see that the exchange is not entirely interchangeable.
NFTs are basically one-of-a-kind digital assets (not yet another kind of cryptocurrency!), such as paintings, photos, videos, music, and GIFs. Simply put, any content that strives to be unique can be an NFT. NFTs are super valuable among art collectors, gamers, and art lovers. Non-fungible tokens are bought and sold through special NFT auctions and marketplaces.
Apart from art pieces, NFTs can be used for video games or in-game items, digital collectibles, digital ticketing, and more.
How Are NFTs Created?
Non-fungible tokens are created with a smart contract on the Ethereum blockchain, which is basically a computer program or transaction protocol that automatically facilitates, verifies, or enforces the performance of a contract.
Anyone can create an NFT. To create NFTs, you need to have a crypto wallet with any cryptocurrency of your choice.
Here's a crash course on how to create an NFT token in the OpenSea platform:
Open the OpenSea website.
Head over to Create > My collections.
Create a collection, add a name and a description to it, and add a logo.
Add tokens to the collection: choose Add items > Add new item.
After the NFT is uploaded, auction it.
Wait till it’s bought for millions of dollars.
When & How Did NFTs Emerge?
Blockchain and cryptocurrencies are not new – they've been talked about for years now, but NFTs, as we know them today, appeared just a couple of years ago.
The CryptoKitties game contributed a lot to the popularity of NFTs. The idea of the game is growing and breeding virtual digital cats. The price of such a cat sometimes can be more than hundreds of thousand dollars.
But the biggest part that played in NFT's popularity is celebrities, influencers, and entrepreneurs who fuel interest in non-fungible tokens. Every now and then, you can stumble upon news saying that yet another celebrity bought or launched an NFT. Such big names as Elon Musk, Paris Hilton, Banksy, Tarantino, Mark Zuckerberg, and others contributed to the popularity of NFTs a lot.
Where Can You Buy and Sell NFTs?
Why Would Anyone Want to Have NFTs?
First, let’s talk about what happens when you buy a non-fungible token.
What happens when you buy an NFT?
Once you purchase a non-fungible token, whether it's an art object or even a tweet, what you actually purchase is metadata that is attributed to this token. What is metadata? Metadata (translated as ‘data above data’) describes everything about the NFT and enables you to see what your purchase allows you to do with the token.
For example, if you buy a digital ticket as an NFT, its metadata might be the event's date and time, the type of the ticket, as well as the right that entitles you to attend the event. In other words, if someone else right-clicks to save the ticket on their device, they'll have the file, but it will not include the metadata that gives the right to visit the event; only the buyer has this right.
When you buy an NFT at auction, you can't resell it until another round of bidding takes place.
Considering this, you may wonder why on earth anyone would want to buy a digital art piece that you can't even touch and place it on a wall. Especially given the prices these are sold for. You can right-click and save it on your computer for free, right?
Well, painting reproductions can be found and seen on the internet as well, yet it doesn't stop art lovers from buying originals for great deals of money. The same is true for NFTs: if you buy a token of a well-known meme, it still will be shared all over the internet, but you'll be its owner.
So the first reason why people buy NFTs is a matter of prestige and ownership of the original art piece, even a digital one.
Apart from these, NFTs are also used by celebrities and influencers to monetise their content and interact with fans on social media. Though originally, NFTs were created to allow digital content creators to monetise their art by selling their pieces to collectors, gamers, and art lovers.
Elon Musk is an example of such monetisation: he auctioned off his tweet about an NFT track for one million dollars. Although it wasn't sold eventually, it drew much attention from the media.
Another reason why people buy NFTs is exclusivity. These tokens are non-fungible, so there are no direct equivalents to the digital piece you buy, no one else has the same token, and the whole information about this token is stored on the blockchain, confirming your ownership. For collectors, art and game lovers, it is just as equal as buying the physical original.
Beyond exclusivity, prestige, and monetisation, NFTs are a good investment asset.
However, the issue with NFTs is that in the physical world, we can assume how the prices for art are built, at least approximately, then with blockchain and digital art, there is a completely new creative market where prices depend on yet vague factors, such as the project's popularity, scarcity, and other facets, influencing supply and demand.
But Do You Actually Own an NFT After Buying One?
Hopefully, you figured out why people buy NFTs. But purchasing an NFT is not all; the thing is that even after you buy one, you don't become an actual piece owner with all the rights belonging to you. Outside the blockchain, you don't have any legal rights to dispose of the NFT.
Perhaps, it's yet unclear. Let's consider an example:
Let us take the world-renowned Pulp Fiction movie by Quentin Tarantino, cutscenes of which have been recently announced to be sold as tokens. Whoever buys the token will get the unique digital asset which they can dispose of the way they want within the blockchain. In other words, the buyer doesn't hold the ownership rights on the object.
What’s Next for NFTs: Social Media & Influencers
Social media platforms announce NFT-related updates and attract investments; whilst artists, musicians, influencers, and even celebrities find their interests in this scaling-up niche.
As of January 2022, Twitter launched the NFT Profile Pictures feature that allows linking an NFT as a profile picture while authenticating the ownership.
In May, Instagram announced that they were testing the feature that'd allow a handful of US creators and collectors to be able to share NFTs on Instagram that they have created or bought. This is what it will look like:
In addition to this, Instagram launched #NFTeachMe, a new series where they break down NFTs and related concepts.
In the first episode, they discuss the basics of NFTs, which you can now discover on Instagram. Or you can download it with 4K Stogram, the desktop Instagram content viewer and downloader, and have all new episodes downloaded automatically on your PC with the in-app subscription feature of 4K Stogram!
More and more celebrities launch their own NFTs, so we reckon the trend will live on. There are, of course, certain legal issues regarding copyright and ownership of such art forms, but as time goes by, an actionable regulating solution.