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What is an NFT? Spelling out the new form of digital ownership

Simply stated, an NFT (non-fungible token) is a unique unit of data stored on the blockchain that is associated with a given asset. These assets can resemble a number of different types of formats, like images, audio, or video; and art, moments, and music all have big representations as NFTs.

Where do NFTs live?

NFTs live on the blockchain, which is a public ledger. There are many different blockchains out there, but not all of them have the capability of minting NFTs. As of right now, most NFTs live on the Ethereum blockchain and a great deal of the record setting purchases take place on this network.

 
Ethereum is a cryptocurrency with its own blockchain but other famous cryptocurrencies are also joining the party. For example, a Dogecoin developer recently posted a twitter thread claiming he had minted the first ever Dogecoin NFT.

The first ever NFT minted on the Dogecoin blockchain

What problems do NFTs solve?

There are many different applications of ideas that NFTs are set to solve. Currently one of the most well known applications is that of digital ownership. For the first time ever, original digital art or music can be traced to one owner, and in some instances the creators can even set a percentage to receive kickbacks so that they are able to make money on every single future subsequent sale. Not only does this solve the problem of ownership of a digital asset, but it allows creators to have more control over profits.

What are some examples of NFTs?

There have truly been some crazy items that have been sold as NFTs. The New York Times is selling original NYT articles as NFTs, Jack Dorsey famously sold the first ever tweet for 2.9 million dollars, and there are famous memes like the “Disaster Girl” that sold for $500,000 (to name a few).

“disaster girl” is one of the highest selling meme NFTs

Here is a short list of example items that you can buy and sell as NFTs.

  • Art 
  • Music 
  • Moments
  • Domain names
  • Virtual trading cards & other collectibles
  • Digital objects in games
  • Pieces of virtual worlds

Are NFTs mainstream?

The NFT ecosystem needs a lot of things to happen for it to become what many consider mainstream, but for those in the industry – including creators, traders, developers, collectors and others – it has already become mainstream.  However, If by “mainstream” one means the term “general public,” then the qualification definitely hasn’t been met yet. That being said, there are many initiatives driving new audiences to the marketplace.

Some of the outfits that are making huge movements in the NFT space in the effort to make it more mainstream include NBATopShot, OpenSea, and Rareable. These NFT marketplaces are usually created by a team of developers (or a single developer) that have often times struck very strategic partnerships).

Some of these marketplaces are more niche specific than others, and some even require the development of their own blockchain to get the ball rolling due to high fees associated with Ethereum. This is especially the case with NBATopShot, which is built  around moments in NBA action and has a large sports fans audience – including the actual NBA players themselves.

To elaborate on this particular example, think of Top Shot as sports collectibles on steroids. Moments are typically released in randomize, tiered packs (much like sports cards in the old days) that collectors can purchase. Once the packs are opened, you can then perform multiple actions with the NFTs like create showcases, list your items for sale, hold on to them, or participate in challenges. 

An inside look at what a moment in NBATopShot looks like

Entire suites of toolsets have been developed to help prop up and support these marketplaces, giving buyers and sellers the information they need to help with verification, evaluation, and other important aspects of participating in the market. One example is Evaluate.Market.

How to buy, sell, and create an NFT

Before you can become active in the NFT marketplace, you have to set up a digital wallet. A digital wallet is exactly what it sounds like and is where all of your money is stored (whether it be cryptocurrency or fiat). There are a ton of different digital wallets you can use but two popular ones are Coinbase Wallet, and MetaMask. Some marketplaces limit which wallets are available, so if you are looking to trade on a specific platform, be sure to check.

After that, it’s really about visiting each marketplace and going through their account creation setup, connecting your wallet, and then doing your due diligence in order to choose what you would like to invest in. The largest marketplace at the time happens to be OpenSea, and to get started you will have to buy Ethereum in your digital wallet.

Creating and listing NFTs on OpenSea comes without a fee however thanks to something called “lazy minting” – where fees aren’t charged until a sale is actually made. That being said, there is a one time fee associated with listing your first NFT which can be pretty pricey. You will have to do this in order to create your first NFT on OpenSea.

Creating NFTs on other marketplaces like Rarible allow you to do so at lower prices but requires the NFT to be listed on the Flow network. However this isn’t always. desirable as most of the NFT market exists on Ethereum. The good news is that Ethereum 2.0 is set to aim at lowering gas fees dramatically.

Looking to the future…

The NFT and cryptocurrency space is constantly updating and evolving. Pretty soon NFTs could theoretically correlate to an actual physical object and strides have been made to make that a reality. That’s exactly what Nike aims to do with their newest patent on their latest NFT project: “CryptoKicks.”

When you buy a pair of CryptoKicks, a digital asset will be released that correlates to a unique identifier on the IRL shoe – creating a scarcity aspect. Either the physical shoe or the digital assets can be sold (or both). According to the patent these digital assets will even be able to “intermingle and breed” in order to create “shoe offspring.” This is something both fun and innovative that collectors, shoe heads, and developers are all itching to try out.

This is just one example of what is to come, and the possibilities are virtually endless. NFTs are adding excitement and this early phase is just a glimpse of what living in the meta verse is going to look like. As more utility is added, there will be more reasons to join in.