A Guide to NFTs — Explain to me like I’m 5
Why would anyone pay $2000 for a digital piece of art, when I can just download it as .JPG?
That’s the usual question you get from people who aren’t into blockchain/cryptocurrencies.
Yes, you can just save this file, but you won’t own it, it will forever be written onto the blockchain, making it unique. This is a 1/1 80s retro Bitcoin logo, and it’s available for purchase (link at the end of the article).
If you’re new to cryptocurrency or just new to NFTs, today you will finally understand what NFTs are and why they’re so valuable. As NFTs get more and more mainstream media attention from people such as Garry V. and Logan Paul, the mainstream craze will only get bigger from here.
NFT means non-fungible-token. For example, the US dollar is fungible — which means it can be exchanged for other currencies, while your birth certificate is non-fungible, making it unique and one of a kind. So NFTs are too non-fungible, unique and one of a kind, giving them immense value.
An NFT can be literally any file you can upload, from text media to audio, video and gifs. So one day in the not-so-distant future, all our ID’s may very well be tokenized and stored as NFTs proving their authenticity without a central entity like the government.
How do NFTs actually work?
Right now most NFT marketplaces work on Ethereum smart contracts. There’s a process called “Minting” allowing you to upload your art onto the blockchain, and don’t let all the new names confuse you, the process of minting looks like this — upload file, set price, pay miners fee and you’re done.
Why do you pay the miners fee?
Since the whole process is running on blockchain (Ethereum smart contracts), there’s no central entity to pay a fee to, yet you still have to pay a fee for minting your NFTs, who does it go to? It goes to the miners, the only central entity in blockchain. Well, they’re not exactly “central”, miners are people all over the globe, lending their processing and graphics power to help solve mathematical problems given to them by the ETH blockchain, and in return they get a small fee from the transaction they helped write onto the blockchain. So you pay the miners a “gas fee” for writing your file (audio, video, gif) onto the next block on the blockchain. Once the file is written onto the blockchain, it stays there forever. By doing this process, the blockchain can verify at any time that your item is truly yours, therefor making it unique, one of a kind, and very valuable.
At the end of the day NFTs will be only worth as much money as someone is prepared to spend on them, much like real art. So if you have large following on social media the chances of you selling your digital art become better.
The future of owning things
This concept of NFT art/collectables are merely the first steps. The implications technology like this can have is immense. People are already being very creative with this new technology, for example: You have a newsletter, want to make it premium but don’t know how to charge customers? Mint your newsletter NFT, allowing everyone who purchases it to automatically subscribe to your premium newsletter. That’s a real life use case of NFTs. Now go out there, be creative, think of more interesting things we can do with this technology.
In the meantime, if you wish to support me, you can go over on Rarible and check out my store of NFT art!
80s Retro Synthwave spinning Bitcoin Logo NFT 1/1 Collectable:
Congratulations on reading, the fact that you did makes you more invested in the future than other people. You now understand NFTs a little better now than you did before.