What is an NFT?
Updated: Jun 20, 2022
Let’s answer the big question first, what exactly is an “NFT”? Well, the acronym stands for “Non-FungibleToken”. Now let’s break down the “Non-Fungible” part. This specific term defines a unique digital identifier that cannot be copied, substituted, or subdivided, which in turn is recorded within a blockchain. Now, what is a blockchain, you ask? A blockchain is basically the core of everything to do with the Crypto and NFT space… we will diver deeper into Crypto, and similar topics in another article though.
So a simpler way to understand this, is that an NFT is a digital contract or a “smart” contract, which is permanently attached to any digital file. Identifying it constantly through billions of calculations and equations performed on the blockchain every second. This is used to certify both authenticity and ownership in an ever-growing digital world.
An NFT can be used to certify ownership of literally just about anything you can think of. Though the main things you will see it used for are subjects of digital art in the form of drawings, audio files and video documents.
Think about it like this... We know that the Mona Lisa was painted by Leonardo DaVinci in 1503, and that it is currently on display at the Louvre Museum. Handwritten documents and records certify this to be the one and only original version of this famous painting. Now, what would happen if I were to paint a masterpiece today on my iPadPro? What happens when I then proceed to copy and paste it, and send it to ten different people? Now, out of the 11 different copies in existence, there is only one original, but we have no way of knowing which one it is. Of course I know that I personally have the original version, but how can I prove that? This is where an NFT comes into play. I would make my artwork, or my original file an NFT, and have it become part of the blockchain. The Legitimacy of that file is now tracked by hundreds of thousands of computers that are all attached to the blockchain. Every time a file gets moved on the blockchain the other computers take note of that specific move. There is now a never ending, unalterable record of every movement or exchange that digital file has ever done.
It is said that the blockchain is going to revolutionize our society in a similar way that the internet did. How can that be such a big thing? Well, along with these files now being attached to an unchangeable record keeping system, we also can now make these digital records into digital contracts. These digital contracts, or “smart” contracts as some refer to them as, are also permanently attached to this individual file.
Let me give you an example:
You can now incentivize your art. Say you are going to sell 10,000 copies of your favorite drawing of your cat, Sammy. You can now sell different amounts of them, with different services attached for different values.
Say you sell 5000 copies of version 1 for $10 per piece.
Version 1 might include the original artwork, as well as a handwritten note from you, the artist, and a 10% off coupon for use on your website for another piece.
Version 2 for 2000 copies at $25 per piece. This might include a handwritten note from you, a 10% off coupon, and access to a “members only” secret section of your website.
Version 3 for 2000 copies at $100 per piece. This version comes with everything from version 2, but also includes access to the exclusive Facebook group, where they have direct access to you personally.
Version 4 for 900 copies at $500 per piece might include everything from version 4, and a 15-minute private phone call with you.
Version 5 for 50 copies at $2000 dollars per piece might consist of everything from version 4 as well as 1% of all profits made from sales of this specific project.
Version 6 is reserved solely for family and friends for the last 49 spots.
Of course, you keep the original for your own collection, and everyone that supports your project gets a hell of a lot more than just a piece of art. They have the security of knowing that every transaction is tracked and logged by the blockchain, and they now have a real piece of history from a time where tangible art isn’t nearly as popular as it’s digital counterparts.
I’ll get deeper into this if you guys would like to know more, but I hope I scratched the surface of this topic in a way that you could easily understand. If you have any questions, please let me know in the comments section,and I’ll do my best to answer them!
Below you will find more resources for understanding NFTs
The NFT Revolution by Crypto Dukedom
NFT Field Guide by Shane Cantrell