Ever heard someone say that NFTs are just “over-hyped digital JPEGs”? Well, whoever told you that is missing the point. NFTs are pioneering a new model of digital ownership that allows people to buy, sell, and trade unique digital items.
In this post, we will cover: ✅ What an NFT is – in simple terms ✅ How NFTs unlock new ways of monetizing digital assets ✅ Examples of how NFTs can be used in practice, for creators and entrepreneurs
Let’s dive in 🏊♀️
What is an NFT?
An NFT is a digital asset that represents ownership of something unique, like a piece of digital art, a video game item, or a tweet. It's like a digital collectible that only you can own.
NFT stands for non-fungible token. That might sound like a mouthful, but it's a simple concept.
Non-fungible means that it is a one-of-a-kind – it is unique and can't be exchanged for something else, whereas "fungible" means something that can be exchanged for something else of the same value, like money or Bitcoin.
NFTs are created using blockchain technology, which is the same technology that cryptocurrencies like Bitcoin use. A blockchain is a digital ledger that keeps track of transactions in a secure and transparent way.
When you buy an NFT, you're buying a unique digital asset that is stored on the blockchain. This means that you have proof of ownership that can't be duplicated or faked. You can even sell your NFT to someone else if you choose to.
But can’t someone still copy my digital file, for example a JPEG, even though it is an NFT?
Yes, that’s true. However, they cannot copy ownership of that JPEG - since it is stored on the blockchain. So any benefits and perks (aka utility in web3 jargon) associated with owning that NFT cannot be copied.
Think of NFTs like a certificate of authenticity: yes - the original work can be copied infinitely, but the certificate lets you know which is the original.
Why should you care about NFTs?
While a lot of the hype around NFTs has been focused on the speculative nature of NFTs, the power of NFTs goes far beyond speculative investing.
NFTs have the potential to cause a paradigm shift in the way we think about digital ownership and value. By creating a unique digital asset that is verifiable on a blockchain, NFTs allow for the ownership and transfer of digital assets to be more secure and transparent.
In the past, the value of digital assets has been difficult to establish and protect, leading to issues with piracy and a lack of value attribution for creators.
NFTs can potentially solve these problems by providing a way to establish the ownership and authenticity of digital assets. This has the potential to create new markets and revenue streams, and could change the way we think about the value of digital assets.
NFTs and utility
While some NFTs are created purely as works of art or collectibles, others are designed to have specific uses or functions that make them more valuable to their owners. In the context of NFTs, this is referred to as utility, ie the potential perks and benefits that a particular NFT provides to its owner, beyond its visual or aesthetic appeal.
For example, a musical artist might create an NFT that gives the owner exclusive access to a private concert or meet-and-greet. In this case, the NFT has a specific utility that makes it more valuable than simply owning the digital artwork. And the underlying blockchain technology keeps track of who is the real owner of the NFT and the associated perks.
NFTs with utility can provide unique benefits to both creators and buyers. Creators can monetize their work in new ways by providing exclusive access or functionality to NFT owners, while buyers can receive unique benefits or experiences that are not available to others.
NFTs can be created with or without utility. In general, NFTs with utility are more likely to retain their value over time.
NFTs and community building
NFTs can be a powerful tool for building a community or engaging with an existing audience, since NFTs offer a unique and valuable way to create and share content. Here are a few ways that you can use NFTs to build a community:
Create an NFT-based membership program You can use NFTs to create a membership program that offers exclusive content, experiences, or rewards to members of your community. For example, you could create a set of limited-edition NFTs that grant access to special events or private chat groups. This can help to build a sense of exclusivity and loyalty among your community members.
Launch a collaborative NFT project You can involve your community in the creation of an NFT collection by asking them to submit artwork, ideas, or stories that can be turned into NFTs. This can help to foster a sense of collaboration and creativity, and can also give your community members a sense of ownership over the project.
Use NFTs as a fundraising tool You can create an NFT collection that is designed to raise funds for a charitable cause or community project. By offering NFTs that have a specific utility or value, such as access to an exclusive event or a special edition item, you can incentivize community members to support your cause and help to spread the word to others.
Host NFT giveaways and contests You can use NFTs to incentivize engagement and participation among your community members by hosting giveaways and contests that award NFTs as prizes. This can help to generate buzz and excitement around your community, and can also help to attract new members who are interested in winning an NFT.
World of Women – an NFT project championing diversity in web3
An innovative and inspiring example of how NFTs can be used to create a vibrant community in the digital space is World of Women (WOW).
World of Women is a global community that was created to promote diversity and representation in the NFT space, which has historically been dominated by male creators and collectors. The project was founded by a team of female creators and artists, and has been designed to celebrate the strength, resilience, and beauty of women from all walks of life.
The original collection created by World of Women featured 10,000 unique digital characters, each represented by an NFT. The characters are all female, with diverse backgrounds, stories, and abilities. The digital artwork for the NFTs was created by a team of talented artists from around the world, who have been carefully selected for their diverse styles and perspectives.
World of Women has gained a large following in the NFT community, and many of the NFTs have sold for significant amounts of money. The project has also been recognized for its philanthropic efforts, with a portion of the proceeds from each sale going to support charitable organizations that empower and uplift women.
Several high-profile celebrities are part of the WOW community, for example, Reese Witherspoon and Eva Longoria.
NFTs are "trucks"
One of my favorite analogies for clarifying the substance behind NFTs and how they work was written by economist Dror Poleg.
A smuggler used to drive across the border every Tuesday.
The customs officer would stop him, open the back of the truck, look around, and let him go on his way.
The smuggler did this every week for 20 years. And the customs officer always looked, and never figured it out.
One day, after the customs officer already told him he can go on his way, the smuggler said: "Today is my last day. I'm going to retire."
The customs officer congratulated him.
And then, a little hesitant, he said: "I know you've been smuggling something. I never found anything in my searches. I promise I won't press charges. Can you tell me what is it that you were smuggling all these years?"
The smuggler smiled and said: "Trucks!".
NFTs are trucks. They are a new way to convey, monitor, and monetize intellectual property. Everyone is focused on the monkeys or apes or whatever other nonsense people currently put on these "trucks".
But it's the "trucks" themselves that are the main story. They can be used to revolutionize the way we own, use, and monetize other types of intellectual property: lines of code, financial information, media, DNA, and beyond.
So, next time someone asks you about monkeys and apes, give him a banana.”
The original tweet by Dror Poleg
NFTs might seem confusing at first, but they're actually a simple concept once you break them down. They're a new and exciting way to own and trade unique digital assets. Whether you're a creator or a collector, NFTs offer a lot of potential benefits, so it's worth exploring the world of NFTs for yourself.