There are many recent news headlines about how regular people made millions selling NFTs. What are these NFTs and why are they so valuable?

NFTs stand for Non-Fungible Tokens. They are essentially tokens that are unique and cannot be replaced.

Cryptocurrency VS NFTs

Cryptocurrency has often been tied to the term NFTs. Though their underlying principles are the same (blockchain), they are completely different in terms of what they represent. Cryptocurrency is similar to currency. NFTs are similar to art.

In currency, your $1 coin is the same as my $1 coin (given the same currency). There is nothing unique about the coin. Similarly, your 1 bitcoin (if you can afford one) is the same as my 1 bitcoin (I definitely cannot afford one) – fungible.

However, in art, your painting of the real Mona Lisa is different from whatever image I found online of Mona Lisa. Yours was painted by Leonardo da Vinci while mine is just a copy. The one you own is authentic and unique – non-fungible. Though it can be exchanged for money, it is not the exact same. Similarly, an NFT is unique and there are no 2 of the same in the world.

So… What are NFTs

Due to their similar properties, many link NFTs to digital artworks. However, NFTs are not just for art. Simply put, you can think of NFTs as a signature. So long as you have your signature on it, it is verifiable that it is yours. Whoever buys it, knows that it is yours because of that signature.

Hence you can make anything you want into an NFT. A picture, an in-game asset like skins or weapons, or even digital land (yes… that’s a thing).

What makes NFTs special?

There sure is more to it than just being expensive. Here are some things that make it special and why so many people (especially artists) want to adopt it.

1. Decentralized

It lives on the blockchain. This means it is not controlled by a single entity.

2. Programmable

You can actually program what you want the token to do. For example, in art, you can program it to give the original artist a royalty for every sale of the art and trace every subsequent owner of the piece. This helps the artist make more money as it continues trading unlike art in the real world

Why are NFTs so expensive?

To be honest, I have no idea. When I discuss it with my friends, they called me a boomer. Guess I probably am.

If you see NFTs like stock trading, it probably is very expensive and the price looks to fluctuate just like a stock chart.

If you see NFTs as a piece of art or collectibles like those on OpenSea, it is actually not that expensive. If you are willing to pay thousands of dollars to own a physical collectible like pokemon cards or paintings, this is no different other than it is digital.

Conclusion

In simple terms, an NFT is a complicated way of saying “This is mine” on the internet. I do believe that the large price tags do not justify whatever is behind it. Someone famous once said: “If the price of a barrel of oil goes to zero, at least you still have a barrel of oil. If the price of bitcoin goes to zero, you have nothing.” I think this applies to NFTs as well.

So trade NFTs at your own risk. Or even better. Mint your own NFTs and ride the hype train and earn millions like the people in the article below. I guess I will just stick to my boomer way of earning money which is to buy the lottery and get a normal job.

Happy coding!

Discussion welcomed here.

An interesting NFT

Moxie Marlinspike, the founder of Signal (a privacy-focused chat app rivalling WhatsApp and Telegram), created an NFT called “At my whim”. What’s special about it is that it changes its appearance when seen from different locations. If you see it on OpenSea, it shows an image that is different from if you see it on Rarible.

He said in a tweet that if you open the NFT in your wallet, it will show a shit emoji rather than what you see when you bought it. In the thread of tweets following this, he pointed out the fact that storing the image data on the blockchain is too computationally expensive. Hence most NFTs only store the link to the image. This means whoever controls the link controls the image that you bought as an NFT.

This exposes a critical flaw as there is no verification that the image will always stay the same. The one who controls the link can just change what image it is pointing to. So is it truly non-fungible??? :)

Link to tweet.

Relevant Articles

12-year-old coder made $5 million in 3 weeks

Student made millions selling expressionless selfies as NFTs