Even if you’ve been living under a rock since the pandemic started, you’ve probably still heard some chatter about non-fungible tokens (NFTs). It’s hard to ignore the hype, when someone can make a million bucks taking unassuming selfies.
It’s also nearly impossible to ignore the skepticism and heated criticisms surrounding the budding product, such as NFT plagiarism (also known as copyminting), NFT scams, and the environmental cost of blockchain operation.
But even if you already know that NFTs exist, it’s highly likely that you still have no clue what NFTs really are.
It can be pretty intimidating to delve into this new world without prior knowledge, so we got an expert to ask “what are NFTS?” and break things down like we’re kids.
David Tng works as the head of growth at TZ APAC, the Asia-based ecosystem adoption arm for the Tezos blockchain. This basically means that they help people get into the NFT world. Below are his answers to questions about NFTs.
What are NFTs?
I think the simplest way to describe NFTs is as signed posters from your favorite artist. For instance, you like Madonna, and she has created a poster of her latest album. She just issued 100 copies of this poster with her signature on it, and it’s all serialized. So when you buy an NFT, you’re buying one of these 100 copies. Of course, on the internet, you can always download one copy. But that’s not the one with her signature, and it’s not the one with a serial number. You’re not buying the copyright of her artwork, but you’re buying a copy of the one signed by the artist.
An NFT is a unique digital object with its own traceable history and each object would have a record on the blockchain. Going back to the poster example, you can see who were the past owners for each copy, and that it was originally created by Madonna.
In some cases, there is an NFT that was previously owned by another artist, or another star, and you’re like, “Hey, this NFT is unique. There’s a traceable history. I can see that it has been owned by someone else famous as well.” So it brings more value to it. Some people like that sort of appeal.
What’s a blockchain?
I see it as a common book of records that everybody is able to see. Everybody’s also able to add to the records. And again, it’s decentralized, so it’s not just one person who’s holding on to the book.
What are the types of NFTs?
NFTs come in many different forms, but they generally represent digital ownership.
The most prominent type of NFT comes in the form of artwork copies. If you’re looking at NFTs of artworks, they usually don’t represent much other than you buying a piece of artwork that you can display and say, “Hey, I own one of 100 copies of this artwork.” You can also create a virtual gallery in the metaverse to showcase NFT art, but it’s more of a funny, engaging experience where it doesn’t have to be monetized.
But NFTs can also come in the form of a digital plot of land in the metaverse. Or they could be in the form of in-game assets, such as exclusive skins.
Then there are NFT collectibles that grant you access to membership clubs—kind of like IRL country clubs. A famous example would be the Bored Ape Yacht Club, which boasts members like Jimmy Fallon, JJ Lin, and Post Malone.
Who can create an NFT?
Anybody can create an NFT. If you want to mint your own NFT, there are many different platforms, such as objkt.com and Rarible. The most famous one is OpenSea. There are a lot of marketplaces where anybody can mint their own NFT.
But I think a misconception is that if you create the NFT, it has to be sold. It really doesn’t. It can just be for yourself to acknowledge that you’ve created an artwork and minted it. It’s just proof and documentation.
Why buy NFTs?
So if you’re looking at NFT artworks, perhaps some people buy an artwork because they enjoy the work. Or they could be supporting the artists they admire. There are also speculators who buy NFT art as investment—much like in the traditional non-blockchain-based world.
If you’re buying a virtual land in the metaverse, you can build experiences on it and organize virtual events.
As for the collectibles—the membership clubs such as the Bored Ape Yacht Club—besides getting to be in a well-known community with celebrities, there are also other benefits, like granting you entry to exclusive concerts and access to exclusive clothing drops.
Can you only buy NFTs with cryptocurrency?
It depends on the marketplace. Some marketplaces only transact in cryptocurrency, while some accept credit cards. It really depends on which platform they’re printing their artworks on and where they are selling their artworks at.
Are NFTs expensive?
No, they really don’t have to be. Let’s take NFT artworks for example. They can cost a million dollars—and we’ve definitely seen these sky-high prices in the news—but there are also lots of artworks that are sold for like $10. We’re definitely seeing this a lot on the Tezos blockchain. Some artists just enjoy creating artworks and they think it should be accessible to everybody. There’s a very wide spectrum of NFTs, as well as a wide range of prices.
What do NFTs mean for artists?
Another aspect of NFT art is its innovation. We’re seeing a lot of artists exploring digital art (such as AI art, VR art, and generative art). They do digital works such as videos that can’t really be printed out as a physical piece.
In the past, if you were a digital artist, you create a piece of work and you put it on Instagram for everybody to see, but how do you earn money from that? You would have to look for alternative sources of income. With NFTs, these artists can attach a certain number of digital signatures on their artwork and sell them.
This interview has been edited for clarity and length.
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This article was updated for clarity on May 23, 2022.