$69 million. Everydays — The First 5000 Days, a composite work by the digital artist Beeple sold for over $69 million. Everydays was purchased in an auction by a cryptocurrency investor known as MetaKovan using 42,329 Ether. However, this was no ordinary piece of artwork. This piece of art is entirely digital and known as a non-fungible token (NFT).

   An overwhelming majority of people don’t know what NFTs are, or have little knowledge and only assume they do. Many people believe NFTs are a waste of money and don’t see why others are buying them. There are several reasons why people think it is a foolish purchase such as fake scarcity, technical issues, waste of money, and even impending climate disaster. Others argue that these tokens only have value because people think they have value, which is true, however, money works the same way. 

   Although there are many reasons to argue against NFTs, the unique tokens hold real value and can even be beneficial. Yes, there is no copyright and they can just be screenshot and used throughout social media; however, the more people play into it, the more popular NFTs become which increases the value of the original token.

How it works

   To put it simply, there are many unique works that are available for purchase. Each piece has an attached token that signifies the ownership of the piece. The token is known as the NFT, but the project it is attached to brings attention to the token. It’s not that people really want the image, they want the token that is linked to the image, and because everyone wants it and there’s only one, people will pay a lot of money for it.

   In other words, an NFT is a one-of-a-kind digital token that is permanently linked to a piece and is encrypted with the artist’s signature. It validates the piece’s ownership and authenticity. It’s a form of digital asset that can be used to represent real-world artifacts like art, music, video, and in-game gear. These items are tokenized, which allows them to be bought, sold, or traded on the blockchain. 

   Just like physical art, these collectible digital assets hold value. NFTs are all unique, which is where the term “non-fungible” comes from. If something is fungible, it can be replaced, such as a jacket. If someone were to receive a jacket and it was ripped, he or she could send it back and get it replaced. The jacket remains the same and has the same value. Non-fungible is the opposite. Something that is non-fungible is unique and can’t be copied, such as the Mona Lisa or Starry Night. NFTs are the same, but digital. This means that the value is extremely high. Yes, they can be screenshot, however, that doesn’t decrease their value because it is still non-fungible.

Blockchain

   To understand how NFTs work, it is important to understand the blockchain. Just like computer networks, there are hundreds, if not thousands, of blockchains. The blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system. A blockchain is essentially a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain. This means any transaction made on the blockchain can be seen by the entire world. Each transaction proposed in the blockchain must be validated by the majority of computers to go through. There is no bank involved.

   How does this relate to NFTs? Because everyone on the blockchain can see any transaction, there is a demand for approval from everyone else. Essentially, using cryptocurrency, the blockchain is an easy way to show off one’s wealth. That’s where NFTs play a role. Purchasing and owning a non-fungible piece of art is a big deal, especially to people using the blockchain. The more expensive and exclusive the token is, the more attention it will get. 

Not just art

   Many people look at NFTs as just an image on a screen. However, this is far from the truth. There are many distinct types of NFTs. These include art, music, video game items, trading card or collectible items, big sports moments, virtual fashion, and much more.

   Art NFTs are the most famous. The popularity started when artists decided to sell their work by associating them with tokens. The tokens carry the ownership of the artwork. Once the idea gained popularity, the projects moved to the digital world. Digital art and characters started selling for large amounts of money directly or in auctions. The most prominent example is the CryptoPunks, which are unique characters generated via an algorithm. Other forms of NFT art contain short videos, video art, and even gifs.

   Music has also made its way into the NFT world. Just like video NFTs, music NFTs are in high demand. Musicians and rappers have stepped foot into the NFT business eagerly. But why? Well, when musicians publish their finished work on a streaming service, they still need to pay for the record label and the streaming site. Hence, they only get a fraction of the money. For this reason, many have decided to go a different route by making music NFTs. By selling their music directly, almost all the money earned will go directly to the musician.

   The most recent spike in popularity has been video game NFTs. Developers of games have begun offering in-game items that can be sold as NFTs. The best example of this is the game Axie Infinity, which can be played in the metaverse. The plot of the game is raring, taming, and breeding the creatures known as Axies. These Axies are the NFTs, which can be bought and sold in the games NFT Marketplace.

