Non-fungible tokens (NFTs) are one-of-a-kind, digital assets.
You pay a creator for their work, and you own the asset to use and sell. The file can't be replicated or reproduced. The blockchain tracks NFT ownership.
NFTs matter because you get to own them. Ownership equals money and power.
What are NFTs:
NFT stands for Non-Fungible Token.
Non-fungible = One-of-kind
Token = Digital file
One-of-a-kind, digital files allow creators to unlock a new business model - digital ownership. You, the customer, pay a creator for their unique, digital work. In exchange, you own the right to use and sell it. The asset can't be replicated. The blockchain tracks if and when you decide to sell it to someone else. Generally, the creator makes a little money on this sale too.
Here's an example:
When I was ten, I bought my first pair of basketball shoes - Air Jordans. I loved these shoes. I'd pay good money for a picture of that exact pair - blue black and white Air Jordans circa 1999 in size 6 - for this post. With an NFT, Nike & Michael Jordan could create a one-of-kind image of that Air Jordan shoe. I could buy the NFT and paste the image right here in this newsletter.
Only I could use the image. If I sold it to someone else, Nike, MJ, and I would get paid. You might be thinking, Julianne you own the actual shoe! Isn't the real thing better than an image? In many ways, yes. Increasingly though our worlds are online. Our digital selves crave uniqueness, personality, and status.
Also, my mom donated the Air Jordans.
NFTs are relatively new and use cases vary. Digital art, trading cards, in-app game purchases, dunk highlights, unique songs and even tweets are now NFTs. Not all NFTs operate exactly the same. For example, some NFTs pay the creator one time. Others don't provide owners exclusive rights to use the file. And to be honest, some don't make all that much sense, at least to me. NFTs are created, bought, and sold on platforms like Dapper Labs (creators of TopShot and CryptoKitties) and OpeaSea.
Why Do NFTs Matter:
Ownership = Money = Power
When you're an owner, you make money not just spend it. Unique assets, like NFTs, can grow in value over time. As an owner of that asset, you make money when the value goes up. That's neat!
Stick It To The (Middle) Man
The middle man makes money in most industries - especially in finance, media, and technology. Today, when a creator uploads unique content to YouTube or Instagram, the platform owns that video or image. The platform rents images we create back to us. The distributor holds the money and power. NFTs give ownership back to the creator.
People buy NFTs because they think it will sell for more later on. Speculation will always be a thing.
NFTs are not strictly related to finance. Ownership, money, and power are. NFTs are one recent example of ownership creating power. To paraphrase Chris Rock, we’re not talking about being rich, we’re talking about being wealthy.
Chris, please make this video an NFT.
Want to Learn More?
Cryptocurreny’s Newest Frontier (Listen to Kevin Roose’s experience building and selling an NFT).
NFTs Make the Internet ownable (Jesse Walden’s thesis on creators, not platforms, owning the internet with NFTs).
One-of-A-Kinds on NBT (Great synopsis of why you might want to buy and use an NFT).
Power to the Person on Not Boring (Wonderful cross industry analysis of internet technologies that give individuals power).
So You Bought an NBA Top Shot NFT (Pros and cons of owning certain NFTs)
Value Chain of the Open Metaverse (Web 3.0 trends across the internet)