Open in app

Sign in

Write

Sign in

📣🖼 Demystifying NFTs — Here’s what you are missing out!!

NFTs will help us to virtualize Physical & Digital Assets, driving frictionless movement of assets with all the benefits of authenticity, scarcity, clear ownership, tamper-proof & smart contracts

Saurav Bhatia
Coinmonks
Published in
11 min readAug 30, 2021

--

If you liked this article — Do sign-up for my FREE weekly newsletter, share it with your friends, and give me feedback. You can find me on Social Media Twitter — @sauravbhats or Linked in.

People are going Crazy on NFTs..
Is it just another fad from the crypto weirdos?

Most of you have heard of NFTs. While you may not understand the technology behind it but am sure you have read of people dropping millions of $$$ on random pictures or pieces of art. $900M in NFT Sales were made as CryptoPunks went stratospheric with almost $400M in sales at the time of writing this article (Aug 2021)

YES!! you got it rite these pixelated images traded over $400M dollars. Not the whole image. Each character is traded seperately.

As of 27th Aug 2021 from www.larvalabs.com/cryptopunks

$7.6M for the first image on the left

If you were living under a rock and have not been tracking some of this action, let’s get you caught up.

Based on reading this you can fall into 2 camps

  1. This is just hype like the Tulip Mania that gripped Dutch Investors, and a lot of wealth was destroyed OR
  2. There is more to this than what meets the eye. Let’s dig deeper to understand this a bit more.

If you fall in the second camp, you have come to the right place. As part of this article, I would explore those questions along with a few more

It is not all about pixelated art. Some of these NFT’s are very intricate pieces of digital art.

Beeple, The First Emoji. Part of the $69.3 million Everydays.

As I am not an art expert, I have no background on how to ascribe value to specific pieces of artwork or why some NFT collections are more valuable than others. What I would look to do is evaluate what the underlying technology to make an NFT is and what it is capable of doing. In subsequent articles, we can dig a bit into what helps create more demand for certain artists/types of art.

What is an NFT

NFT = Non-Fungible Token (A file that lives on a blockchain)

What does it mean in plain English?

Fungibility — In economics, fungibility is the property of a good or a commodity whose individual units are essentially interchangeable and each of whose parts is indistinguishable from another part.1 For example, gold is fungible since a specified amount of pure gold is equivalent to that same amount of pure gold, whether in the form of coins, ingots, or in other states.

“Non-fungible” means that it’s unique and can’t be replaced with something else. For example, a bitcoin is fungible — trade one for another bitcoin, and you’ll have exactly the same thing. A one-of-a-kind trading card or painting, however, is non-fungible. If you traded it for a different card, you’d have something completely different.

An NFT registered on a blockchain has truly become a “unique” asset that cannot be faked, tampered with, or spoofed. Blockchains enable public access and private ownership of any digital media file

Comparison NFT Internet vs. Internet of Today (From Ethereum website)

How do NFTs work

NFTs are minted (created) on a Blockchain. To start with Ethereum was a popular platform but now they are being created on other blockchains. NFTs gives the ability to assign or claim ownership of any unique piece of digital data, trackable by using blockchain as a public ledger. An NFT is minted from digital objects as a representation of digital or non-digital assets. For example, an NFT could represent:

Digital Art:

  • GIFs
  • Collectibles
  • Music
  • Videos and sports highlights
  • Virtual avatars and video game skins

Real-World Items:

  • Collectibles — Art, Watches, Wine
  • Designer sneakers
  • Deeds to a car
  • Tickets to a real-world event
  • Tokenized invoices
  • Educational records & Legal documents
  • Signatures

Many more interesting and creative options.

If you want to get super technical. The most commonly used token standard that started everything. ERC721 tokens are non-fungible; each token is unique and can be priced independently. There are a comparable token formats for other Blockchains such as BEP-721 for Binance smart chain.

What problems are NFTs really solving?

To help differentiate a passing FAD from a fundamental This is an important question to ask. What problem is NFT really solving?

Over the last 20–30 years as the internet has grown it is destroyed a lot of value for creators as it has become easy to make multiple copies of their original work (art, music, books) without really pass the value back to the creator who had to spend considerable hours creating and perfecting this piece of art.

Along comes NFTs, leveraging a Decentralized Blockchain infrastructure to provide the below-listed attributes to get us to the promised land

  • Authenticity — Is the item genuine or a copy/replica
  • Scarcity — Defined number of units or copies in circulation. e.g. tickets for a gaming event with specific ticket numbers or seat numbers
  • Ownership — who does the item belong
  • Fractionalization (optional) — part ownership
  • Unique — not interchangeable 1:1 with something else
  • Tamper-proof — No one can manipulate it in any way
  • Smart contract capabilities — the ability to program logic into the NFT e.g. pay a royalty to the original creator every time a sale happens, destroy the Green NFT if carbon footprint goes above a threshold, etc.

All of these without having to depend on trusted intermediaries that had the ultimate power to block out individuals they felt like or change a record as they deemed fit. The underlying blockchain system builds on distributed, a decentralized trustless environment that is scalable, global & robust.

“Can’t I just take a screenshot of the file?”

Damn, I was busy right-clicking on the video and downloading something someone paid Millions of $$ for. That’s nasty but true. So where is the value??

