What [Wtf] is an NFT?
and why you should care
An NFT, or Non-Fungible Token, is a specific type of cryptocurrency token that was founded on Ethereum, but we are seeing this process start to proliferate to other blockchains as well.
As for the NFT itself - it’s a way for a creator to generate a permanent, public ID on the blockchain. If you’re not familiar with blockchain technology just yet, here’s a good primer on the subject.
Unique - every individual NFT represents a specific asset (or token), which means there is no standard value. Since there is no uniform value, NFTs aren’t directly interchangeable and instead act as individual stores of value based on market demand.
Verified - every NFT is “non fungible” which means it’s a verified original, and once minted, cannot be duplicated. Because the token is encrypted on the blockchain, it’s both publicly verified and very easy to prove their authenticity.
Trade-able - While not directly interchangeable, so you can’t go swap an NFT 1 to 1 like you could for say Ethereum and Bitcoin, there are specialized exchanges for buying and selling (or even creating) NFTs.
For these reasons, NFTs are exceptionally well suited for protecting intellectual property rights, such as trademarks - or tokens that historically have been easy to counterfeit, such as low dollar fiat currency or concert tickets.
NFTs right now
The most prevalent media type we’re currently seeing minted as NFTs are JPEG files, hence the name of our little publication here…
Investors are currently spending about $2,500,000,000 on them per month. Yes, 2.5 Billion dollars, with a B.
Why would someone spend $6.6 Million on a picture?
Truth be told, no one knows for sure what reignited the CryptoPunk project from 2017 (pictured above) in the wild frenzy we saw earlier in 2021.
But what we do know, is that the volume of investors getting into this space is unprecedented in any asset class in the history of mankind.
A bit of history
The idea of NFTs emerged from what is called a “colored coin”, initially issued on the Bitcoin blockchain in 2012-2013.
Colored coins are tokens that represent real-world assets on the blockchain and can be used to prove ownership of any asset, from precious metals to cars to real estate, even equities, and bonds. Although not as sophisticated, this original idea was to use the Bitcoin blockchain for assets like digital collectibles, coupons, property, company shares, and more.
They were described as new technology and gave raw possibilities for the future prospects of utilization.
Colored coins gave way first to games, and then to art collectibles (like the Punks and CryptoKitties).
Here’s a take on the current state of the NFT landscape from a well known, and very well established collector;
The NFT landscape from a Crypto Native
Best way to think about what’s happening is that there’s 3 sectors of market:
1. Crypto Natives who want exposure to NFTs.
Crypto Natives prefer Autoglyphs, XCOPY, Punks, Artblocks, Hackatao
2. Degens entering the NFT space.
Degens prefer Bored Ape Yacht Club, Pudgy Penguins, and are in it for a quick buck
3. Traditional art collectors.
They seem to be going for Hirsts, XCOPY, Punks, Artblocks, and other traditional artists creating NFTs.
Momentum trade degen NFTs, long-term buy and hodl the good stuff :
Coming back to the why…
The best analogy I’ve heard thus far is comparing NFTs to a Rolex watch.
Think of it like this…
It’s 2021, and your daily interactions with other humans are becoming, exponentially, IVR (in virtual life) opposed to IRL. This means your profile picture, is becoming increasingly representative of you - as a person, and a digital native.
As our IRL lives move more and more into the metaverse, your profile picture is coming to represent more than just you and your online presence - but your values, beliefs, and dare I say it, social status.
Why does someone own a Rolex in 2021? It has zero utility.
We all have phones that are effectively tethered to our bodies and within arms reach at nearly every moment of our lives.. why spend 10’s of thousands of dollars for a hunk of metal that you might lose, damage, or even get robbed for?
But posting pictures of yourself and your Rolex in your profile picture is beyond lame.. one might even say it’s actually.. kind of douchey. But posting a profile picture that you spend $10,000 on.. that makes you part of an elite club. One with a very limited number of tickets (NFTs) and one that demonstrates your social status to anyone else in that club..
I think this in particular has been why we’ve seen the first wave of explosive growth in NFTs come from the profile picture (or pfp) projects.
As more of these projects go blue chip, I think we’ll continue to see the floor rise on NFT projects with the most active, engaged, and loyal communities.
The camaraderie that is already in place in so many of these Discords is mind-blowing, combined with some of the most sophisticated social media engineering I’ve seen (as a professional digital marketer of ~15 years) which is going to continue to push the floor up in the months and years to come.
Moving beyond status - the future of NFTs
The real utility in NFTs long-term is its’ ability to 1) protect the rights of creators, 2) assure those creators are appropriately compensated for their work, forever, and 3) establish new standards for on-going royalty payments - as NFT contracts (smart contracts built on ETH) can be created to ensure royalties or commissions are paid every time a token transaction takes place.
This is where I’m most bullish - on the ability for this technology to revolutionize trademark, creative licensing (think video, music, even poetry), and the long-term management of licensing, royalties, and verified sales from verified creator collectives.
We will continue to update this section over time, to keep a running list of our favorite resources.
What is an NFT? Interview with Keyboard Monkey on Primed Mind Podcast
Here’s a fascinating look at NFTs from one of the most notable (and successful) traders I’m aware of, Keyboard Monkey interviewed by world renowned mindset coach, Elliot Roe.
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