15 minute read
You’ve probably heard of NFTs. You might even have shrugged them off. What you might not realize, is that like the rise of social media networks, NFTs are a technology that is here to stay. No matter what business or service you are in, NFTs may one day be as much a part of your life as Facebook, Instagram and online shopping.
In this article we’re going behind NFTs: What they are and where they come from. We’ll discuss the technology, the history and also the potential for them in future.
Not least of all: how can NFTs benefit you?
NFT Frequently Asked Questions
A pivotal point in history
Think about this: If you were old enough to remember when Microsoft or Amazon was first publically traded, you might wish that you had the foresight to buy shares back then when they were cheap. If you had purchased $1000 worth of shares in 1997 and held them, you’d be sitting on $2,000,000 right now. Well, don’t despair. We are once again on the verge of a tremendous shift in technology which is very similar to the rise of the internet in the early 90s. Some are calling it the greatest wealth creation event of our lifetimes.
For designers and creators, this new technology is something to pay attention to. While there is no denying that there are risks involved in investing in NFTs, where the technology really shines is in how it will work for your creative ventures in the future. Thus, whether you get involved at this early stage or simply stay current with the news, it is something you should really be aware of!
There is no doubt that if you do have the guts to get involved and to adopt this technology early, you are likely to see the greatest rewards.
We are talking about Web 3.0, the “metaverse”, and specifically, NFTs.
What does NFT actually stand for?
NFT stands for Non-Fungible Token, and funny as it sounds, it has nothing to do with mushrooms! If you’ve heard of NFTs but have had a hard time getting a straight-forward answer to what an NFT is (that you could actually wrap your head around), we’ve got you!
It is true that the world of NFTs, the blockchain and web 3 technology is notoriously difficult to navigate for newcomers, but don’t let that put you off. Everyone starts somewhere. Once you get a handle on the basics, you’ll see why everyone is so excited about NFTs. Luckily for us, there are also a lot more beginner resources available now than there were a year or two ago.
Two external articles I recommend on this topic:
Definition of NFT (Non-Fungible Token)
On to the fun stuff: A proper exploration into the basics of NFTs should begin with understanding of what an NFT is and also what it isn’t.
Let’s break the initials NFT down into two parts: non-fungible and token.
Non Fungible = Unique
Non-fungible means ‘not able to be exchanged for another’. In other words, it’s uniqueness is guaranteed. It is one of a kind and it is not possible to fake a substitute. Remember how your mom told you that you were unique and special, and that there is no one quite like you in the universe? Yes, you are non-fungible.
Token = A unit of exchange
Tokens are units of exchange, not unlike coins, except that they are less general and way more specific. They can have more inherent potential than a pure ‘currency’ like the US dollar, the Japanese yen or their purely digital counterparts, Bitcoin, Ether or Litecoins. This potential lies in the fact that tokens are programmable and may include agreements, aka “smart contracts”.
Just like the cash in your wallet, digital coins can be traded for goods and services online on decentralized exchanges (more on this later). Tokens, on the other hand, can be described as being more like tickets to an experience like a concert, which may include free popcorn or VIP backstage passes. They might represent access to a service offered, a membership to a club, or rights to a piece of artwork.
You can think of a non fungible token as a unique token with it’s own ID. In the case of NFTs, the tokens are totally digital and are stored on the blockchain, which is a decentralized database. It is also the basis for Web 3.0, and a large part of the move to a future three-dimensional web.
Quick fact: All coins are tokens, but not all tokens are coins.
Further reading: The Difference Between Crypto Coins and Tokens.
Fungible vs. non-fungible
If you think of fungible coins as being an army of identical units, none any more special than the other, NFTs are the ‘new tokens on the block’, and they happen to think that they are special. While coins, like Bitcoins, are fungible, (meaning that one can be exchanged one for another), one NFT has the ability to identify as totally unique from other NFTs. This introduces the idea of ‘rarity’. And where there is rarity, there is always demand.
Now, before you start thinking that NFTs are the best thing since the invention of YouTube, there are a few caveats. Remember, that just as IRL (in real life) not all products and services are equal, so too not all tickets or tokens are created equal. The value of NFTs is not inherent. In other words, an NFT is not valuable just because its an NFT. Instead, it is valuable because of what it represents.
An NFT that represents a ticket to a Justin Bieber concert has no value to me, but that doesn’t mean its not valuable to someone else. Rather than toss it, as an NFT I could find the best buyer I can for my asset. The real value here is the perceived value: what someone else thinks it’s worth and is ready to pay for it. Ownership is the prize.
If you understand collecting rare coins, stamps or baseball cards, this is a great analogy. There are may baseball cards, for example, but certain ones are rarer than others, making them more valuable on the open market to collectors and traders.
Your baseball card is valuable because of how rare it is and will sell for the price the market decides if it goes to auction, meaning the highest bidder wins, and ultimately decides the value.
Why all the NFT hype?
For investors: People who invest in NFTs do so because they are fans of the artist, brand or project which creates the NFTs, and also in hopes that the NFTs value will go up in time.
