What is an NFT and why would I need it?
- February 14, 2022
- Category: NFT
No matter what newspaper you read, no matter which TV channel or program you watch, there’s no escape possible, NFT is the talk of the town and 2022 looks to become the year of NFT. In that respect, the term is working its way to a standard in the vocabulary of non-crypto people, who at this point only know one crypto word: “Bitcoin”.
As with everything in crypto space, there’s a lot of hot air and so one can easily think NFT’s will come and NTF’s will go. Bubble-alike valuations for NFTs are certainly not helping the idea that NFT is anything else but hype. When you follow the crypto space even from a far distance, we’re pretty sure you heard about the Bored Ape Yacht Club (or BAYC) and about CryptoPunks. For info, the cheapest bored ape you can buy right now (begin 2022) is around $217.000. Another famous NFT is Beeple’s collage ‘Everydays, the first 5000 days’, which was sold at Christies for a staggering 69 million dollars, kicking the artist directly into the top 3 of most valuable living artists.
Coming back to earth and maybe the more boring bit of theory, NFT stands for non-fungible token and this is a quite technical-feeling term for “a reference to a unique digital asset somewhere stored on a blockchain* and that has a verifiable ownership”.
*Note that we write “a blockchain” and not “the blockchain” as there is not something like a unique blockchain (contrary to “the Internet”).
Buying the rights to brag
So, what would you do when you just spend 217.000$ for the cheapest bored ape NFT? Brag, of course! You can tell all your friends how awesome you are and that your deep pockets didn’t feel harmed when spending money on a digital file that anyone basically can copy using their printscreen button.
So why spend money on a digital file that can be copied? NFTs are designed to give you something that can’t be copied: ownership of the work. To put it in terms of physical art collecting: anyone can buy a Van Gogh print. But only one person can own the original painting.
After the brag and “I feel awesome”-period, any NFT owner can start to think how to make a quick buck on the NFT, aka “find someone who wants to pay even more than yourself for a digital file”. Coming back to Beeple, one of his NFTs that was originally sold for +66.000 $ was resold for $6.6 million, that’s a 100x in a few months. It should come as no surprise that the NFT space is vibrant with young people buying cheap NFT’s and then trying to resell the NFTs to someone else. NFT marketplaces make reselling incredibly easy by allowing users to ‘list items for sale’ or ‘sell items’. For every resale, the NFT marketplace again receives a commission, turning one single NFT in a “multi-times jackpot”.
When you are a creative person, an artist, then NFTs are a gift send by god. Where in the past you could create the same digital drawings and they would for sure go by unnoticed, with the advent of large NFT marketplaces like OpenSea, exposure to rich people is a given and your chances have incredibly increased to live from your creations. This is a perfect example of the power of web3.0, where the power lies in the hands of creators.
One thing to note however: the most popular NFT marketplaces are like Google: there is only one “first page” so you can drawn in the depths of a sea full of NFTs, and the best NFT marketplaces have a strict policy to take only the applications they feel will bring enough money to the marketplace. There’s no ‘get-rich-quick’ scheme or cutting corners possible.
Beyond bragging and reselling
So we know that an NFT is a proof of ownership towards a unique digital asset on a blockchain, and that you can buy it, tell your friends and maybe resell it to someone else. Doesn’t feel useful? You’re right.
So what could NFT mean in terms of utility, answering the question “Why would I need a NFT?” Let’s sum up some use cases:
- Membership of a club
Membership of a club, a VIP club, a sports club, a poker club, … basically any club that you can think of.
“I have a plastic card that proves I am a member, I don’t need a NFT”. Sure, such plastic cards can work out too, but the NFT comes with the inherent possibility to resell your ownership to someone else in case you no longer wish to remain a member of the club. Aside from that, the NFT that you typically store in a crypto wallet or app, can be used in a myriad of digital ways, like getting access to a webshop on the internet (try that with a physical plastic card).
- Receive discounts during in-store or online purchases
During the checkout process, and when the webshop allows it, connect your wallet and prove you are the owner of a NFT, and immediately get a discount.
- Be rewarded for being a NFT owner
A bit more advanced, but in combination with tokens, a business that has tokens could offer extra yield when you lock the tokens.