NFTs For Beginners | What Are NFT’s and Why Do They Matter?

Are you new to the blockchain space? Has the NFT rave caught your attention? Looking for a detailed, brief, and concise introduction and induction to the NFT space? You’re at the right place.

Quick guess. You heard a jpeg of an ape sold for hundreds of thousands of dollars and now wonder what NFTs are. Right? You’re not alone. Keep reading.

For context, we’d be looking at the blockchain industry, crypto, the basics of NFTs, benefits, and how they work in this piece.
Without further ado, let’s get to it.

What’s the full meaning of NFT?

The abbreviation, “NFT” stands for Non-Fungible Token.

What are NFTs?

See it this way. An identical item can replace a fungible item. Consider the dollar bill. My $1 bill is worth the same as yours and any other $1 bill in circulation. To put it another way, they’re interchangeable.

Non-fungible items are one-of-a-kind and cannot be duplicated or substituted. For example, the Mona Lisa, the Statue of Liberty, and a Super Bowl ticket are all non-fungible. That is, they are unique.

In the cryptocurrency world, if I own one Ethereum token (ETH), it is fungible because it is worth the same as any other ETH token owned by someone else. An NFT is like a digital copy of the Mona Lisa. The original copy of Mona Lisa, painted by Leonardo Da Vinci, will always be one worldwide. No matter how many people attempt to recreate it.

Before you ask, Yes, screenshots of NFTs used as pfp’s (profile pictures) are invalid and do not certify ownership.
NFTs, or non-fungible tokens, are virtual representations of real-world assets. They are frequently regarded as the first iteration of Web 3.0 in an increasingly virtual world: the Metaverse, in which we all actively participate. NFTs are the bridge connecting assets from the offline world to the online, open, and decentralized digital world, fueling the rise of new digital immersive ecosystems.

Let’s use music as an example:

• Song = NFT
• Artist, songwriters, producers, e.t.c = Original artist(s). Or what we’d like to call 1st gen copyright owners
• Internet = Blockchain (platform where all transactions take place)
• Youtube, Spotify, Apple music e.t.c = 2nd gen licensed owners (like people who buy the NFT directly from the source)
• People who listen to music = Those who screenshot NFTs and use it as pfp’s/appreciate the art

Note: Music law is more complicated. This is a watered-down explanation to give you a better picture.

How do NFTs Work? The Basics

Although NFTs use the same blockchain technology as cryptocurrencies, their lack of interchangeability distinguishes them (fungibility). Every NFT has its blockchain address. This feature enables NFTs to serve as a digital twin for any unique digital or physical asset, providing public proof of ownership.

NFTs exist on a blockchain, a public distributed ledger that records and keeps transactions. You’ve probably heard of Blockchain, the underlying process that enables the existence of cryptocurrencies.

NFTs are typically stored on the Ethereum blockchain, but they can be stored on other blockchains as well. Currently, there’s a rise of Solana and Arbitrum NFTs in the space.

An NFT is “minted” from digital objects that represent both tangible and intangible items, such as:
• Video game skins and virtual avatars
• GIFs of graffiti art
• Sports videos and highlights
• MusicsCollectibles
• Designer shoes

However, the current hype is centered on the “NFT jPegs” For example; the Bored Ape Yacht club is one of the most successful NFTs ever made. You’ve probably heard of it. Or how Jack Dorsey, former CEO of Twitter, sold an image of his first test tweet for over 2 million dollars!

So, NFTs are essentially digital versions of physical collector’s items. The buyer receives a digital copy instead of an actual oil painting hanging on the wall in his digital gallery. Like OpenSea.

Buyers will also have sole ownership rights. NFTs can only have one owner, and the use of blockchain technology simplifies the process of verifying ownership and transferring tokens between owners. Specific information of the creator can also be stored in an NFTs metadata. For example, artists can sign their work by including their signature in the file. This could increase the creator’s market credibility in future projects.

More on the NFT Ecosystem

Rather than hang on a museum’s wall, NFTs exist on the Blockchain’s livewire. So, if you picture the digital image of a Bored Ape hanging on a wire-like blockchain platform, you imagine right! The Blockchain is the NFT Museum.

What is a blockchain? A blockchain can be thought of as a decentralized and distributed server. When you interact with a blockchain, you are not simply sending a transaction to a server farm, as you would in a more centralized ecosystem, such as Amazon.
Instead, thousands of computers (known as miners) will verify portions of your transaction simultaneously. As a result, the Blockchain is extremely secure and virtually unhackable.

Why Do NFTs Matter?

The most obvious advantage of NFTs is increased market efficiency. Converting a physical asset to a digital asset streamlines processes and eliminates intermediaries. NFTs on a blockchain representing digital or physical artwork eliminate agents’ need and allow artists to connect directly with their audiences. They can also be used to improve business processes.

The rich diversity of players in the NFT space makes it so appealing, with each exploring new technologies and market opportunities and meeting various needs with different approaches.

The NFT market is young and thriving. The boundaries and content of this new territory are rapidly expanding – hence, its gold rush territory! New opportunities are identified and investigated daily, and new services are launched. It is a mistake to regard NFTs as merely a market.
A better way to think about NFTs is as an ecosystem of interconnected marketplaces, market sectors, applications, actors, and interests.

Importance of NFTs for Creators and Businesses

The smart contract concept! A smart contract is a computer program that runs when certain conditions are met and is stored on the Blockchain. So, what exactly are we talking about here, and how can creators and businesses benefit from them?

For collectible art projects, royalties can be programmed into the smart contract. Typically, royalties are set at around 10%. This means that whenever an NFT is sold, a portion of the proceeds is automatically transferred to the original creator’s wallet. This makes sure the original creators are always associated with their projects, a concept known as provenance, and that they can benefit as their work becomes more well-known.

This is revolutionary for art collectors who previously had to rely on authenticity experts to determine whether or not a piece of artwork was worthy. In short, the buyer makes the final decision, and the creator’s work can be appreciated without the influence of a third party.

Again, it is estimated that up to 20% of paintings owned by museums are forgeries. A buyer cannot always distinguish between a genuine and a fake. Since a pedigree exists on the Blockchain, it is permanent and verifiable indefinitely. So, if an unauthorized copy is made, it is simple to determine that it is a forgery and save money.

In short, NFTs can help creators, businesses, and consumers have a healthier market relationship and experience, increase value, and preserve authenticity.

NFTs in the Future

It’s impossible to predict how devs, creators, and businesses will use NFTs and their innovative underlying smart contracts, as with any new technology.
NFTs will almost certainly be used to track ownership of items such as college diplomas, real estate, professional licenses, event tickets, and countless other contracts currently existing on paper. All of these things will take time to materialize. In some cases, most people may be unaware that NFT technology is being used for them.

Finally, the only limit to what NFTs can do is our imagination. It’s exciting to think about what’s possible and what’s to come.