What is an NFT and Why Should Creators Care?
If you have spent anytime on the Internet over the last year, you’ve probably heard the term NFT. The explosion of news that has come out since the inception of NFTs has left most of us dizzy – wondering how the heck are people making millions selling digital art?
This article is meant to be an introduction for creators to better understand what NFTs are, how they work and if NFTs are something you should even care about. So, let’s start with the basics.
What is an NFT?
The acronym NFT means non-fungible token, which in layman’s terms means a unique digital asset that cannot be modified or replaced with something else on the blockchain. And what does that mean?
Unlike Bitcoin, which is a fungible cryptocurrency, which can be traded for a predetermined value, like any other currency or money. An NFT is unique token with no interchangeability with other tokens – much more like a piece of art. Those unique NFTs do not have a set standardized value. Instead, non-fungible tokens (again much like art) are based on the current market value.
The simplest way to think about the difference between fungible tokens, like Bitcoin or Ethereum, verses non-fungible tokens like NFTs is:
Cryptocurrencies = currency (or money) and NFTs = goods.
You can trade cryptocurrencies like you trade stocks for a set ticker price or you can use cryptocurrencies to purchase goods for a set price. NFTs on the other hand, are the “digital goods” that you can purchase with various cryptocurrencies for various prices.
How Do You Buy an NFT?
Before you consider purchasing your first NFT, you will most likely, need to buy some Ethereum. The cryptocurrency was one of the first to build a blockchain that supports NFTs–meaning its blockchain can store extra information tied directly to the one-of-a-kind non-fungible token. While the Ethereum blockchain has proven to be the leading platform for NFTs, other blockchains are implementing their own non-fungible tokens too. So no, you don’t have to use the Ethereum blockchain, but it is currently the largest blockchain for NFTs.
So you have cryptocurrency that can purchase NFTs, now what?
Now you can start investing. NFTs are bought and sold on a digital marketplace, just like IRL goods are sold on Amazon. These marketplaces allow you to buy a digital good at a price set by the creator or they function as live digital auction like eBay. Prices of NFTs that are sold at auction, change based on demand–meaning the higher the demand the higher the price.
Where Can You Buy an NFT?
There are a variety of marketplaces where you can purchase an NFT. Currently, some of the top markets include OpenSea, Rarible, SuperRare, and Foundation. These marketplaces host a variety of types of NFTs from digital art or music to in-game content in video games or memes. Or you can opt for more niche marketplaces that specialize in selling specific types of digital assets–like the NBA’s Top Shot marketplace.
Now… Why Should You Care about NFTs?
First and foremost, maybe you shouldn’t. Just like purchasing fine art as an investment, alternative markets are always more volatile than mainstream markets. Therefore, before you start investing or selling your own work as an NFT, you should understand the rapidly changing market dynamics.
But if you see value in a digital-first world or you are a creator of digital art already, NFTs are a new avenue to make money. While the future of NFTs is certainly speculative right now, it is clear that non-fungible tokens have created value for creators that have never been met.
Stay tuned as we continue to explore this new digital-first economy and how it impacts and evolves the world for creators.
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