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NFTs are blazing hot rn. WTF is a NFT and why are they so hot? Let me try to answer from the top of my head.
An NFT is a Non-Fungible Token. This is distinct from the typical fungible tokens you see traded on Coinbase or other exchanges. Fungibility refers to the concept that one token may be replaced by many other tokens of the same type. An NFT represents a unique token that does not share the same characteristics as any other token. NFTs therefore, are made for things like trading cards, in-game assets, and, most notably, art. Most NFTs today use the ERC721 Ethereum token standard, while most fungible tokens today use the ERC20 Ethereum token standard. To put it simply, NFTs are a standard type of digital asset that represent something unique.
Fun fact: Vitalik first created Ethereum to protect valuable items in games like World of Warcraft from being stolen or economies inflated. NFTs solve for this kind of issue by offering an immutable (non-changeable) manner for tracking ownership and creation of these tokens with a network like Ethereum.
NFTs have always been thought of as a potential “gateway drug” for crypto adoption. Rather than a token that represents a fractional share of some uncertain defi protocol, with NFTs you own a token that represents a cute digital cat, or a work of art from a renowned artist, or a ticket to join a cool new internet community! There’s a clear emotional connection to these items, and that connection drives familiarity and cultural significance. Companies like Dapper labs have raised millions of dollars leveraging the idea. Another benefit of NFTs is that, due to their fungibility, they do not act like securities in the same way an ERC20 does. Thus, NFTs are cute and offer some legal protection from the notoriously grey zone of crypto development. This makes NFTs the fertile ground for companies to build systems that attract large numbers of people to interact with the blockchain, but why did
Last May, Beeple kicked things off with an NFT auction of his digital art in conjunction with the world renowned Christie’s auction house. This work sold for $69 million and validated the cultural significance of art using the NFT ERC721 standard.
In hindsight, it makes sense that this led into a bull market like we’ve never seen before. NFTs offer the general public a more intuitive use-case for why these digital assets feel valuable, and that connection is the key. It is the same reason fine art holds arbitrary value. Pricing culture is inherently arbitrary.
The crypto community continues to grow with new tools and ideas around how to make the tech more valuable and how to coordinate to create new forms of productive online organization. They rally around projects for a variety of reasons, CryptoPunks because they are cool and OG, BAYC because they are sexy and new, Cool Cats because there’s an interesting tv show being developed… the list goes on as the Cambrian explosion of ideas, JPEGs, and smart contracts culminate into the next big wave of financially driven cultural relevance. This might be a bubble at the moment, but the tech holds significant long term opportunity.
If you like this info, and want to get involved with helping build Season 2, don’t hesitate to reach out!
We are looking for people with marketing and writing skills who are excited about Web3!
Duncan
