You’ve probably heard of the acronym NFT at some point. It’s popping up in headlines left and right, and if you follow financial publications, you’re probably well-acquainted. It’s the red-hot investing craze stealing the nation’s attention.
But what is it, really? Well, much like anything relating to digital cash, it’s a little complicated. Speaking of which, tap or click here for a crash course in cryptocurrency.
No worries, though — we’re here to lift the fog. Today we’re diving into the weird world of NFTs: what they are, how you can buy them, why they became so popular and more.
First off, what the heck does it even mean?
The acronym NFT is short for “non-fungible token.” If you have no clue what fungible means, it refers to interchangeable goods. Basically, it means replaceable — so if something is non-fungible, it’s non-replaceable. So if you buy a non-fungible token, you’re buying something that’s one-of-a-kind. Nothing can replace it.
With us so far? Here’s an example: one of Kim’s favorite snacks. Kim loves our sponsor, Humann SuperBeets Heart Chews, and always keeps a bag of them on her desk. During video meetings, if anyone mentions gummies, Kim’s face will light up and she’ll whip out her bag to show off her pomegranate gummies.
When Kim wants to buy a bag, she goes on the internet and grabs one for $35. But the bag she buys isn’t unique — when she buys it, she doesn’t care which specific gummy bag Humann ships to her home. She just wants a bag.
If some SuperBeets-loving burglar were so hungry for the sweet pomegranate flavor they broke into her office and snatched her bag, Kim would want a replacement. Instead of sniffling over the loss of that specific bag, she’d be happy with her new one.
That’s because bags of SuperBeets Heart Chews are all the same. They’re replaceable. Or, in other words, they’re fungible.
As you can imagine, non-fungible goods are way more valuable than fungible goods
Compare Kim’s favorite chews to a treasured item she has in her home: a BBC mic from World War II. Her husband Barry bought it as a gift four years ago. After watching “The King’s Speech,” Kim was fascinated by the unique mic used in the movie.
She told Barry, “It would be so cool to have that mic!” When Barry found it on eBay, he knew she would love it. Although the BBC mic he found isn’t the same one Colin Firth used in the film, Kim’s model has its own unique history.
“It was used at some point in Buckingham Palace,” Kim said. “I often walk by it in the living room, hunch over and say into it, ‘Hello, this is London calling.’ In a British accent, of course!”
Since Kim’s BBC mic has its own rich history, it’s irreplaceable. Sure, she could find a similar mic online — but that wouldn’t have the same feeling. This one is special because it was a gift from her husband, and she associates it with a movie they enjoyed together. In essence, it’s non-fungible.
To summarize so far:
GOT COOL STUFF LYING AROUND? Your old collection could be worth millions!
But how does this all translate to the digital space?
So we gave you an example of a fungible item. Now let’s look at some non-fungible items. These are irreplaceable items — think of the Mona Lisa, a rare and special painting you can only see in the Louvre.
As it turns out, you can have a digital version of the Mona Lisa. It’s called Nyan Cat, and it’s a timeless piece of internet history. A cat with a Poptart body flies through the sky, leaving a sparkling rainbow in its wake.
Ten years ago, users adored Nyan Cat. It was one of the web’s biggest memes, and it’s still considered an iconic part of 2010s internet history.
In February, Nyan Cat’s creator, Chris Torres, put a one-of-a-kind copy of Nyan Cat up for sale on an NFT website called Foundation. A mysterious buyer spent $826,419 to buy the rights to this digital GIF.
Here’s where the confusion may set in. You might think, “Why spend so much money for Nyan Cat? I can just right-click on it and save it to my computer!” Sure, but you wouldn’t own it. When Chris Torres sold it as an NFT, he was basically selling the ownership of this famous GIF.
Still confused? Let’s get so into the weeds we might as well be in the jungle
So, we got the basic philosophy out of the way. You understand that non-fungible tokens are hugely valuable. You also understand how they’re different from fungible tokens.
But what if you don’t know what “token” means? Well, it all comes down to the blockchain, an online peer-to-peer environment where you can transfer digital currency.
Basically, every NFT is a unit of data stored on a blockchain (which is just a public digital ledger of business transactions on the web). The blockchain certifies unique digital files. If you already understand how cryptocurrencies work, you’re halfway there.
WANT TO LEARN MORE ABOUT BLOCKCHAINS? Here’s a handy video that breaks down the mystery
The big difference between Bitcoin and an NFT of Nyan Cat is that the NFT is irreplaceable. You can replace a Bitcoin (though it will cost you). There’s no way you can replace a unique NFT of Nyan Cat, though.
Every NFT has a unique digital signature — or a “cryptographic hash.” In other words, the blockchain uses a unique string of characters to define each NFT. You can actually track NFT ownership by following the digital signatures of certain tokens.
Thanks to the blockchain’s assignment of unique digital signatures, you can be 100% certain your digital file of Nyan Cat is authentic.
Almost anything can be an NFT
They aren’t exactly rare. In fact, there are tens of thousands of NFTs you can buy online. They’re basically a cutting-edge type of investment — and some say they revolutionize the financial market.
- Music: Some artists sell short clips; other sell entire songs. Kings of Leon was the first band to sell an entire album as an NFT!
- Art: Want to buy digital artwork? How about graphics of GIFs? One image of a single-pixel sold for $1.76 million.
- NBA Top Shot: Want to own minted copies of hotshot moments from your favorite NBA players? You can do that. In fact, the NBA made $2.6 million in NFTs in 30 minutes!
So if you’re looking for a new way to grow money over time, you may want to jump on this trend. In fact, buying NFTs could be a great way to collect cryptocurrency over time. Not only is each NFT unique, but if you’re using the Mintable app, you could even own the copyright to the NFT you buy.
That means you own this token, and if you own a rare item other people want, it may skyrocket in value in the long run. Think of NFTs as collectibles: you hold on to them and sell them for a profit later on.
Unlike a painting, which could burn in a fire or disappear at the hands of a burglar, you can’t lose an NFT. It lasts forever because data doesn’t change, and blockchains are forever.
Bottom line: It’s not too late to jump on the NFT train. It’s not leaving the station any time soon!