What the **** is an NFT?!
There are many articles out there which try to tackle this question. But everyone has a different way on explaining it and sometimes you need to hear it from a differing view to get it.
Here’s what most people say it is, “a JPG” ( which is a type of file for an image). So why are people paying millions for a picture?
First we dive into the uniqueness of every NFT. NFTs stand for non-fungible tokens. What that means is that each of these tokens are unique from each other and no 2 are the same. Unlike money, where I can use any dollar note to pay you a dollar, each NFT may be of different value (hence, non-fungible). Simply put, each NFT is unique and has a value of its own (think the Mona Lisa. There’s only 1 and it’s value is different from the Starry Night painting).
Now we look at why is this important. Up till now, society never had a way to “prove” ownership of digital assets because of the ease of copying. We can take movie pirating as an example. You could watch any movie you want simply by downloading it (though it is illegal). When it came to art, the original was always the coveted one. There are prints and copies of every famous art work out there, but only the one original painting has the value. This is the same with NFTs.
On the blockchain — which is where the data is stored, every transaction from the original picture is recorded. That means that all the transfer of ownerships can be tracked back to the original piece of work. If we look at our Mona Lisa example again, we wouldn’t need to hire someone to inspect every detail to authenticate the painting. We could just go into the blockchain, and verify that the current owner is legitimate. So yes, you could copy and save the image all you want, the important thing, which is the actual ownership of the asset, is the thing that you do not have. So you’d be pirating so to speak.
We’re still very early into this and while there is a lot of potential usage for this, it started out as art. So yes, the millions of dollars you see that are thrown around in this space are, up to a couple of months ago, mostly for the art.
You may look at the images and go, “What art?! It’s just a lame picture”. For the famous Cryptopunks, they have legacy on their side. They are a historical first. Hence why their pixelated characters fetched a handsome price. The other projects? Well, art has never been an exact science has it? You can have a painting that makes absolutely no sense to you and you absolutely hate it, but, it sells to someone else for 10 million because they feel connected to the piece and refuse to leave the place without it.