Understanding NFTs
The acronym “NFT” is becoming more and more common. Let’s dive into what an NFT actually is and why you might be interested in this new form of technology.
What is Non-Fungible?
This is not a new term, but for those unfamiliar with the concept of fungibility in economics this might be something foreign. More people have heard this term lately as it becomes more commonplace with the rise of NFTs. Maybe you’ve heard the term yourself, but could you define what Non-Fungible means?
Lets keep it simple:
Fungible means that something is able to be replaced with an identical item of the same value. For example, a dollar bill is worth a dollar and is mutually interchangeable.
Non-Fungible means that something is uniquely identified and can’t be copied or replaced. An example would be a flight ticket, since there cannot be another ticket with that specific identifying data. Same with a car, each has its own VIN number to identify that specific vehicle. Even though they might look similar on the outside, cars are non-fungible.
In the case of Non-Fungible Tokens this means that something with uniquely identifiable data is stored in a blockchain to certify authenticity or ownership of that thing. In the case of NFTs, those “things” are usually images, video or audio of some sort.
Ownership & Utility
Being able to verify ownership of certain NFT assets can grant you access to things in the real world. This access is called “Utility”. Without utility an NFT would serve no more purpose than collecting art. For some people this might be appealing, if your favorite artist releases work maybe you’d like to own some of it. Maybe in the metaverse you’ll even have a place to hang your fancy artwork in a virtual frame, but for a lot of people the excitement is a layer deeper than just art collecting. Having an NFT with a powerful Utility can make NFT projects with Ugly Art gain immense popularity. It’s not always about how the art looks, sometimes it’s about what you can do by owning a specific NFT.
Prime Example of NFT Utility
If you’ve spent any amount of time looking into NFT’s I’m sure you came across Gary Vaynerchuck and his enthusiasm for the space. If not, go watch some YouTube videos. His project called ‘VeeFriends’ would be a prime example of an NFT project where Utility is more powerful than Art. Gary sat down with a marker and a piece of paper then quickly drew some animal doodles and gave them each funny names. There is a video of each NFT as it was drawn to go along with the images stored on the blockchain.
It might be hard at first to understand why these silly looking doodles go for tens of thousands of dollars until you realize what can be gained from owning one of them. VeeCon is a multi-day superconference with discussions and performances from iconic and emerging leaders in NFTs and Popular Culture. The only way to get in is by holding a VeeFreinds NFT. Depending on the “rarity” of the NFT that you hold you will get different levels of access at VeeCon and can even spend time with Gary Veynerchuck if you hold the right NFT. This creates immense value for people outside of just owning a picture.
There are a lot of popular NFT projects that are starting to prove their Utility. The Bored Ape Yacht club is probably the most popular with numerous celebrities holding “Bored Apes” to gain membership into the exclusive club.
A ton of NFT projects right now just offer the basic utility of giving access to an otherwise hidden Discord Channel if you hold their NFT. Currently most of the utility surrounding NFTs is a big promise for the future. It is still very much an evolving space, and not every project follows through with the utility they promise. That is why it is important to find a strong community of people that rally around a project, and to find people running the project that you can trust. There is little regulation in NFTs, and nothing is stopping the owner of an NFT project from taking all the funds and abandoning the project right after a successful launch. It happens frequently, so always approach any project with a skeptical eye and make them convince you that they are deserving of your time.
We have barely scratched the surface of NFT’s, but this will help build a foundation of understanding that you can use as you continue to grow your knowledge. Making sense of the ever evolving world around us doesn’t always come naturally, but eventually what was once a new, uncommon idea, can often later become labeled as common sense.
If you spend some time looking around and learning, you will feel much more confident that this brand new use case for a relatively new technology might be here to stay.
Next let’s go over ways that you can identify if an NFT project is successful or failing, and look at some tools you can use to better understand how much people really care about a specific NFT Project.
