Just about every year, there’s a new trendy way to make money online that quickly begins proliferating. Prior examples include cryptocurrencies, forex trading, online gambling and bonus types, re-selling sneakers, and the list goes on and on.
Welp, there’s a new method that’s getting all the attention in 2021 — non-fungible tokens (NFTs). Maybe you’ve heard of NFTs but don’t quite understand it or perhaps this is the first time you’ve ever seen the acronym, no matter what camp you fall into, we’re here to break down the fast-rising trend in simple terms.
What the heck are NFTs?
To get a grasp on NFTs, we must define the words. First, there’s “non-fungible” which essentially means assets that aren’t interchangeable. Fiat currency, like a $100 bill, is fungible. That means the $100 bill you have is worth the same amount as the one carried by your friend.
However, the cars you each drive are not fungible, for example. Even if you both drive a truck that’s the same exact make and model, the value of each will differ based on the year of the vehicle and how many miles have been logged in it. Unlike the paper currency, you and your friend can’t swap vehicles and keep the exact value in-tact with the transaction.
Then there’s “tokens” which are tradable digital assets on an existing cryptocurrency blockchain. Popular examples of tokens include trading cards, gaming add-ones, art, and even real estate.
How do NFTs work?
Like we said, NFTs run on blockchain networks, mainly via Ethereum but other cryptos also support it. It’s that blockchains technology which ultimately gives NFTs its luster.
Why? Because blockchains prove a token’s ownership. It’s nearly impossible to undo a transaction after it’s been recorded on the blockchain. Therefore, once a token is bought, it’s forever etched in the system. Not only does this prove ownership, but the authenticity of digital assets, too.
NFTs can be bought and sold on various websites and platforms — there’s simply too many to count. They can’t be bought in cash, well, not directly at least. To use cash, you would first need to buy the crypto, which is then leveraged in the NFT purchase.
What are the advantages of NFTs?
This is a natural question that arises a lot. To many onlookers, the thought of buying a digital asset seems asinine, especially if a counterpart can be bought in the real-world.
Think about it in terms of sports cards. Would you rather have a physical LeBron James rookie card that you can feel and touch or a digital one that lives in your computer? Before you answer that question, you might want to know the benefits of the NFT version.
We touched on authenticity before, but it bears repeating again. In the history of sports trading cards, validation has always been the number-one issue. Fraudsters have created inauthentic replicas to scam people out of their hard-earned money. However, that’s a non-issue with NFTs because of the blockchain technology we already touched on.
Advantage two of NFTs is how easy they are to transfer. Forget about going to the post office, buying packaging, and sending off a card to a buyer — all while hoping the card doesn’t get lost in transit. Instead, NFTs can be swapped in seconds across the whole world.
What are NFTs worth?
No NFT is created equal — hence them being non-fungible. However, there’s a growing appetite for certain assets.
Let’s go back to the sports card example. Few companies have outdone NBA Top Shot in the NFT space. The company sells cards featuring current and past NBA players, many of which in video form — another advantage over traditional cards that are static.
Recently, a LeBron James card featuring him dunking in the same manner as Kobe Bryant, re-sold for a whopping $213,000. Likewise, the last three-pointer Vince Carter made before retiring also fetched upwards of $200,000.
Of course, those cards are outlier high performers. Most NFTs are worth a fraction of that, but we use those examples to give you an idea for the demand of certain assets.
And that’s NFTs in a nutshell. We’re not here to tell you they are or aren’t valuable. However, hopefully the information provided leads you to forming your own opinion on NFTs. Is it a fad or is it the future? You tell us!