NFT'S 

ALL EXPLAINED

Basic introduction

One new asset you might have seen exploding onto the market is the NFT, or Non -Fungible Token.

From music and art to everyday items like toilet paper, these digital assets are "selling like 17th century exotic Dutch tulips," say Forbes writers Robyn cont and John Schmidt.

The question is : are they worth the money (or the hype)?

Some experts feel they are "a bubble poised to pop", while others believe NFTs are going to change investing forever. 

In this special report, we'll take a close look at what NFTs are, how they can help your business and so much more.

Let's begin!

What is NFTs

It's a digital asset that represent some real world object like music, art, in game items, or videos. NFTs are bought and sold online, often with cryptocurrency, and are usually encoded with the same underlying software as many cryptos.

NFTs are becoming well known now, though they have been around since 2014, because they are increasingly popular way to buy and sell digital artwork.

Cont and Schmidt report that" a staggering $174 million has been spent on NFTs since 2017".

Many NFTs, especially nowadays, have been digital works that already exist in some form elsewhere (like securitized versions of digital artwork that's already out on Instagram).

 The differences between an NFT and cryptocurrency,  then ?

NFT stands for Non - fungible token. A fungible, like physical money and cryptocurrency, can be traded or exchanged one for another.

They are equal in value. One dollar, is always to another dollar and one Bitcoin equals any other Bitcoin.

In fact, cryptocurrency's fungibility makes it a trusted means of conducting transactions on the Blockchain.

On the other hand, a non-fungible asset, even if blockchains,  the same kind of program as cryptocurrency, cannot be exchanged with any other non-fungible asset.

Each NFT has its own digital signature that makes it impossible for it to be exchanged for (or equal to) another one.

How NFTs work

You have heard of Blockchain, probably as the underlying process that makes cryptocurrency possible. It's basically a ledger recording transactions.

NFTs exist on a Blockchain, usually the Ethereum Blockchains (although other blockchains support them as well).

An NFT is minted (created) from digital objects representing both tangible and intangible items, include art, GIFs, videos, sports highlights, collectibles, video game skins and avatars, designer sneakers, and music.

You can even sell a tweet. In fact, Twitter co-founder Jack Dorsey sold his very first tweet as an NFT for nearly $3 million!

Essentially, an NFT is like a physical collector's item, only it's digital. Instead of buying a physical painting to hand over the mantel, you get a digital life. You also get exclusive ownership rights because an NFT can only have one owner at a time. Its unique data makes it easy to verify ownership and transfer tokens between owners. Also, the creator or the owner can store specific information inside their NFT, such as the artist's signature in the metadata.

NFTs give artists and creators the power to protect and authenticate their work like nothing before. With an NFT, a creator can certify that a piece of art is one of a kind. This can make the demand for NFT creation higher than ever.

The problem is, all the value proposition of a digital work is tied to speculation the promise that the value of that work  will increase (or at least hold steady) over time. Who's making that promise, though? This is where things can get sketchy, according to Joe Procopio.

"Speculative value is not be confused with value derived from usage".

Let's say you buy a saw to cut a piece of lumber for a shelf in your bedroom. The value of that saw is directly tried to the cost of making it, plus how badly you need that board sawed. And as a saw owner, you are not really interested in whether the value of the saw is going to go up over time. Speculative value is tied to market value.

 Your company, says Procono," is worth what's gone into it ? The speculative value of the investment in that solution once that solution reaches peak market saturation".

Investors buy shares in a company for one reason : they believe that down the road, someone else will pay more for those shares.

Collectibles have speculative value - and lots of it. You can purchase a piece of someone else's painting, sitting on their wall. You may never see that painting in person, but that's not the point.

What you want is the return when someone else buys your piece of that painting for more than you paid for it.

When you stop caring about having an actual above your mantel, it doesn't really matter whether that painting even exists in the real world - so long as the rules of ownership apply.