An NFT, or non-fungible token, is a unique cryptographic token that is built on the blockchain and cannot be replicated. That probably doesn’t help you. Let’s break it down.
What does “non-fungible” mean?
“Non-fungible” means that something is unique and cannot be replaced entirely with something else. While the U.S. dollar and other crypto currencies like bitcoin can be traded one for another — they are fungible — NFTs are one-of-a-kind. A real world example of a “non-fungible” item would be the Mona Lisa. The Mona Lisa can’t be traded for another painting because they are not the same and people perceive their value differently.
What do NFTs represent? Is it more than just a JPEG?
Yes, much more. At a high level, NFTs represent digital ownership. In many cases, that digital ownership can be of real world items like art, music and real estate. The reason creators are interested in selling items as NFTs on the blockchain is because they are then able to verify the scarcity and authenticity of the item or the collection.
Remind me quickly what the blockchain is again?
The blockchain is the backbone that the decentralized Internet of Web3 is built on. You can think of it as a way to store data without having to involve another company or person to ensure that the information is accurate and secure. There are many different blockchains backed by different cryptocurrencies. Most NFTs are a part of the Ethereum blockchain, an open-source blockchain. Ethereum is both a blockchain as well as a fungible digital currency, like bitcoin.
You can think of the blockchain as a digital ledger of transactions that exists online. This allows NFTs to only have one owner at a time as well as to have a digital record of its ownership history. Nothing in Web3 and nothing related to NFTs can happen without the blockchain.
What’s an example of an NFT?
Going back to our painting example, if you were to buy a painting off the street, you would have no way of verifying the authenticity of that item. But if you were to buy a painting that came with an NFT off the blockchain, all the information about it would be stored and verified.
One standout example of an NFT art sale includes a CryptoPunk NFT that sold for $1.8 million at Sotheby’s. Twitter CEO Jack Dorsey also auctioned off his first tweet as an NFT for $2.9 million. In total, the NFT sales totaled $29 billion from June 2021 to June 2022.
It’s important to remember that art is just one use case for NFTs. Musicians are now using NFTs to sell one-of-a-kind experiences with their music, event organizers are using them to grant access to real-world events and brands like Nike and Hermes are getting into the NFT game as well to create unique experiences for fans. If we wanted to, we could turn this very article into an NFT and put it up for sale on the blockchain.
For More: Founding BFF Prerna Gupta on music NFTs
OK, let’s do something like that! How do you even create an NFT?
We asked Founding BFF Elan Halpern to break that down for us, starting with the easiest way to create an NFT:
And here is a demo of how to get your NFT set up for sale on an auction site like Opensea:
Wait, what is all this I am seeing about “gas fees”?
Gas helps manage and measure resources on the blockchain. More on that from Elan here:
Got it, I’m now ready to buy my first NFT! Where do I start?
Like all things on the blockchain, buying an NFT starts with connecting your wallet. Elan breaks down an example of buying an NFT here:
For More: WTF Is... A Crypto Wallet.
This is not financial advice. If you don't want to spend money investing in crypto or Web3 — you don’t have to. The intent of this article is to help others educate themselves and learn.
Elan Halpern is a Founding BFF and Co-Founder of We3
