What is an NFT?
NFT stands for Non-Fungible Token. Simply this means that it is an item, a token, that is unique and cannot be replaced by another that has all of the same properties. In contrast, a penny or a bitcoin is fungible. All pennies have the same value. You wouldn’t say “oh I don’t want this penny, I want that penny because it has unique properties that I like”. Sure a coin collector may argue about this, but for the most part it holds true. All pennies are the same, quarters, bitcoins, etc.
An NFT exists digitally on what is called a blockchain. A blockchain is like a bank ledger, but it exists decentralized and public on the internet. What is neat here is that you can trace this history of ownership of a particular NFT because when it is first created, called minting, and every sale and resale afterward is recorded to the blockchain.
Okay, but what can I do with an NFT?
An NFT can exist as an image file that has a set of defined properties. For example, there is a collection that I follow called The Giraffe Tower, created by Gary Henderson. GT is a collection of 10,000 uniquely designed giraffe. What an NFT does for you depends on what it means to you and what utility the creator may provide to owners of their NFT. Maybe you simply like the artwork. That is fine. Sometimes it is just about the artwork. Utility is where it gets interesting. Creators can have the capability to provide benefits, memberships, services, etc to verified owners of their NFT. There is technology that will verify that you are an owner. In GT for example, there are levels of benefit depending on if you own 1, 2, 5, 10, 50 giraffe NFT. By simply owning 1 giraffe, you start earning a digital utility coin called gleaf. With a certain amount of gleaf, you can then name your giraffe. If you own 2 or more giraffe and then pay some of your gleaf you can then produce a baby giraffe which will become a new NFT that you own. With these baby giraffe, as with any NFT, you can then hold/keep it or sell it for a profit.
An NFT can also be used as a ticket to gain entry to an event. There was a conference in recent months that cost $300 or so to attend, and all giraffe NFT owners were able to attend for free.
It’s an exciting time in technology with new collections of NFTs and new uses of NFTs being thought of all the time.
NFTs as an Investment
An NFT is an investment when you can buy low, hold until the floor price rises, and sell for a profit. Some people have made a few hundred dollars in profit while others have made hundreds of thousands of dollars of profit.
Let’s look at the Giraffe Tower collection. At the time of this writing only 3500ish of the 10,000 NFT have been minted/created. Which means you can still get in on this collection at the original mint price of only 0.05 eth. Eth is a digital cryptocurrency; its value changes all the time. At this moment, 0.05 eth = $155.58 USD. Now in my graphic to the left you will see that the floor price is 0.03 which is less than the mint price. So right now you can mint a new giraffe at 0.05 and receive a random design (did I mention you don’t know what a mint looks like until after you purchase it?) or you can buy one that someone is selling, currently there is at least one for sale at 0.03.
The website we are looking at is called Open Sea.
Now let’s look at what might be the most well known collection, the Bored Ape Yacht Club. All 10,000 ape NFT are minted. So the only way to acquire one is to purchase one that is for resale. Currently the floor price is 97 eth = $301,827.14 Now imagine if you had gotten in early at $150 on an NFT that is now worth over $300,000? Incredible.
How long does it take for the value of an NFT to go up? There is no direct way to predict that and it may not go up. The age old supply and demand plays a factor. I’d say that first a collection needs to sell out at its initial mint and then the fun will begin.
More Resources on NFT
- Listen to Gary Henderson talk on Clubhouse about What is an NFT?
- Listen to Brian Fanzo’s Daily NFT Podcast