HaveYouHeard Durban managing director Kirsty Bisset unpacks the five most important things you should know about NFTs and gives you a short list of NFTs making history you can drop into the conversation to show you wouldn’t get lost in Decentraland!
What are NFTs?
Fungible goods or assets are those, according to the Cambridge Dictionary, something such as a currency, share or goods that can easily be exchanged for others of the same value and type. Fiat currencies (for example, the South African rand) and cryptocurrencies (for example, Bitcoin) are fungible because they can be exchanged like for like – so, R100 for another R100 or $8 depending on the day, and one Bitcoin token for another Bitcoin token or cryptocurrency depending on existing agreements.
It stands to reason, then, that non-fungible goods are assets not easy to exchange or mix with other similar goods or assets, and nonfungible tokens – NFTs – are blockchain assets that are designed not to be equal.
Blockchain? Blockchain is essentially a system used to make a digital record of all the occasions a cryptocurrency is bought or sold, and that is constantly growing as more blocks are added.
An example of a blockchain asset is an aeroplane ticket. An aeroplane ticket isn’t a ticket on any flight at any time – it is for a very specific flight at a very specific time (in a very specific seat).
NFTs are unique and non-reproducible – and they are not real in the way that you would imagine. They are digital assets and exist only as computer code, a prime example being Estate 331 located in Genesis Plaza. This is not real estate that you can visit, dig your hands into its soil or walk under its trees – it’s virtual land in a digital world that you can only visit on a computer.
According to forbes.com, fashion, art and entertainment are the hottest NFT commodities; and people are also buying virtual trading cards and digital lands as investments for the future.
Importantly, the concept of purchasing something intangible isn’t new – take shares in a company or unit trusts, for example. In years gone by, you’d be given a physical stock certificate proving ownership but that certificate never actually had any physical link to a physical asset, it simply indicated you owned a portion of the business.
Who is buying them?
A recent article on forbes.com quoted, logically, some US statistics:
According to ARK Invest, the virtual good ecosystem is expected to reach $400bn by 2025.
How do you buy them?
You’d think that you can only interact in the crypto world of NFTs using cryptocurrencies, but many companies or individuals selling NFTs accept Fiat currencies. All the better to reduce barriers to entry and grow the market, yes?
And, while big money has certainly been spent on several NFTs, not all come with huge price tags. Beeple, an artist on Instagram, started by selling his digital artwork as NFTs for as little is $1. OK, he did also – through auction house Christie’s – sell a single piece for nearly $3,000,000.
How do you prove ownership?
As ‘tokens’, NFTs possess a unique ID – which distinguishes them from other NFTs. And trade in NFTs is recorded ‘on-chain’ – that is, on blockchains – just as cryptocurrency deals are so, once ownership is transferred, it cannot be reversed.
Think of a blockchain as a list that cryptographically records a series of events, or transactions – like a chain with each linking to the one before and the one after. This makes it nearly impossible, after a certain number of new transactions have occurred, to change an old one. Importantly, too, blockchains are ‘open’, that is, anyone can view the history of transactions.
Are NFTs only for art, fashion and entertainment companies, brands or celebrities?
NFTs offer a new way for brands to engage with their customers. For example, a video promoting fashion brand The Dematerialised’s NFTs suggests owners display their assets on their blockchain profile, that they wear their assets on social media and that they port their asset into a game or metaverse.
So, consider this: How long before Toyota Gazoo Racing creates an exclusive car for use only in online racing games? Before fashion houses and possibly even clothing retailers create collections only available as NFTs for use by avatars in Decentraland?
Or if you owned an apartment on Estate 331, wouldn’t you want it stocked with the same (or maybe better) appliances and furniture as you have in the real world? Which brands would be in your fridge, which wines would you serve for dinner?
And about that art of the walls, would that now be a Beeple?!
NFTs you should know: