$2.9 million. That is how much the founder of Twitter and Square, Jack Dorsey’s, first-ever tweet has recently sold for. A piece of intangible memorabilia that individuals will never be able to physically hold in their hands is now worth millions and one of the most sought-after NFTs on the face of the planet.
You might be asking yourself: who would pay such an outrageous price for a tweet that can easily be screenshot or replicated?
That is where the beauty and the magic of NFTs lie, in their ability to be uniquely held by one single individual. All NFTs exist on blockchains, which are connected across the globe and provide a safe haven to keep your most valuable intangible possessions.
It sounds like the stuff of Alan Turing’s dreams—a world interconnected by millions of individuals spanning every continent on Earth all joined by one single idea. This is what silicon valley is calling,the “internet of all things”.
It all sounds very glorious, but how exactly do NFTs work, and what can they be used for in a practical sense? Let’s explore that.
What Exactly Are NFTs?
Let’s start off with some good old-fashioned vocabulary.
NFT stands for “non-fungible token”. “Fungible” is a word coined by economists to mean an item that can be replaced. For example, the shirt and pants that you are currently wearing are more than likely not entirely one-of-a-kind. If you are like the great majority of people around the world, then your clothes were most likely mass-produced in a factory somewhere in an foreign country, with the intention of being sold to as many people as possible.
This is where NFTs differ from everyday items. They are specifically designed to be one-of-a-kind. Think Leonardo Davinci’s Mona Lisa or Michaelangelo’s Sistine Chapel. Sure, people can certainly take photos of them and reproduce them all around the world. But nothing will ever compare to possessing the original artwork.
This is the same principle that allows NFTs to be so incredibly valuable. Whether it’s the original Nyan Cat gif or Jack Dorsey’s first tweet, the NFT is the original. It cannot be replaced, or is “non-fungible”.
What about the “T” in NFT? That stands for “token”, or a piece of information that describes a transaction, specifically in this case a financial transaction.
You are at home, getting ready for the big game, right before your buddies from work come over. You decide that you want to order a few boxes of pizza. You fire up your smartphone, launch the Pizza Hut application, order everything from hot wings to double-meat.
When this happens, Pizza hut communicates with your bank and essentially asks if you have enough funds to purchase your pizza. Your bank, goes through every one of your transactions and responds back to Pizza Hut and says, “Hey, it looks like Charlie has enough funds to purchase the hot wings.”
The money for your pizza is then transferred over to Pizza hut’s bank which turns around and does the same type of calculation of transactions to realize they are $100 richer because of your pizza and hot wings.
This is where the blockchain comes into play, they essentially cut out the middle man, no more banks, just millions of connected computers vouching for your tokens.
More and More People Are Using NFTs
This may come as no surprise to you, but a large majority of tech companies and multinationals are finding clever ways to utilize blockchain technology and NFTs.
From ordering your groceries and then paying for them through your crypto wallet, all the way to making your first purchase of an electric vehicle at Tesla. Every day more and more companies are incorporating this new type of technology. Not simply because it is novel, but because it simplifies the entire financial transactional process.
Are NFTs and Blockchain the Future?
By now, you must have a fairly solid understanding of NFTs and what it means for the future of shopping and owning intangible items. As the human need for survival diminishes and our basic needs are met more and more every day—we are turning to these innovative ways of owning unique pieces of art.
From Grimes selling their music for $6 million to the NBA auctioning off the best video highlights in basketball history for a whopping $230 million. To you, my dear reader going to Whole Foods to pay for your weekly matcha using Bitcoin and your phone to pay for it.
These inventions are the way of the future and as more companies integrate them into their everyday usage. Before you know it, even your kids will be paying for their after-school popsicles from the ice cream truck using Ethereum.