Do you have any idea of the revolution that NFTs will bring? Some equate it to the creation of the Internet or even the invention of fire. In this guide, I will tell you everything you need to know to get started with NFTs.
But what the heck is an NFT? And why is everyone talking about it now? Yes, I also love learning new things, but so much innovation sometimes
Don’t worry. I will explain how I would have liked it to be explained to me.
NFT stands for Non Fungible Tokens. You have stayed the same. It happened to me, too, the first time I read it.
What is an NFT?
It is a unique digital asset that cannot be duplicated or divided. That is to say, like a painting by Picasso, but with the technological security that makes it impossible to replicate.
Note that fungible means interchangeable. A $100 bill is fungible, and a bitcoin is fungible. You can give a colleague a bill and have him give you another. Nothing changes. You both still have $100. The same thing happens with bitcoin, you send me a bitcoin, and I send you another. We both still have a bitcoin.
Also, it is divisible. What do I mean by divisible? What if I tear a ticket? Is it worth the same? Of course not.
What I mean is that someone can give you a bag of 10,000 pennies and exchange it for a $100 bill. With bitcoin, it happens, too; think of satoshis as something similar to a penny.
And an NFT? No, you can’t do any of that. It is neither interchangeable nor can it be divided when you think of an NFT think of a work of Art. Can you split a Picasso painting? No. It loses all value. You can’t just swap it either. It is unique; there is no other identical.
Unless you’re doing like Banksy, who put a shredder in one of his works, the crusher was activated after being auctioned for a whopping 1 million dollars.
Tell me you’re not looking forward to seeing the faces of those present.
Laughter aside, it doesn’t make sense. We are not going to talk now about the divine and the human. Today is the day to learn what NFTs are, how they work, and what they are for.
Because I’m sure you’re wondering: how is this supposed to improve our life?
Don’t worry, don’t get ahead of events. You know that things in the palace go slowly, and I’ve already told you that this is a brutal revolution.
What are NFTs for?
NFTs, non-fungible tokens, possibly have the most practical applications and the most options to revolutionize different sectors.
What do I say sectors? They have the potential to open a world of possibilities to current sectors, but they can create new sectors.
But how? I tell you.
The basic digital object is the token, which can be fungible or non-fungible, but all represent the value of a financial or digital asset. In the real world, we call tokens, and they have value only within a specific context, such as a casino.
Outside the casino, the chips have no value, but inside they are everything.
The tokens fulfill that same function but in the virtual world. So its value has the characteristics that its creator wants to give it.
The limits are only in our imagination, but the main tokens are mainly used to represent investments, offer different services, or partially or fully represent a property.
How is an NFT token created?
The creation of the token goes through a smart contract generated through a blockchain platform. This is one of the big differences between tokens and cryptocurrencies. The former relies on third-party blockchain technology, while cryptocurrencies rely on their own.
The Ethereum platform, the second largest in the world after Bitcoin, is the most used by developers to create tokens, known in the industry as
Ethereum is the most important market player in the world of tokenization. And, of course, also in the growth of non-fungible tokens. NFTs bring all the advantages of the token, but they add something more, they are unique and as specific and rare as their creator wants them to be.
For example, you could have a CryptoKitty like this.
This was sold for 605 Ether.
It’s a joke. Well, the thing about them being sold for 600 Ether is no joke; that’s true. I promise you. I want to say that this is the facade of the world of NFTs, but its real applications are incredible.
Now yes, I will tell you everything you can do with NFTs:
- Buy digital fashion: The manufacturer revolutionizes the fashion market through digital fashion. Digital fashion? How do you read it? This company sold the first digital-only dress for $9,500. The goal is to reduce waste when making clothes and for brands to know the measurements and success before they even start producing a garment.
- Revolutionizing the luxury sector: Louis Vuitton, Prada, and Richemont have already teamed up to create a marketplace that can finally track the sales of luxury goods. The idea is that when you buy a pre-owned Rolex, you know exactly when it was bought, how many hands it has been through, and how much it has cost each time it has been traded.
- Having the property of a unique and exclusive design: CryptoKicks is the name of the Nike patent that aims to promote creative designs by its community and end counterfeits. Imagine that you have a design idea for a shoe. You cast it, and it turns out to be mind-blowing. Everyone wants to have shoes like yours. You create an NFT with that design, and Nike starts selling shoes with your design. You could win hundreds of thousands of dollars, and it would all be on the record. Nike sells the shoes, but you own the design.
NFTs stand in stark contrast to real-world currencies in which they are all the same, indistinguishable, and, of course, perfectly interchangeable.
However, NFTs are not something new; we could not say that they are a revolution since they have existed for a long time in industries such as video games. Every time you bought a more powerful racket for your virtual tennis player or managed to activate a special weapon in Call of Duty, you were using an NFT, even if you didn’t know it.
