However, for the sheer amount of times we come across those three letters every day, it’s easy for the whole NFT fad to remain a mystery. Besides, a lot of times when you try to dive into explanations, they’re just confusing or overly technical — or mention vast sums of money which distract from the basic facts.
So, what does NFT stand for, and what does that actually mean? And more importantly, what’s the point in NFTs?
If I had a dollar for every time I’d seen the acronym “NFT”, I’d probably have enough to afford some of the more expensive NFTs you see hitting the headlines.
What on earth does NFT mean?
You’ve probably already seen the term “Non-fungible token”, and while that’s the correct answer, chances are that as a term, it probably doesn’t mean anything.
Let’s break it down. Non-fungible refers to something unique, something that can’t easily be replaced. A dollar is fungible, for example. Why? Because I can replace one dollar with another dollar. It’s not unique and it is replaceable — or, in other words, it is fungible.
Cryptocurrencies are also fungible. One bitcoin can be traded for another, and you’ll still have the same thing as before.
And how come it’s a token? Because it’s an asset, something digital, and it can take different forms, like a visual artwork. Token captures these possible meanings.
So in short, when we’re talking about NFTs, we’re talking about assets or digital things that are entirely unique and cannot be replaced.
Now you’re probably thinking “what if I just save the image or video or take a screenshot?” Indeed, this is a common first counterpoint when people talk about NFTs, but just like with physical works of art, you can replicate the picture. You can make prints, or paint another version of it that’s indistinguishable from the original, but it will never be that original.
Digital assets have their own digital fingerprints, and so even if you download an image or take a screenshot, they can still be non-fungible. Check out this piece for more examples to explain this.
Understood. But what’s the point of NFTs?
First thing’s first — not everyone will get the point of NFTs, in the same way that not everyone understands the point of collecting art, or collectibles, or baseball or Pokémon cards. But you can apply a similar logic to each.
When you buy an NFT, you own that original digital asset, and they come in-built with proof of ownership to act as authentication. Yes, fraud is a big topic in the NFT community, but there are ways of authenticating NFTs, and there is a lot of work being done to tackle NFTs. Kind of like the equivalent of old-style art in the digital age.
And once you own an NFT, there’s a growing number of ways in which you can use them. From showing off your collection of digital assets to creating entirely unique gaming avatars, even social networks such as Twitter are implementing ways for users to set their authenticated NFTs as their profile pictures. It’s an exciting space to watch!
I still don’t understand why anyone would want NFTs…
Totally fair enough to say. Of course, for some individuals, they see NFTs as an investment with the potential to pay off in coming years in a similar way as has happened with crypto such as bitcoin.
If you think about it, even before NFTs, art has been used as a way of storing value and making an investment. Collectors would collect paintings, sometimes due to a love of art, but also as a way of investing their money and storing value. NFTs are the digital way of doing this — and with their increasing ubiquity, there is a much lower barrier to ownership than there may have historically been in the world of art.
However, it’s not just about the money. NFTs provide artists and brands a completely new and unique way to connect with customers — and as the owner of a unique NFT, you as a consumer then have something unique and special that hasn’t existed before.
Imagine supporting an up-and-coming artist, for example, purchasing one of their first NFTs, and in a few years after they’ve had their big break and are exhibiting in the biggest venues in the world, you own a unique piece of their digital journey.
Or maybe you’re a die-hard fan of a brand such as Gucci, and they release a series of one-off exclusive NFTs. The chance to own one of these is a unique opportunity for the biggest fans, and a new way of giving them a piece of their favorite brand.
How can something digital be worth so much?
Just like any artwork or collectible, the value of any NFT depends on many factors. Some may have practical uses in gaming or other ways. Some may have fascinating past owners or intrinsic underlying value. Some may simply be worth more to certain groups of people, for example, fans of a brand or artist, and some may have promise when it comes to projected future value.
It’s easy to get the impression that all Non-fungible tokens are worth thousands, but that’s actually not the case at all. As with anything in the media, the most extreme cases get value. Yes, there may be simple NFTs from children’s drawings that are being sold for seemingly insane prices, but there are also thousands of NFTs worth less than a dollar that have never been sold.
That's exactly why there's potential for brands to create NFTs as a new way of engaging with loyal consumers. These NFTs will already carry meaning, going beyond the "for the sake of it"-style doodles and carrying intrinsic value to shoppers.