Basic Crypto with the Beasts: What are NFTs?

By now, you’ve likely collected a few NFTs and may even have a few Hype Beasts in your wallet.

Using a platform like OpenSea or Aura Marketplace, you can view those NFTs, trade them, sell them, and more. But most people think of them as advanced JPEGs or pictures. That’s not really what they are.

In this series, we will look closer at the meaning behind NFTs, not just literally. What can they be used for, and why should anyone be excited about them?

Let’s freakin’ go.

Basic Crypto with the Beasts: What is an NFT, really?

NFT stands for “non-fungible token,” a verifiable token attesting that one particular owner is the token holder. But that doesn’t really explain what they are.

It’s best to think of NFTs as more of a certificate. Rather than representing the image or content contained within the NFT — they can include images, music, and other media — they serve as digital certificates of authenticity recorded on the blockchain. At any time, you can look at the public ledger and see where that NFT has been, what wallet is currently holding it, and so on.

Suppose you’re collecting baseball cards. Back in the early days, that would mean holding the physical card in your collection. Outside of getting the card graded by a professional service, no one knows what your card is worth, where it came from, or even whether it’s authentic.

NFTs, on the other hand, provide that reassurance. More importantly, they represent the very nature of digital ownership. What that actually means in the grand scheme is continuously evolving. An NFT could be a licensed copy of a digital game you can trade, lend out, or resell someday.

What the hell does ‘non-fungible’ mean?

As it pertains to NFTs, non-fungible means unique in form and value. They cannot be replaced or swapped.

A dollar bill, for instance, is always a dollar, so it’s fungible. It’s the same as another dollar bill. They hold the same value and the same purpose. But if you take that dollar and you have it autographed or draw designs on it, suddenly it becomes unique — it’s not the same as other dollar bills and is now non-fungible in a fundamental sense.

Each NFT is a unique asset, and even though they may contain the same images, traits, and characteristics, they can all have different values. What you trade your NFT for may differ from what someone else sells theirs for. It’s gone forever once you trade it or lose access to it.

How do NFTs work?

When you mint an NFT, it creates an immutable record of that token on the blockchain. Everything about its usage and movement is tracked, like when it’s listed on a marketplace, when it sells and exchanges owners, or when it’s used in a web3 game or dapp — like for staking.

What do you do with them?

Once an NFT is in your wallet, it’s yours. Most can be used as a profile picture on certain social networks, platforms, and apps. You can also share your NFTs in digital art galleries, display them on a website or profile, or use them in virtual experiences, like metaverse worlds. Some are meant for web3 games, others have utility like staking rewards, and some are meant to be collected, like trading cards.

Usage will depend on the NFT and the project it comes from.

How do NFTs have value?

Like most assets, digital or otherwise, it is about supply and demand. When the demand for an NFT increases, and supply is limited, so does its cost.

You can trade and sell them on marketplaces like Aura Exchange or OpenSea. Technically, you could actively trade NFTs in this way to make a profit, buying low and selling high, but there are better ways to leverage them and make money.

Why should anyone be excited about NFTs?

Conceptually, there are a lot of cool uses for NFTs, some of which have yet to be realized. That’s what’s so exciting about them. Naysayers call them JPEGs or pictures, which is not really what they are. Also, because of many bad actors in the web3 space, they’ve sometimes taken on a “scammy” reputation.

Because NFTs are digital certificates, they can be anything from real estate contracts and smart business contracts to digital media licenses and verifiable assets — like valuable trading cards. It just depends on what they’re being used for.