NFTs for Dummies

What exactly is an NFT?

NFT stands for Non-Fungible Token, a non-replaceable series of numbers and digits with which a person can prove that he/she is the owner of a digital product, i.e., a kind of digital proof of ownership. You can assign that proof of ownership to a digital image, video, or sound clip, for example. Then you register such attribution in a database (the blockchain). 

Afterward, such an NFT can be stored in a kind of digital safe/ wallet. Of that wallet, only the owner has the digital code/key, no one else can access it.

Anyone can see via the database (blockchain*) that you are the owner of a digital painting, for example, but you are the only one with the code/key to proving that you are the owner and have the right to resell it if necessary (for a higher price).

So what makes an NFT valuable?

Surely, in the case of an image, you can get it off the Internet somewhere without paying for it? That's a good question. Compare it to an image of, say, the Mona Lisa. You can also download that high-res from the Internet, print it out, and hang it on your wall, but it is not the real Mona Lisa. That one hangs in Paris and is worth a lot of money. The real Mona Lisa is also just canvas and some paint, but we still put a value on that. 

So the Mona Lisa is, therefore, a non-fungible item; it is irreplaceable because nothing about it is equal in value.

It is the same with NFTs. Some NFTs are made by specific artists in limited editions, while others have additional options that make them more valuable. For example, NIKE sells an NFT of a shoe, which gives the owner the right to order a particular type of athletic shoe online that an ordinary customer cannot find on the website. With other NFTs, you get a membership that allows you to get/download clothing or other merchandise. And there are collectors who just want a series of NFTs, like people collecting LEGO boxes, for example.

Why should I buy an NFT?

Most people buy NFTs to be able to sell them again for a higher amount. The rest are collectors, creatives, or just want it. Bored Ape Yacht Club is a group that creates and sells illustrations of monkeys. At first for a few hundred dollars, but now they sometimes change hands for a million euros. But with all the success stories, there is also a downside. Some NFTs yield nothing extra. It's not like investing in companies. But that doesn't have to be a bad thing. Some print out their NFT high-res and hang it on the wall because they like/love it.

Conclusion

Just as cryptocurrency is seen by many people as the digital world's answer to traditional money, there are those who see NFTs as the digital answer to valuable collectibles such as art, original music, video, etc. And if in the non-digital world, things sell for thousands of Euros, why not in the digital world? Take a look at opensea.io and be taken into a store full of beautiful images/sounds that you can view and purchase so that you are the only one who can say: that one is mine until I possibly sell it.

*) Blockchain: a database used to store different pieces of digital information in chronological order. These pieces are called blocks (blocks). Blockchains are spread across different areas/offices/countries rather than in 1 location. This allows buyers and sellers to trade directly with each other without an intermediary or agency.