What is an NFT?

October 14th, 2021

What is an NFT?

While the masses still digest the idea of a digital dollar or the possibility of a decentralized bank outside of the control of world governments or political powers, new opportunities in the crypto-verse are emerging every day. Although most people have heard of, and are growing accustomed to Bitcoin, it would be a disservice to the overall crypto market to not mention NFTs and smart contracts. Although Bitcoin has the potential to adopt and become integrated with these concepts, via the layer-2 network or application layer – as it is commonly referred to, the “silver to Bitcoin’s gold”, Ethereum has made great progress in the smart contract space and has given birth to a new crypto project called NFTs.

There is one thing about the entire internet few people pay any mind. Have you ever thought about how many times a file you have been sent has been copied and pasted, over and over again, until it finally was received by you? How would you know who created the original file/document? With social media and things being sent and shared amongst friends daily, this has become commonplace to everyone using the worldwide web. A file on a computer looks the same to everyone, on the surface. If someone creates a unique, one-of-a-kind, digital image or type of art, whether image, music, novel, etc. it just sits on a hard drive until someone claims ownership and publishes the art – usually in the physical “analog” world. This would be like the painting of the Mona Lisa sitting on Da Vinci’s desk and waiting for him to reveal it. However, Da Vinci is the only one who knows that this is his original artwork, and until he comes forth claiming ownership it is essentially “up for the taking”. Aside from physically signing his name on the back or in the corner of the artwork, no one who stumbled upon it would be the wiser.

We now live in an almost completely digital era, everything from banking to relationships, to full careers can take place online at our fingertips, with access to the world wide web. That being said, shouldn’t artists, or anyone, who creates something unique be able to apply the technological advances we have made to their works or property? The answer comes in the form of three letters: NFT.

NFT stands for non-fungible token. Try not to get hung up on the verbiage around the technology, it is a simple concept to explain. Think of it as exclusive ownership rights to a type of digital media, that no one can copy, reproduce, or replace with another “just like it”. Non-fungible means it is unique, and one-of-a-kind, and cannot be replaced with something else like it. Bitcoin, for example, is fungible. If you and your friend each buy 1 BTC on a cryptocurrency exchange (hopefully from Bitcoin of America) you essentially have the exact same product. One BTC coin cannot be singled out as unique or different from the other coins.

The ownership of the unique and non-fungible media is transferred to the buyer via a smart contract. Although many blockchains are now rushing to support the inflow of demand for NFTs and smart contracts, Ethereum, the world’s second largest cryptocurrency to Bitcoin, has taken the lead. Ethereum’s most prevalent use case is involving the smart contract and exclusive ownership rights in the digital realm. This has become the 21st century version of art collecting, combining fine digital art, with a “token” or smart contract attached to the piece of media clearly defining and establishing ownership. Ownership is securely kept and held on the blockchains ledger, supported by its validation mechanism, making this extremely secure and tamper-proof.

These NFT works can be viewed and purchased on a multitude of marketplaces such as opensea.io, rarible.com, and binance.com, just to name the leaders. Think of this as an online art museum, with each artist establishing exclusive ownership to their works, and then auctioning them off to the highest bidders. Before this is seen as a fad, consider this.

A renowned artist that goes by the name of Beeple created a collage of his digital artwork called “The First 5000 days”. This mega NFT is a collage of 5000 separate images all strategically placed side by side to create one large piece of art. Beeple created these works over the span of 13 and a half years, working day and night to create this new age masterpiece. Christie’s auction house, which needs no introduction, held an online auction in early 2021 to “test the water” in this new type of technology infused artwork.

Beeple’s First 5000 Days was finally sold for a whopping $69,346,250 USD. Celebrities and elites across the world watched and placed bids, in hopes to participate and possibly eventually own this unique artwork, that is sure to go down in history. Many felt it was like bidding on an original copy of Leonardo da Vinci’s Salvator Mundi, which sold for $450.3 million in Nov. 2017, at Christie’s. Perhaps even more interest was generated, being that this is the first NFT auctioned at Christie’s and is in an entirely new format – NFT with smart contract.

There are more uses than fine digital art collecting at hand with the NFT breakthrough. In the summer of 2021, a California real estate broker by the name of Shane Dulgeroff incorporated an NFT image of a house for sale, to include not only the artwork of the home, but the actual physical property, in hopes of becoming the world’s first home sold through an NFT marketplace. The purchase of this home would give exclusive ownership to the property, just as a title company would issue, when closing on a piece of real estate. In his own words “The buyer who’s offer is accepted will have the opportunity to own a piece of history of both a digital and physical investment.”

No one knows how far and vast this technology will reach, but just like Bitcoin, it appears success is inevitable. Crypto whales are pouring billions of dollars into creating new marketplaces to exchange NFTs, meanwhile creating new applications and use cases to incorporate exclusive ownership rights stored on a secure, reliable blockchain. Everyone from Twitter founder Jack Dorsey, to Mavericks owner, and Shark Tank star, Mark Cuban have begun creating their own projects and working with developers to show us what will be next in this exciting new cryptocurrency ecosystem.

This disclaimer informs readers that the views, thoughts, and opinions expressed in the text/sponsored content belong solely to the author, and not necessarily to Bitcoin of America, organization, committee or other group or individual. All investments are at your own risk and should be done after careful research.

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