The value lies in owning the authentic file — Would a photocopy of the author-signed book have the same value as the actual author-signed book. You can copy a digital file as many times as you want, including the art that’s included with an NFT.

But NFTs are designed to give you something that can’t be copied: ownership of the work (though the artist can still retain the copyright and reproduction rights, just like with physical artwork). To put it in terms of physical art collecting: anyone can buy a Monet print. But only one person can own the original.

“Is NFT only about Digital Art?”

Not really. Art is just the first set of use-cases for NFTs that have caught the social fancy. NFTs can be used for anything that has finite quantity, is not interchangeable, uniquely identifiable. You would start seeing more and more NFTs being created to represent real-world physical assets whose ownership is managed as an NFT. Ownership of these assets can then be easily verified on the open blockchain, used as collateral for transactions, and easily traded or fractionalized for sale. (more uses cases are explained below)

History of NFTs

NFTs have come a long way. The most notable ones have been CryptoPunks (still going strong) and Crypto Kitties.

Today, NFT minting platforms Mintbase and Mintable enable virtually anyone with the tools to mint their NFT.

Marketplaces for NFTs include OpenSea (most prominent), Nifty Gateway (limited edition works), Super Rare (single edition works), Cargo Marketplace, Known Origin, and MakersPlace.

“This NFT world is likely the greatest unlock of artist opportunity in 100+ years. This isn’t a suboptimal or fringe version of the real-world art economy, it is a vastly improved one.” — Scott Belsky, (Chief Product Officer at Adobe, Founder of Behance, Venture Partner at Benchmark)

Mainstream business & artists getting involved

Highlights

Music Artist

Pop music artists Kings of Leon, Grimes, Flume, and Steve Aoki have all created NFTs for sale to great success. Rolling Stone reports NFTs to be a possible game-changer for musicians who opt to offer songs, albums, virtual paraphernalia, and even coupons for virtual meetings to “super-fans” as NFTs.

NFTs are a game-changer for independent artists and musicians

The potential for the Creator economy is huge with creator tokens soon to start popping up.

Metaverse and Galleries of the future

If you don’t already know about the metaverse, it is a virtual world where people will interact, work, play — Watch the movie Ready Player one to get a better perspective of what is possible.

Many of the digital artwork, Avatar accessories, buildings, goods will be NFTs that have been purchased and can be used or put on display in the virtual world.

Only time will tell how these use cases will really pan out over time. But for now, I won’t go down this rabbit hole and will keep that for another article.

Why should I care

NFT’s could change how we think about ownership, the same way the internet changed how we consider communication and commerce.

Internet-enabled us to Bridge the physical distance divide. Started with — image, voice, text Reduce friction in the process

NFTs will help us to virtualize Physical & Digital Assets, driving frictionless movement of assets with all the benefits of authenticity, scarcity, clear ownership, tamper-proof & smart contracts

Content Creators will take back control

Today content creators have limited control. They are either fleeced by middlemen in whichever industry they are part of or get the wrong end of the stick from consumers when their hard work is indiscriminately copied without any income being generated for them. Many content creators have had their art, music, product banned from social media platforms for incorrect copyright infringement claims. All of these can become things of the part as Content creators can package their product and reach out to consumers directly. The blockchain can help enforce access, payment services, royalties as the book, music, video, etc is consumed by end-users. Their work can be packaged as NFTs with smart capabilities that can enforce how royalties are shared every time a book is sold ahead or payment streamed for each page of the book that is read. The options are endless.

Examples of NFTs

The NFT world is relatively new. In theory, the scope for NFTs is anything that is unique that needs provable ownership. Here are some examples of NFTs that exist today, to help you get the idea:

How do I get my first NFT Art?

The crazy for now is still in the realm of NFT Art. While it seems like a 4 step process, it still has quite a few hurdles for noobs to get started. Definitely an opportunity to simplify the process & make the UX better.

  1. You need to get your money into the crypto universe (most likely through an exchange like coin base, binance, gemini etc
  2. Buy some ETH or BNB (depending on which platform you want to buy NFT on)
  3. Sign-up for a decentralized wallet like metamask and transfer your tokens to it. Some options let you buy ETH directly into your decentralized wallet.
  4. Go to an NFT marketplace like OpenSea, Rarible, etc and buy your first NFT.

This is not meant to be a full how-to on buying an NFT. I can try to do that separately.

Some of my earlier posts if you have not read them yet

If you liked this article — Do sign-up for my FREE weekly newsletter, share it with your friends, and give me feedback. You can find me on Social Media Twitter — @sauravbhats or Linked in.

🚨Big Disclaimer: This is not investment advice. I am not an investment advisor. This information is meant to be for educational purposes. Please do your own research before you decide to invest your hard-earned money. If you are unsure seek help from a professional financial advisor who can understand the full breadth of your financial needs & commitments to advise you on what you should do.

Join Coinmonks Telegram Channel and learn about crypto trading and investing

Also, Read

Crypto
Nft
Blockchain
Investment
Advice

--

--

Saurav Bhatia
Coinmonks

Written by Saurav Bhatia

21 Followers
Writer for

Help

Status

About

Careers

Blog

Privacy

Terms

Text to speech

Teams