What are NFTs? What is a Blockchain?
Before we get into NFTs, it's essential to understand the idea of the blockchain. What is a blockchain, and how do blockchains work?
You have a blockchain when the computer network nodes share a distributed database. This blockchain stores digital information needed for a cryptocurrency (1). Blockchains provide a record of a cryptocurrency transaction with a secure and decentralized account of that transaction.
This innovative use of a blockchain makes sure that this record of the data's security is trustworthy and does not need a third party to happen. The structuring of data in a blockchain is different than your average database. First, groupings called blocks collect the information. Then, when a block's storage capacity is filled, it is closed and linked to the block filled before it, creating the chain.
The way this data is structured makes a permanent timeline of the transactions. A filled block is forever and cannot be reversed.
NFT stands for non-fungible token. Non-fungible means that the NFT is unique and cannot be replaced. Think of it in terms of one-of-a-kind items. For example, you have a collector's special edition baseball card; it is the only one of its kind. If traded for another card, you would wind up with a different thing. NFTs are the digital equivalent of one-of-a-kind.
These non-fungible tokens are digital assets. This digital asset can represent artwork, photographs, music, games, and other types of collectibles. It can also be an original digital creation that only exists online (2).
Once you create an NFT on a blockchain, sales record is tracked and recorded. In addition, that metadata contains pertinent information such as ownership and other terms applicable to that NFT (3).
Take a deep breath! Whew… I know that was a lot of information, but there is more to learn.
Why Do NFTs Matter?
NFTs exploded during the COVID pandemic. From 2020 to 2021, purchases of NFTs rose to an astounding 11,000%! NFT expert Ben Yu explains the importance of NFTs by stating: "…for the first time in the history of humanity, you can now own things on the internet." (4).
Ben has a masterclass on NFTs through the Nas Academy and has become a successful millionaire by investing in NFTs.
We're looking at around 500 million dollars spent on NFTs in 2020 (5). In addition, the first quarter of 2021 saw NFT sales surpass 2 billion (6), and the art market, when it comes to NFTs, grew over 800% (7)!
Think of it this way: you post a video on social media. You don't own the video even though you made it. Facebook, YouTube, Instagram, TikTok – they all own it. Another person that wanted to download the video from these platforms could end up owning it. If this video were an NFT, only one person would have ownership of the video.
This concept has impacted the art community. What was once an activity reserved for the real world has become a digital phenomenon. Physical art galleries are quickly becoming virtual ones. Digital art is being invested in, shared, and sold online through the blockchain.
Museums in the metaverse are fully functional virtual art galleries!
I know, I know. Yes, it's true. You can copy the digital file. You can do this as many times as your heart desires and get a screengrab of something you like. But you still don't own it in the same way as you would with the NFT.
With the NFT, you can have ownership of the work (remember that the artist can still hold on to the copyright and reproduction rights just like in the real world). Think of it as owning a print of the Mona Lisa. You have a copy, but you don't own the original.
The momentum of this revolution of art online doesn't appear to be slowing down.