It’s important to note that even if they were sold by the same artist, each NFT in a collection can hold different value. This is possible because NFTs have a digital signature which identifies them. Individual NFTs may become more valuable because of their appeal, who owned them before, or because of built-in rarity traits.
For digital art creators and designers: NFT ownership can be traced back to its origins and its also possible to include royalty payouts every time the asset changes hands. This means the original artist can continue to benefit from the sale of the asset long into the future. No record label or artist management agency required.
NFTs are also valuable to the world of traditional real estate. We may soon see a future where all purchases which include contracts are done with the aid of smart digital contracts (yes, NFTs). It’s not hard to see how the current way is archaic and on its way out.
Digital asset ownership
Just like a plane ticket, which is registered to your name and has a unique identifier, your NFT is traceable. You can prove ownership.
This is huge because NFT technology represents the first time that it’s been possible to assign clear ownership to digital assets. In a world where millennials are finding it challenging to own traditional assets like property, they are placing their bets on a world they do understand and value: the digital world.
This means that acquisition of digital assets is on the rise and only set to continue exponentially.
The fact that two entire generations (Gen Xers and Millennials) are likely to fully embrace this technology is already reason enough to pay attention. When the traditional financial systems starts to take notice and traditional investors start investing in crypto to diversity their portfolios, that’s even more reason.
Non-fungible tokens, or NFTs, have created a way to easily stake and prove ownership of digital assets for the first time since the internet was invented. Because of this, they have opened up a lot of interesting opportunities, especially for artists and their collectors. Some notable examples of massive success stories in NFTs is the first sale of a digital artwork at Christie’s by the artist Beeple for $69,000,000 and the artist Grimes who sold several pieces of her artwork for $6,000,000.
Popular “blue chip” NFT projects like Crypto Punks or BAYC (Bored Apes Yacht Club), owned by celebs like Eminem and Bieber, have become unaffordable to the every day investor. New projects hit the market every day.
We have entered an age of “digital goldrushing”.
Naturally, this has given rise to some scams (“follow me, I’ll take you to the gold!”), but that doesn’t mean that the gold isn’t there. You just need to become more invested in learning how to find the genuine stuff.
What an NFT is: Any type of data stored on the blockchain as a programmable asset.
What an NFT isn’t: Only a jpeg of a flying rainbow cat, mutant ape or some other example of tradable digital art.
Let’s talk about the blockchain
Now that we’ve discussed NFTs in some detail, let’s get some additional background for context. In order to understand how NFTs work, we need to know a little about the blockchain, which is the home to all things decentralized.
Think of this as a crash course.
What is the blockchain?
The blockchain is a global peer-to-peer computer network. While peer-to-peer has been around since 1999 (remember Napster?) its use for cryptocurrency trading has only existed since Bitcoin was first invented and traded in 2009, ten years later.
The blockchain supports a digital public ledger, meaning it acts as a record of exchange that can be viewed by anyone, and anyone can theoretically add to it. You can think of this ledger as something like a giant excel sheet. Whenever someone makes a transaction (i.e: buys, sells or swaps something) on the blockchain, a permanent record is created.
Decentralized finance (DeFi)
What crypto enthusiasts love about this is that it makes the use of digital currency much more transparent to the average person than the government issued money that is currently in use, particularly cash. Cryptocurrencies’ existence outside of government regulation is one of the greatest appeals but also the greatest threats to its future.
But while regulation is a concern (China and India have banned cryptocurrencies in favor state-created versions), the massive adoption of cryptocurrencies across industries and countries continues. Take the example of small nations like El Salvador, who have adopted Bitcoin as their national currency and see it as a way of bolstering their economy.
Bitcoin and Ether are unlikely to go anywhere. Not least because of all of the tech companies building the internet of the future on these very blockchains.
Even Elon Musk, the richest man on earth, is a proponent of cryptocurrencies and decentralized finance (DeFi).
The metaverse or web 3.0
What’s most important about the blockchain is that it is the underlying structure of the decentralized web, also known to some as Web 3.0; or for others, the “metaverse”. Here’s why blockchain technology is important: The entire worldwide web or ‘internet’ as we know it is starting a slow shift from centralized websites (previously Web 1.0 and currently Web 2.0) to decentralized websites.
The first version of the web (Web 1.0) was static, while the version that we use now is more interactive and dynamic (Web 2.0). The future version of the web (yes, Web 3.0) will be far more immersive. It may eventually become almost indistinguishable from real life. This is because we will see the current two-dimensional web become the 3-dimensional web.
We are already seeing the early signs of this with VR and immersive gaming in ever more expansive worlds.
The birth of Bitcoin
The first units of exchange on the blockchain were called “Bitcoins”. As you probably know, Bitcoin is the original cryptocurrency. In the future our ancestors will remember it as the first-ever purely digital form of currency.
Bitcoin’s birthday is January 12th, 2009, making it thirteen years old. Right now Bitcoin has the largest market cap of any digital currency at over eight hundred billion, and a circulating supply of almost nineteen million.
