NFTs have swept the tech world up in a whirlwind. Still, many are left asking themselves “What exactly is an NFT?” Whether you’re a potential collector, savvy business owner, or just a curious mind, we’ve taken all the guesswork out of that question. Here are NFTs, explained.
So, What is an NFT?
NFT stands for non-fungible token. An NFT is a unique digital asset stored on the blockchain that can represent tangible and intangible items. The most popular NFTs to date have been in the form of digital items like art, but NFTs can be used to show ownership of a physical item like a pair of exclusive sneakers or even a piece of real estate.
Quick breakdown: Fungible means that something is interchangeable with another item; it is exactly the same. A gold coin can be swapped out for an exact equal. Gold is fungible. Non-fungible means that something can’t be exchanged for an identical item. It is the only one in existence. Diamonds are non-fungible. A single diamond has unique characteristics that make it unlike any other. The token in non-fungible token refers to a digital certificate that shows ownership.
How Do NFTs Work?
NFTs are powered by smart contracts, most commonly on the Ethereum blockchain. NFTs are created by the process of “minting”. This is when a digital file is transformed into a digital asset. The asset is given a unique fingerprint (hash), token name, and token symbol. Once minted, this asset can then be stored on the blockchain, traded, or sold. Like other cryptocurrency transactions, records of ownership and transfers of digital assets will be stored on the blockchain for all to see.
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Benefits of NFTs
Broadly, NFTs have several characteristics that make them beneficial to all:
- NFTs can’t be destroyed: they can’t be removed or replicated since they exist on the blockchain
- NFTs are indivisible: they can’t be divided, but only exist as a whole item
- NFTs can’t be counterfeited: digital assets can be authenticated much easier than traditional works of art
How Artists Can Benefit from NFTs
Artists may find NFTs as a preferable way to sell their creations to a new market of digital art collectors. Without art houses or middlemen, artists retain more money from each piece sold. Additionally, creators can program royalties into digital artwork so they receive income each time the work is resold to a new owner.
How Collectors Can Benefit from NFTs
NFT collectors can buy their digital assets knowing that they own a truly unique asset. Unlike baseball cards or works of art that have been replicated many times over, NFTs are verifiably genuine. Collectors also have the opportunity to generate wealth from their collections. NFTs can function as any other speculative item like real estate or Bitcoin, gaining value as demand grows.
How Businesses Can Benefit from NFTs
Savvy businesses have already started engaging with the NFT community. Businesses can use NFTs to tie ownership to physical items, like Nike’s Crypto Kicks blockchain-based shoe authentication system. NFTs can also be used for promotional and marketing purposes. Business use-cases for NFTs will continue to evolve as brands showcase their creativity and ingenuity.Related article: How Brands Can Use NFTs for Marketing and Much More
Popular NFTs Created by Brands
Many forward-thinking brands have created their own NFTs.
Coca-Cola’s Friendship Lootbox
Coca-Cola released its Friendship Lootbox NFT which celebrates the brand’s iconic history of forming friendships. The collection auctioned for over $575k and benefited The Special Olympics.
Pringles released a limited virtual flavor NFT, CryptoCrisp. The collaboration with artist Vaysa Kolotusha was priced at $2 (the price of a regular can of Pringles) but is now on the resale market for 4.95 ETH.
Taco Bell NFTaco Bell
Taco Bell released a variety of its delectable foods in NFT form to frenzied fanfare. The sales benefited The Taco Bell Foundation.
Kings of Leon “When You See Yourself” NFT Album
Rock band Kings of Leon released its 2021 album, “When You See Yourself”, in NFT format. Around $2 million in sales were generated from the NFT album. In addition to receiving the album, NFT collectors were entered to win front row tickets to one show per tour, per life.
NBA Top Shots
NBA Top Shots is an NFT community created by the National Basketball League. It gives fans the opportunity to purchase historic in-game moments featuring their favorite NBA stars and teams. NBA Top Shot takes one of the oldest forms of collectibles, sports memorabilia, and reimagines it for the digital age.
Start Creating and Selling NFTs
If you’re all in on NFTs and the metaverse, the only thing left for you to do is create, buy, or sell your own NFTs. For a full dive into NFT creation, read our guide on making and selling NFTs.