WTF are NFTs?

Non-fungible tokens – NFTs – what a buzzword.

Let’s break it down.

NFTs 101: glorified JPEGs worth $1,000,000s

0. What are NFTs?

The easiest explanation is that:

Non-fungible tokens (NFTs) are unique tokens linked to digital (and sometimes physical) benefits which provide proof of ownership.

“Wait, but what the f*** means Non-fungible?
And what are Tokens?”

1. Main definitions

Ok, let’s drill it down:

Fungible: means that in case you trade something for something you’ll get the exact same result.

Eg.: a bitcoin is fungible — trade one for another bitcoin, and you’ll have exactly the same thing: one bitcoin…

Non-fungible: means that it’s unique and can’t be traded with something else.

Eg.: you can’t trade the Mona Lisa painting for another one because there’s only one authentic Mona Lisa painting..

Now, regarding Tokens: they are just a Smart Contract which concedes benefits to the owner.

Eg.: imagine a Ticket for a Concert. That ticket represents the Token which concedes a benefit for its owner – having access to the concert.

So, what are NFTs really?

2. NFTs wrap up definition So: NFTs are digital assets containing unique traits coded and stored in the blockchain in the form of a Smart Contract, which concedes benefits to the owner …

Don’t know what Smart Contracts are? Read this

3. But why do we need NFTs? So: For years we’ve developed numerous ways to prove authenticity and value physical things. Let’s see the Mona Lisa painting: It’s valuable cause there’s only one authentic copy and it’s authentic cause @ChristiesInc authenticates it right?…

4. The problem

“But how can we authenticate and value something in the Digital world?”

We can’t.

We’ve been downloading other people’s work without paying for it.

And why?

Cause there was no way to prove authenticity neither value digital things.

“But wait, value?”..

5. What is value?

To understand value we must revisit microeconomics but today let’s assume that:

The more people (demand) there is wanting to buy a specific product (supply), the more valuable that product becomes – prices increase.

So: scarcity leads to value increase..

Eg.:

A special edition Ferrari is worth millions because there are thousands of people wanting to buy it but there’s only a few models of that special edition.

On the other side, a Ford Focus car or Levi’s jeans are cheap cause there are millions of copies of the same model..

6. Framing the problem

“Hmm ok, I see, and what about benefits?”

Yeah so, let’s see the Ferrari eg.:

By buying a Ferrari you’ll:

1. drive a great and prestigious car
2. have access to their “Owners Club”
3. be perceived as having higher status ..

7. Understanding the problem “Hmm ok

So the problem today is that I can’t: • authenticate a specific digital product • validate that someone is the owner of that product • value that asset properly because I can’t create scarcity” “And NFTs solve this?”

8. The solution Yes exactly

As we know, NFTs are stored in the blockchain as Smart Contracts. So, we: • can proof authentication by tracing the NFT to its original creator • pay him directly according to its value and • have access to digital and physical benefits..

9. Famous NFT projects & marketplaces Some well-known NFT projects: • CrypToadz – @cryptoadzNFT • CryptoPunks – @cryptopunksbot • Bored Ape Yacth Club – @BoredApeYC Some well-known NFT marketplaces: • Rarible – @rarible • OpenSea – @opensea • SuperRare – @SuperRare

10. Other Use Cases

New use cases for NFTs continue to emerge.

Some are:

• Music and Gaming
• Events and ticketing
• Fashion and wearables
• Social media and Influence
• NFT Clubs and Communities access

“Now, how to buy an NFT?”

And that’s a topic for another thread

If you’re here — Thanks for reading. Want to understand Web 3.0? Then follow me @hey_bernie I’m writing a thread like this every day until year-end. Want them in your email? Then subscribe the newsletter

bit.ly/thecreatorjour… I write about: • Creators

Web 3.0

Summary:

0. What are NFTs?
1. Main definitions
2. NFTs wrap up definition
3. Why do we need NFTs?
4. The problem
5. What is value?
6. Framing the problem
7. Understanding the problem
8. The solution
9. Famous NFT projects & marketplaces
10. Other Use Cases