{"id":8179,"date":"2022-06-10T18:06:02","date_gmt":"2022-06-10T23:06:02","guid":{"rendered":"http:\/\/blog.jlbn.net\/?p=8179"},"modified":"2022-06-19T14:34:03","modified_gmt":"2022-06-19T19:34:03","slug":"what-is-an-nft-non-fungible-tokens-explained","status":"publish","type":"post","link":"http:\/\/blog.jlbn.net\/?p=8179","title":{"rendered":"What Is An NFT? Non-Fungible Tokens Explained"},"content":{"rendered":"\n

Non-fungible tokens (NFTs) seem to be everywhere these days. From art and music to tacos and toilet paper, these digital assets are selling like 17th-century exotic Dutch tulips<\/a>\u2014some for millions of dollars.<\/p>\n\n\n\n

But are NFTs worth the money\u2014or the hype? Some experts say they\u2019re a bubble poised to pop, like the dot-com craze or Beanie Babies. Others believe NFTs are here to stay, and that they will change investing forever.<\/p>\n\n\n\n

What Is an NFT?<\/h2>\n\n\n\n

An NFT is a digital asset that represents real-world objects like art, music, in-game items and videos. They are bought and sold online, frequently with cryptocurrency<\/a>, and they are generally encoded with the same underlying software as many cryptos.<\/p>\n\n\n\n

Although they\u2019ve been around since 2014, NFTs are gaining notoriety now because they are becoming an increasingly popular way to buy and sell digital artwork. The market for NFTs was worth<\/a> a staggering $41 billion in 2021 alone, an amount that is approaching the total value of the entire global fine art market.<\/p>\n\n\n\n

NFTs are also generally one of a kind, or at least one of a very limited run, and have unique identifying codes. \u201cEssentially, NFTs create digital scarcity,\u201d says Arry Yu, chair of the Washington Technology Industry Association Cascadia Blockchain Council and managing director of Yellow Umbrella Ventures.<\/p>\n\n\n\n

This stands in stark contrast to most digital creations, which are almost always infinite in supply. Hypothetically, cutting off the supply should raise the value of a given asset, assuming it\u2019s in demand.<\/p>\n\n\n\n

But many NFTs, at least in these early days, have been digital creations that already exist in some form elsewhere, like iconic video clips from NBA games or securitized versions of digital art that\u2019s already floating around on Instagram.<\/p>\n\n\n\n

Famous digital artist Mike Winklemann, better known as \u201cBeeple,\u201d crafted a composite of 5,000 daily drawings to create perhaps the most famous NFT of 2021, \u201cEVERYDAYS: The First 5000 Days,\u201d which sold at Christie\u2019s for a record-breaking $69.3 million<\/a>.<\/p>\n\n\n\n

Anyone can view the individual images\u2014or even the entire collage of images online for free. So why are people willing to spend millions on something they could easily screenshot or download?<\/p>\n\n\n\n

Because an NFT allows the buyer to own the original item. Not only that, it contains built-in authentication, which serves as proof of ownership. Collectors value those \u201cdigital bragging rights\u201d almost more than the item itself.<\/p>\n\n\n\n

How Is an NFT Different from Cryptocurrency?<\/h2>\n\n\n\n

NFT stands for non-fungible token. It\u2019s generally built using the same kind of programming as cryptocurrency, like Bitcoin<\/a> or Ethereum<\/a>, but that\u2019s where the similarity ends.<\/p>\n\n\n\n

Physical money and cryptocurrencies are \u201cfungible,\u201d meaning they can be traded or exchanged for one another. They\u2019re also equal in value\u2014one dollar is always worth another dollar; one Bitcoin is always equal to another Bitcoin. Crypto\u2019s fungibility makes it a trusted means of conducting transactions on the blockchain.<\/p>\n\n\n\n

NFTs are different. Each has a digital signature that makes it impossible for NFTs to be exchanged for or equal to one another (hence, non-fungible). One NBA Top Shot clip, for example, is not equal to EVERYDAYS simply because they\u2019re both NFTs. (One NBA Top Shot clip isn\u2019t even necessarily equal to another NBA Top Shot clip, for that matter.)<\/p>\n\n\n\n

How Does an NFT Work?<\/h2>\n\n\n\n

NFTs exist on a blockchain, which is a distributed public ledger that records transactions. You\u2019re probably most familiar with blockchain as the underlying process that makes cryptocurrencies possible.<\/p>\n\n\n\n

Specifically, NFTs are typically held on the Ethereum<\/a> blockchain, although other blockchains support them as well.<\/p>\n\n\n\n

An NFT is created, or \u201cminted\u201d from digital objects that represent both tangible and intangible items, including:<\/p>\n\n\n\n