In 2022 one Bitcoin is currently worth roughly, USD48,000 and it has traded as high as USD64,000. True story: The first Bitcoin ever used to purchase something was used to buy two pizzas. At today’s rate of exchange those two pizzas sold for 3.8 billion dollars.
I know, right?
As the original base currency of the digital world Bitcoin is roughly equivalent in perceived value as gold is in the real world. It is already referred to by some as “digital gold”.
Who in the world is Satoshi Nakamoto?
The origins of Bitcoin, like any great heroic tale, is shrouded in mystery. The inventor of Bitcoin is known only by the pseudonym “Satoshi Nakamoto” and no one knows his real identity. When Satoshi invented Bitcoin he envisioned a “perfect” currency. It is perfect because it has a built in reserve base (a fixed amount that will never be touched) and an upward limit to how many total units will ever be produced.
This creates scarcity and also makes it a finite resource, much like precious metals.
Despite it’s popularity, however, it is important to note that Bitcoin is still highly volatile compared to traditional fiat currencies, due to the fact that it is still so new.
The Rise of Ethereum and Smart Contracts
After Bitcoins, the next major cryptocurrency to become widely adopted was Ether. Ether is a cryptocurrency which runs on a different network, the Ethereum network. Ethereum is the brainchild of Ukrainian-born Vitalik Buterin. What makes Ethereum different from Bitcoin is that, unlike Bitcoin (which will only ever be a currency), it was designed to be programmable, making way for ground-breaking innovation: DAOs (Decentralized Autonomous Organizations) and smart contracts.
This is where NFTs enter the picture.
The final portion of our article on NFTs centers around some frequently asked questions regarding NFTs. These answers will be briefer and more to the point. Enjoy!
Frequently asked questions about NFTs
- How long have NFTs been around for?
- Who invented NFTs?
- What was the first NFT?
- How many NFTs have been sold to date?
- What are the benefits of NFTs?
- What are the downsides of NFTs?
- What is the future of NFTs?
- How do I buy an NFT?
- How do I create an NFT?
1. How long have NFTs been around for?
NFTs have been around since mid 2015, making it almost seven years since the first ever NFT was minted on the Ethereum blockchain.
2. Who invented NFTs?
3. What was the first NFT?
The first NFT was a simple text message written to one’s “future self” on the blockchain as a way of staking a claim in the new digital world, hence the NFT project title “Terra Nullius”, which means “nobody’s land” in Latin.
4. How many NFTs have been sold to date?
This statistic is hard to come by, however, we do know that the total number of NFT holders exceeded 360,000 in 2021. The NFT market is currently worth 40 billion and the most popular type of NFT is collectibles. Companies like Adidas and Gucci are already selling digital assets as NFTs.
5. What are the benefits of NFTs?
Investment: Blockchain technology is highly secure and transparent. NFTs stored on the blockchain have the benefits of fractionalizing ownership of assets in the physical world (digital assets can be equally divided for shared ownership) and streamlining complicated processes. Investing in NFTs can be part of a diversified portfolio.
Artists: NFTs put the power and control back in the hands of the artists, who can sell and manage their own sales, copyrights and royalties without the need for middlemen.
Designers: The future of VR is tied to NFTs, which will immerse design and architecture clients in immersive experiences tied to physical projects. Digital architecture in virtual worlds will also require designers to build them. Smart contracts will make sales easier.
6. What are the downsides of NFTs?
Some of the downsides to NFTs are difficulty of acces for beginners, scams and abandoned NFT projects, and technicalities tied to the details of smart contracts.
7. What is the future of NFTs?
Some of the things we have to look forward to with NFTs are the democratization of art, more diversity respresented in the art and design worlds and greater efficiency when buying and selling both physical and digital assets.
Investing in the right NFTs or starting a winning NFT project is also a potential way to make millions.
8. How do I buy an NFT?
I would highly suggest that you do a ton of research before buying into any NFT project. A great way to learn is to follow people in the know on Twitter, read the sources in this article and also to learn more about Web 3.0 and the Metaverse on YouTube.
Follow my Twitter (I will hook you up with some recommendations!)
You Tube Channels:
9. How do I create an NFT?
As an artist or designer creating your own NFT project is an exciting prospect. I too plan to launch several projects in the future and I would love some collaborators.
Here are some resources to get you started if you are thinking in this direction:
How to Make and Sell an NFT (Crypto Art Tutorial) by Kapwing
Being part of a community is central to starting a successful and meaningful NFT project that has a future and will make returns far into the future. If you are interested in technology as relates to urban and interior design, graphic design and art, please consider signing up for our newsletter “Baddie Bite-sized“!
What is it?
Each week I share three useful links from my personal reading and research, including useful resources, subjects relating to the world of virtual design, greener homes and inspiring news about the technology and thought leaders shaping our industry.
If you enjoyed this article, you’ll be happy to know that we will produce more articles on technology for interior design, such as smart homes, and art. We will soon look at some really inspiring women-led NFT projects that you should know about, so stay tuned!
Got questions or suggestions for things you’d like me to cover next? Shoot me an e-mail at firstname.lastname@example.org. I’d love to hear from you.
Happy future designing and creating!