Where do I Keep My NFTs? Say Goodbye to the Pocket Wallet and Hello to Digital.
NFTs, and tokens in general, can be stored in so-called digital wallets that perform the same service as traditional wallets with current money.
Any simple Google search for digital wallets leads you to a whole new world of digital concepts.
Among them stand out those of “cold” or “hot” wallets, public and private keys, and numerous warnings about the importance of security in this market.
Let’s not get carried away by panic because, in the end, all these concepts have their counterpart in the traditional world that we already know and dominate.
Hot or Cold: a Matter of Taste and Goals
Cold wallets differ from hot wallets because they are not connected to the network. They have a physical medium similar to a USB and exist in the real world.
The main advantage of cold wallets is that they are not hackable. So your digital assets are less at risk in that regard.
The main disadvantage is that having a physical form can be broken or lost, making everything inside them disappear forever. Additionally, it is always necessary to connect them to the network, even momentarily, to be able to operate with the assets they contain.
A reasonable strategy could be to use both types depending on the objective we are looking for. We will store the digital assets that we want to keep in the longer term in the cold wallet and those with which we will operate more frequently in the hot one.
MetaMask is the most popular hot wallet. And for cold wallets, Ledger and Trezor can be very good options.
Whichever option is chosen, digital wallets have the function of controlling the private key that gives access to the digital assets inside. Let’s not be scared. A private key in this world is the equivalent of the password we use to access the traditional bank account, while the public key would be the number of the bank account.
The Real NFT revolution comes from the hand of Blockchain technology.
One of the industries in which, without a doubt, it is having the greatest impact is the art world. In 2021, Christie’s, the 250+-year-old auction house, sold its first NFT created by the artist known as Beeple.
It is a collage assembled with 5,000 digital photos that reached the chilling figure of 69 MM USD. More than works by Van Gogh, Picasso, Manet, or Warhol.
This transaction marked the first NFT sold by Christie’s and the first sale paid directly in Ether – the Ethereum cryptocurrency that dominates the NFT world.
Have they Gone Crazy?
The first time I read the news, I thought that the world had gone crazy and that we had not learned anything since tulipomania, the bubble of all bubbles. But as soon as you take a look at it, you realize that the value of Art lies largely in its exclusivity.
After all, art lovers pay such extraordinary sums because they are unique, collector’s items. If the classical painters had made several identical replicas of the same painting, the current value would be much less.
If you don’t believe me, why is the Gioconda valued at tens of millions of dollars, but a replica would not fetch even a tiny fraction of that amount? Would you pay the same for two visually identical Gucci bags if you were told that one is authentic and the other a copy from Thailand?
When exclusivity meets authenticity secured by blockchain technology, the magic of disruption is born. Hold on; curves are coming.
From the world of Art to everything else
We could put many other examples within the world of art, fashion, or entertainment. Trading cards, event tickets, exclusive fashion designs, and many other examples are already being tokenized.
Large companies like Ralph Lauren, Loewe, or Nike already have their departments specialized in exploiting this digital niche. Even legendary institutions for their conservatism and respect for traditions, such as the ATP, Art Basel, or the Christie above’s, have launched into the new digital El Dorado.
And this is only the beginning.
Digital paintings, sports videos, collectibles, and other paraphernalia can be very exciting at first, but they are just the tip of the iceberg.
They are the trees that do not let you see the forest.
The real revolution lies in apps that can change society and radically improve people’s lives, never seen before in human history.
Tokenization can be applied (and is already being applied) to real estate, vehicles, companies, and practically any instrument used in human relations.
Can you imagine being able to buy a house between several people or issue debt from your company without having to pay high intermediation costs and fill out endless paperwork?
Stop dreaming. It is already possible.
Are NFTs a Bubble? Vices and Virtues to Discover
Let us not fall into the naivete of thinking that this new technology is immune to the sins and vices of novelties and fashions.
Paying 69 million USD for 5,000 digitally pasted photos by a semi-unknown author or 208,000 USD for a Lebron James dunk video does not seem like reasonable prices.
Much of these exorbitant prices have to do with the irrational exuberance of the most avant-garde novelties.
Do you remember the Amazon Fire Phone and its crazy price? Yeah, me neither.
All of this hype will fade over time as the novelty wears off and the true value of these apps shines through. During the dot-com bubble of the late 1990s, we saw skyrocketing prices from new Internet companies, but that didn’t stop them from dominating the following decades.
NFTs represent the beginning of the end of intermediaries, transaction costs, and many bureaucratic obstacles that we suffer daily.
More possibilities, faster, much cheaper, much simpler.
Thanks to NFTs and blockchain technology, we will recover the most valuable resource in the world: time.
Are you going to miss it?