With all this news around NFT’s filling up our news feeds you’re not alone in feeling confused and overwhelmed. With memes such as the ‘Nyan cat meme’ selling for nearly USD 600,000 and tweets being sold for nearly USD 3,000,000, it’s normal to think, ‘Wait, are we missing something?’
We are going to simplify what NFT’s are and what’s in it for us.
What is an NFT and what does it stand for?
NFT stands for non-fungible token – in other words, it’s unique and cannot be replaceable by anything else and only one of its original exists despite it may be having a millions of copies. Whereas a fungible item is replaceable by another identical item. To simplify it,
For example, let’s take the guitar you have had since your childhood, and let’s say it’s a Fender. It’s getting old now and has wared out. You can go to the shop and buy another Fender and a similar-looking guitar. But you can never buy the very exact guitar that you have so many memories with, where you find significant value, and emotional attachment to. Therefore there is only one of it.
NFT is also similar to the physical collectible art, comic book, baseball card industry. Where a group of people decides that a particular painting, card, book is valuable due to certain reasons and sets a price to it and justifies it, where collectors are willing to pay millions to own it. They purchase it, frame it, and hang it on their wall.
The difference now is that it’s done for digital art, in a non-physical way using blockchain.
What’s so great about it and why is it exploding in popularity?
- Blockchain, aka the technology that backs NFT, is growing in popularity. Where experts say close to 50% of new crypto users would use NFT as the entry point. Hence you could say that NFT’s are partly riding the crypto hype wave.
- The world’s largest and most innovative brands are incorporating this concept into their marketing campaigns creating much hype. Let’s discuss it, in just a second.
In the real world we have laws and deeds to prove and stamp the ownership of valuable assets, in the virtual world for digital assets, It’s NFTs
What principles are NFTs based on
- Creating value in something which doesn’t necessarily have an inherent value by incorporating the principle of scarcity.
- Creation of an artificial scarcity by incorporating human psychology.
- Based on hype and speculation markets.
- An NFT works as a digital asset
What human principles and psychology is the NFT hype taking advantage of
- Once a human’s basic needs are met, the mind tends to search for value in self-esteem, psychological hype, and excitement around something.
- Creation of an artificial status symbol of owning an asset that cannot be replaced.
- The movement on how ideas of perceived value are shifting due to the effects of technology.
- The desire to not feel ‘left out’ and feel ‘in’.
What is the influence of blockchain in NFT’s?
Blockchain can be illustrated as a public ledger that records all of the transactions done (similar to your bank statement, with the credits and the debits) the difference is that it’s publicly available.
- It contains distinguishable information like a digital signature who owns the digital asset, who sold it and for what price, making the ownership easily verifiable.
- NFT creates a blockchain-based digital ownership certificate for these collectibles
- The digital art is not necessarily the NFT, but the transaction record on the blockchain that acts as a certificate or token showing everyone who the owner is.