   The craze of collecting trading items or cards is world-known. People are addicted to owning rare sports cards like a Mike Trout rookie card in perfect condition or even rare Pokemon cards like a 1st edition Charizard. Now, these physical cards have shifted into virtual assets. Publishers have turned to creating collectibles as NFTs and selling them just like the real thing. The value entirely depends on the rarity of the token. The more unusual, the higher price it will sell for.

   Possibly the most interesting form of NFTs are big sports moments. Unlike other NFTs, these are only obtainable digitally and have no correlation with a physical item. Big sports moments are purchasable short videos of sports moments in history that had a great impact on the public. Wouldn’t it be cool to own LeBron James’ historic block on Andre Iguodala in a tied game 7 of the NBA finals? Well, NFTs have made that possible. A dunk from one of the greatest basketball players, a game-winning home run, a one-handed football catch; these incredible moments captured in short videos can be purchased as NFTs.

   The fashion industry has been affected by the NFT trend as well. The internet is evolving rapidly and soon we will enter the Metaverse era. Just like the movie Ready Player One, people around the world will be able to communicate using virtual reality. So what does this have to do with fashion? Avatars in the metaverse can wear clothing and accessories purchased digitally, like NFTs. This may sound crazy and far-fetched, but even H&M has opened their own virtual clothing store in the Metaverse.

Metaverse

   Simply put, the metaverse is a virtual reality world where users can interact, play games, and experience things as they would in the real world. Using current AR and VR technology, people can immerse themselves into the virtual world and interact with overlaying objects and other people in the visual projected in front of them. Ever seen Ready Player One? The Metaverse is just like that. But how does this relate to NFTs? 

   The start of the Metaverse has provided many promising opportunities for investors, enterprises, and hobbyists, which can shape up NFT usage and adoption in the long term. Surprisingly, NFTs are playing a big role in shaping the Metaverse. The role NFTs would play in the Metaverse is real estate. NFT Metaverse projects would drive the possibilities of using NFTs as a deed to virtual property. NFTs could also serve a useful role in airdropping branded merchandise or special access privileges to followers.

Collections

   NFT collections are a collection of art created by the same person or company to be sold. These projects have built up many communities in the crypto world. An early example is a project called CryptoPunks. CryptoPunks is a collection of 10k NFTs, each having its own unique feature. The CryptoPunks all have the same easily identifiable style, with small differences to set them apart. For example, CryptoPunk #7319 has a headband and a normal beard whereas #3130 has an earring, mohawk, and small shades. The more properties and the rarer the properties are, the higher the value. 

   Not all collections have unique NFTs. For many creators, there may be several editions of the same NFT. The Rob Gronkowski Championship Series only has 4 different cards. However, each card has 87 editions. That does not mean that the token is no longer non-fungible. Someone who owns GRONK Championship LV (Edition 64/87) may have the same card as GRONK Championship LV (Edition 1/87), but it is still non-fungible because there are no two cards with the same value or edition.

Utility

   Utility NFTs are NFTs where the value is based on the access, perks, and opportunities they provide to token holders. In addition to the usual scarcity, utility NFTs also carry real-world and quantifiable value. One notable project of utility NFTs is Crypto Baristas. This collection of tokens features several distinct characters making coffee, but more importantly, it is helping a real-world company. The Crypto Baristas project looks to connect the Metaverse and the natural world with NFTs that fund the opening of a coffee shop in NYC. Other forms of utility people can get from buying an NFT are invites to real-life events or the ability to do certain things in games that others would not be able to.

Ethereum wallet

   Ethereum is a decentralized blockchain platform that establishes a peer-to-peer network that securely executes and verifies application code. Ether is a digital currency, however, it isn’t an alternative to real currency. Ether can be purchased using real money, but the price of 1 ETH is always changing. The price of 1 ETH can cost over $2,300, so many people choose to buy a very small amount. Ethereum wallets are applications that let people interact with their Ethereum account, just like online banking apps. However, there is no bank. The Ethereum wallet lets people read their balance, send transactions, and connect to applications.

   Although there are reasons to argue that NFTs are a waste of money or have no value, there is a lot more than people think. The reality is that NFTs are very scarce and valuable for many reasons. Apart from value, digital tokens are also extremely unique. There is a wide variety of projects from art to short videos of real sports moments.