We all like to collect things, be it stamps, video games, DVDs, books or even marbles as a child. Our interests, innate passions, and what resonates emotionally drives our collectible hobby or even investments. From artworks, antiques to fashionable bags and shoes.
A digital-only artwork, or NFT meaning non-fungible token, recently sold at Christie’s auction house for a mammoth £50m, but the collector will not receive a print, painting, or even a sculpture. Instead they’ll receive an NFT from the digital artist. Non-fungible tokens have suddenly captured the world’s attention and are the latest cryptocurrency phenomenon to go mainstream.
In this post we look at NFT Meaning. They are blockchain-based digital assets but are different from other blockchain-based assets such as cryptocurrencies, as they cannot be used as currency or exchanged for similar items. They have inbuilt identity management and a marker of identity related to the digital file for proof of ownership or proof of stake.
In the simplest terms:
- NFTs are pieces of digital content or a digital item linked to the blockchain, the digital database underlying cryptocurrencies such as bitcoin.
- Content creators are using NFTs to trade on the blockchain, they transform digital works of art and other collectibles into one-of-a-kind verifiable assets.
- A fungible asset is something with units in Economics that can be readily swapped much like money. Whereas with currency, you can swap £10 for two £5 notes and it will have the same value.
However, due to its unique properties, if something is non-fungible, interchanging it with something else is impossible:
- As long its original and one-of-a-kind then it could be an NFT – a painting, a photo of the painting, or even a print.
- NFTs are ‘one-off’ non-tangible digital assets with digital certificates (not physical assets) that one can buy or sell like any other piece of property.
- These digital tokens are essentially certificates of ownership for virtual assets.
So NFTs are not a currency?
The crypto market moves in waves. Bitcoin is the undoubted blockchain kingpin. Investors including investment funds and Banks are now looking for “the next big thing” to enter early on, and not miss out on the incredible rise and success that we’ve seen with the original cryptocurrency.
A Bitcoin can be swapped for another Bitcoin, or an equivalent sum in Ether, or Bitcoin Cash. But NFTs such as artwork, web domains, and unique in-game items are unique. Another example is an NFT plot in Decentraland. Much like real land, some plots are centrally located in the universe, some are nearer to roads, some are larger, and some smaller but they are all unique.
NFT’s and scarcity
It’s a way of creating scarcity online and providing proof of authenticity and ownership. It’s most commonly applied to digital art, although it can be applied to just about anything where uniqueness is the chief selling point. Anyone can create an NFT. All that’s required is a digital wallet, a small purchase of ethereum, and a connection to an NFT marketplace where you’ll be able to upload and turn the content into an NFT or crypto art. Simple, right?
NFTs could be heard in whispers across the globe until the beginning of 2021 but now they’re firmly in the spotlight. While NFTs seem like they’ve arrived out of nowhere, they do trace back a few short years. The relatively short history of the crypto world has been characterised by waves of trends:
- the 2017 ICO boom
- 2017–18 smart contract platform era
- 2018–19 stablecoin era
- 2020 DeFi craze
Whilst DeFi has been the focus for most of2020, NFTs have increasingly gained traction in 2021.
- NFTs go back as far as 2012 when the first NFT-like token was introduced- Bitcoin 2.X or coloured coins.
- The NFT industry increased by 17% in 2019 and was forecasted to grow 50% by the end of 2020.
- This market capitalisation is fascinating as it represents the creation of more than $200 million in gross value from nothing in less than two years.
- NFT sales activity has increased dramatically since September 2020and has remained higher than previous months of the year, data from NonFungible.com.
How NFTs derive value
Over time, our notions of value have expanded. The majority of economists typically subscribe to a “subjective theory of value” or STV, in contrast to a “labour theory of value”. Both Karl Marx and Adam Smith support this, although in different forms.
STV suggests that a good or service is not valuable in and of itself but, rather, in proportion to how important it is to a consumer. A beautiful, vintage clock costs more than a simple clock from Amazon, but only if the consumer has a more luxurious and pricy taste.
Since ancient times goods were traded between two parties depending on who needed what. If a farmer had lots of produce but not enough furniture, they might trade. The produce had value to the hungry and the furniture to those that needed to fill their home. These items held value according to scarcity and need, or supply and demand.
NFT meaning and Taxi Drivers
There’s an old saying – you know you’re in a financial bubble when your taxi driver starts giving you investment advice. So, now that you’re taxi driver is talking about NFTs – they’re well on their way to becoming mainstream.
- The first major NFT milestone was when Jack Dorsey, CEO of Twitter was selling an NFT of his first tweet, “just setting up my twttr,”.
- Since then, major bands shave started releasing their albums on NFT.
- Kings of Leon recently announced they were becoming the first band in history to release their latest album, When You See Yourself, on NFT.
- Meanwhile, Grimes the musician, and Elon Musk’s partner sold $6million worth of NFT digital art in early 2021.
How to buy NFTs
Some of the most common NFT marketplaces include Rarible, OpenSea, Mintable, Nifty, and Gateway. Niche marketplaces also exist for more specific types of NFTs. Such as NBA Top Shot for basketball video highlights or Valuables for auctioning tweets such as Jack Dorsey’s first tweet.
How to sell NFT art
NFTs are also sold on marketplaces and the process varies from platform to platform. Most NFTs are purchased using Ethereum but can also be bought with other ERC-20 tokens such as Flow and WAX. Effectively, you’re uploading your content to a marketplace adding pricing and description – turning it into an NFT.
The future for NFTs
The possibilities and potential of NFTs are endless. Mass adoption is quite possible with education on crypto and the world of blockchain technology. Of course, recent record-breaking sales are helping to push NFT technology forward. “If you educate people, allow them to get a taste of it, experience it, then they’re not intimidated by it,” highlights John G. Fields, Business Builder – CEO – Grow Your Base.
NFT meaning for startups
As a startup founder or tech entrepreneur, you might be wondering how you can take advantage of the rise in NFTs:
- You can use NFTs to protect your startup’s intellectual property. This can be without spending the time and money to secure more formal IP protection.
- You could argue that NFTs are an efficient way to impose copyright on software without the cost of litigation.
While the above sounds enticing, startups should be cautious in relying solely on NFTs for intellectual property protection. Currently, contract law is moving slowly to recognise new technologies including any legal remedies. Therefore, at 7startup we advise startups wishing to use NFTs as part of their intellectual property protection strategy to do so strategically and cautiously.