What is an NFT? What are NFTs? Non-fungible Token meaning
What does NFT stand for? What is the meaning of NFT?
NFT stands for or is an acronym for non-fungible token / non-fungible tokens.
That means each token is unique. Each token can be identified and specifically referenced on the blockchain.
Why NFTs have value:
Being that each NFT can be uniquely identified, now the economics of supply and demand can play out for each individual NFT item. Supply for one specific NFT or supply for a collection of NFTs can have different amounts of demand. NFTs have scarcity. There is a popular NFT collection called Gods Unchained, which is a blockchain trading card game, such as Magic the Gathering or Pokemon. NFTs enable provable digital scarcity. In contrast to jpegs (digital art) with no provable digital scarcity (right click save), NFTs can prove digital scarcity. There is a set limit that can or will be produced. Just like a set limit of Michael Jordan basketball cards can be produced and thus will be very scarce. The demand comes from collectors and traders in the market, thus we see high sale prices. Physical cards have been around for a long time, but NFTs (digital assets) have become identifiable and unique through recent technology utilizing the blockchain.
Michael Jordan Most Basketball Cards
Check out some of the Most Expensive NFT sales to date. There will be higher sales as NFTs become more and more main stream.
Larva Labs Crypto Punk sold for $6.63 Millions
Beeples "Everyday: The First 5000 Days" sold for a whopping $69 Million
What is a decentralized blockchain?
A blockchain is like a ledger or an accounting system. A decentralized blockchain is a blockchain that is not owned or run by one individual entity. A decentralized blockchain is run by many individual entities normally spread throughout the world. As an example, a public domain such as a county clerk, holds records such as birth certificates, marriage licenses, and deeds. The centralized party is the county clerk. If anyone wants access to the records, they must go to the county clerk for the official records. There have been times in the past where fires have destroyed public records, and thus there was no way to determine what was true or correct. A decentralized blockchain holds records that is verifiable by anyone on the public ledger. The public ledger is viewable and lives in the cloud and on each node operator. Each blockchain works slightly differently, but the general idea is that each node is collecting, verifying and updating the ledger over and over again. No one entity can corrupt the data, unless they were to attack multiple nodes all at the same time.
Where do NFTs live? Do NFTs live in or on the blockchain?
So how does this relate to NFTs? NFTs live on and in the blockchain. Each image can be uniquely identified on the blockchain. NFTs currently are mostly associated to an image, but NFTs can do so much more than just be an image. NFTs can prove ownership. Ownership of an image is one aspect of NFTs. Some NFTs prove ownership to some kind of utility. Utility such as access to private groups. Or utility such as access to eat at a restaurant. Some NFTs prove ownership of a physical good, such as high end watches or vehicles or Real Esate. The possibilities of NFTs are endless and are still being explored today.
How do NFTs hold value? What Makes NFTs valuable? Can I right click save the image?
Back to the Mona Lisa example. The original Mona Lisa will always be sought after as an original piece. If the Mona Lisa were placed on the open market, many collectors would pay millions of dollars to try to acquire it. But a photograph of the Mona Lisa would not garner the same amount of interest nor would someone be willing to pay the same amount as the original piece. The same goes for NFTs. The original 10,000 collection of Crypto Punks will always hold it's value. A copy of a Crypto Punk can easily be identified as a fake and would not sell for the same amount as an original. Think high end hand bags, versus a knock off purchased off the black market.
What is a CryptoPunk? Where did they come from? Who invented the CryptoPunk? How much is a CryptoPunk worth?
CryptoPunks are considered one of the most earliest PFP collections (profile picture) that brought NFTs to the forefront of people's attention. So far they are probably the most recognized PFP collection on the market. CryptoPunks were first launched on June 23, 2017 and basically were sold for free (gas fees). The price of the punks were pretty stagnant for the first four years. In early 2021 NFTs got a huge pump in prices and popularity. You can buy and NFT and pretty much sell it for multiples more within days or hours. Even SNL was making NFT videos which hit main stream media.