NFTs: What Are They?
Written By Sergei Ganz
Have you scrolled through Instagram or Youtube and heard about this strange, new trend in digital art called NFTs? Perhaps you’ve even noted that they are being sold for MILLIONS of dollars? If so, you might be scratching your head trying to figure out what this phenomenon is and how it works. Today, you’re in luck as I am here to enlighten you about the bizarre and mystifying world of NFTs.
What is an NFT?
The term, “NFT” stands for “non-fungible token,” and they usually come in the form of a digital token (certificate of ownership). However, the keyword here is “fungible”. What does this mean? Essentially that something is exchangeable. Therefore, based on this definition of fungible, non-fungible would obviously mean non-exchangeable. When looking at NFTs as irreplaceable things can get confusing because of how easy it is for people to make numerous replicas of anything online. This could appear in the form of screenshots or the downloading of an image from the internet. With that being said, think about an NFT as similar to buying a pair of shoes online. When you buy these hypothetical shoes, you now own that specific pair of shoes and many other people own shoes just like yours. Moreover, your shoes are special because they are worn by you and they break down to the way your foot fits uniquely inside it. This pair of shoes then becomes non-fungible because no one can match the exact way the shoes you’re wearing are after you have worn them, meaning that now there is a very limited supply of that exact shoe that you have worn and bought.
So..where does the token part come in?
To put things in layman’s terms, a token is a digital certificate that is sold to a person to indicate the ownership of a digital object. These objects come in many different forms, most commonly as a piece of art in the NFT world. Going back to our shoe analogy, the token is the pair of non-fungible used shoes.
Why would anyone want to buy an NFT?
The art market is intriguing in itself, seeing as a piece of artwork has no inherent value. When selling a piece, the price is solely based on how much people are willing to pay for it. NFTs fall under this same category. However, many NFT collectors see their purchase as an investment considering that high-end artwork almost always increases in value over time. This possibility of the purchase acting as an investment acts as the primary incentive to trade and sell these NFTs to make a profit in the future.
How do people buy NFTs?
NFTs can be sold in many different digital marketplaces, but the most commonly used one is OpenSea. However, on these platforms, you cannot simply use USD or EUR because the transactions between buyers and sellers don’t go through banks. Instead, usage of blockchains and cryptocurrencies such as Ethereum or Bitcoin is mandatory. A blockchain functions very similarly to a bank because in essence, it’s an advanced security system that keeps track of crypto financial records. These records are public on the internet and are tracked by computers in warehouses all over the globe to ensure the legitimacy and accuracy of accounting. So, when someone goes to purchase an NFT on OpenSea they use their crypto to make the purchase. Then, this transaction is recorded on the blockchain the buyer and seller are clients of, eliminating the need for a third party to verify the security of the purchase.
Blockchains and the environment
Such an innovative idea comes at a cost, though. The huge computer warehouses used for blockchain consume an enormous amount of electricity. The computers that run the Ethereum blockchain alone have consumed about 33 terawatt-hours of electricity in their lifetime. Such power usage is equivalent to the annual electrical consumption of the entire country of Serbia. The concern surrounding this issue is rooted in the fact that the majority of electric power is created by burning fossil fuels. These fossil fuel emissions created are loaded with carbon, accelerating climate change.
What are the craziest NFT Purchases?
The NFT world is loaded with hundreds of insane transactions with people all over the globe taking advantage of this huge emerging market. For example, the NBA began selling NFT versions of incredible highlights from their basketball games. One of these highlights sold for over $200,000! However, this is nothing compared to the most expensive NFT ever sold which was called Everydays: The First 5,000 Days, and it sold for $69.4 million. Beeple, the creator of this NFT was astonished that people were paying so much for his artwork and even said during the auction “Jesus Christ! What the f**k.”
Are NFTs a fad or are they here to stay?
Although NFTs are quite new, they are gaining increasing traction in the media. Huge celebrities like Grimes are even hopping in on the action and bringing in significant profits, but many people see the NFT marketplace as a bubble that is just waiting to pop. Some go as far as saying that because the transaction isn’t tangible in the way that traditional artwork is, the excitement surrounding NFTs will dissipate, causing the marketplace to die. On the other hand, this NFT marketplace could explode and maintain itself into the future just as the internet did in the 90s. The truth is, with many innovations it’s hard to tell definitively whether an idea will boom or bust. So, as best stated by Beeple after his famous NFT sale “…digital art is here to stay.”
All of this being said, if this article interests you, I implore you to keep an eye out for the new AG NFT page on OpenSea. We will be selling handpicked NFTs that have been created by our amazing creative team. Additionally, you can get one of these amazing NFTs before anyone else by becoming a VIP Guardian on our Patreon!