It all started in May 2014. Kevin McCoy decided to create the first NFT on the blockchain; an interactive image called Quantum. NFTs were created for artists to have ownership of their own content. At the time, when McCoy proposed the idea of “monetized graphics” he didn’t get a lot of support. When he presented it in New York, the audience actually laughed. However, it was his visionary approach to the already established concept of Bitcoin, that created the NFT community of today. The “Quantum” by Kevin McCoy is now worth 1.4 million dollars. Who’s laughing now?
NFTs changed the game for the creator’s economy. With this concept of digital assets, artists now can be in charge of their content and make a bigger percentage of profits when selling art. As for the rest of us, its have to re-think how we value digital art and the benefits and community that come with this new form of asset.
What is an NFT?
The best way to explain NFTs is breaking down the three words:
Non Fungible Tokens
The word fungible means “interchangeable”. Currency could be considered as fungible, because it can be interchanged and divide its value. If you have a five-dollar bill, you could exchange it for 5 one-dollar bills. On the contrary, if you have one NFT, you can’t divide it into 5 smaller NFTs. It’s non-fungible, which means one of a kind. A token is the digital representation of an NFT. A token is what you can see, like the art image, the voucher, or the digital visual.
So, to recap, an NFT is a non-interchangeable digital token that is stored on the blockchain and can be sold or traded with cryptocurrency, usually as collectible art.
NFTs and The Blockchain
How are they stored on the blockchain? Each NFT holds a unique fingerprint (hash), a token name, and a token symbol (the jpeg or image format). Any JPEG image can turn into an NFT just by storing it on the blockchain. The owner can create a smart contract that assigns ownership and manage the transferability of the NFT. In simple terms, smart contracts allow the NFT to be securely bought on the blockchain and transferred to its new owner along with the proof of ownership.
One Million Copies, But One True Owner
A common misconception about digital art is that screenshotting an NFT it’s the same thing as owning it. You may have a copy of the image, but it’s impossible to sell it if it’s not on the blockchain. A screenshot of an NFT doesn’t give you any benefits.
A real NFT can give a person:
- Proof of ownership
- The original collectible art file
- Access to an exclusive community
- Financial benefits
A single piece of digital art is valued through the success of the NFT collection as a whole. Prices are driven by demand. The reason why people buy NFTs goes beyond just appreciating the art. Collectors look for the NFT to have benefits like access to special events, educational resources, investment opportunities, and more. On the other side, people also buy NFTs because of the feel-good experience such as donating to charities, the project’s values, or because of the community networking opportunities. Lastly, there are people who just want to make a buck by flipping an NFT. This means buying it when it’s cheap and then re-selling it when it’s worth more and has more demand.
NFT collections have resources like whitelist spots, giveaways, and pre-sales where people can get the NFTs cheaper. A whitelist is just a list created by the founders, where they include the most devoted fans of the project and allow them to be part of the initial sale or mint. To be part of the whitelist you usually have to do a few things:
- Join their Discord and participate
- Comment, retweet, and like their Twitter content
- Stay on the lookout for any announcements for whitelists spots
Another way to get cheaper NFTs is minting:
Minting Vs. Buying An NFT
With most NFT collections, there is a private mint and a public mint. When minting an NFT on a public mint, you do not get to choose which one you get; it’s assigned to you randomly, but you get it at a low price. Same with the private mint, but to get on the private mint, you need to be on a whitelist and you will get the lowest price of the collection – giving you a highest chance of flipping it later. Minting also means you will be the first owner of that new NFT. The negative side of this is that you have no idea if the collection will be successful or a failure, because you can’t see the price history and calculate if it’s a growing and promising project.
Buying takes place after all the presales and it’s open to everyone. It will be more expensive, but you get to see the growth of price over time and see if the collection is going somewhere. You also get to select the specific NFT you want.
What Can Be an NFT?
- Digital artwork
- Event access
- Content: Articles, videos, tweets, etc
- Real estate in the Metaverse
- In-game tokens
Anything that is unique and needs proof of ownership can be turned into an NFT.
Join The Movement
The NFT community is growing its market everyday. We hope after reading the basic attributes and benefits of NFTs, you can better understand the industry as a whole. Let us know how your crypto journey is going on our account @ClapperDAO. Where we will be giving updates of Clapper’s transition into a DAO platform.