Why should we care about NFT? Here's why
NFT has been a hype for few months but its use case is still not clear to many people. I'll try to explain it using a simple example
NFT has been a hype for few months but its use case is still not clear to many people. I'll try to explain it using a simple example.
Suppose you made digital art (like painting) and you want to sell it online.
You upload the image file to an e-comm site like OpenSea. This file now has a fancy term called NFT (non-fungible token). You suddenly upped your game amongst your peers.
You set its price (in cryptocurrency like Bitcoin). You can also put a bid amount to do an auction, a good approach if you're Banksy's cousin.
It's listed as a single item on the platform so only one person can buy it. This means he can download the image file after paying in crypto.
Once sold, you get profit (in cryptocurrency). pop a bottle of champagne.
Whoever buys it now owns it. That means she/he can now sell it at higher price on the same platform. He can also put it as wallpaper on his Mac.
He gets profit when somebody else buys it. He pops a bottle of champagne now.
This trading cycle continues.
Few points to remember: Everyone can see the entire purchase history (sold price, date, buyer, etc) of this image file (aka NFT). Nobody can modify the purchase history.
This open purchase history is called Public Ledger. Tech behind this public ledger is called Blockchain.
It's not limited to image files. you can sell any digital content (audio, video, pdf, etc).
Copies of content behind NFT can be distributed off-platform.
Now, why would someone buy an NFT?
I could think of 2 main reasons for someone to buy/sell something as an NFT.
- Suppose, a person named Rick saw an NFT and looked at the purchase history. He noticed that it's going up for ex: $100 -> $200 -> $500 -> $700. He predicts that this would go further up so he buys it at the current price of $700 and puts a selling price of $1000 hoping someone else would buy. Here, the value is not in the file content but the attached immutable price history (aka blockchain). In nutshell, the purpose is trading.
- Suppose, Morty is a super-fan of Billie Eilish, she uploads her latest album cover as NFT and tweets this is the original. Morty being a nerd bought this NFT asap and gives proof to his other nerd friends by showing the purchase history. The purpose could be to financially support the creator, have (authentic) digital collectibles, etc. Kings of Leon sold their latest album as NFT and made over $2 millions.
This covers the basics of NFT.