NFTs, explained

WHAT IS AN NFT? WHAT DOES NFT STAND FOR?

Non-fungible token.

“Non-fungible” more or less means that it’s unique and can’t be replaced with something else. For example, a bitcoin is fungible — trade one for another bitcoin, and you’ll have exactly the same thing. A one-of-a-kind trading card, however, is non-fungible. If you traded it for a different card, you’d have something completely different. You gave up a Squirtle, and got a 1909 T206 Honus Wagner, which StadiumTalk calls “the Mona Lisa of baseball cards.” (I’ll take their word for it.)


How do NFTs work?

At a very high level, most NFTs are part of the Ethereum blockchain. Ethereum is a cryptocurrency, like bitcoin or dogecoin, but its blockchain also supports these NFTs, which store extra information that makes them work differently from, say, an ETH coin. It is worth noting that other blockchains can implement their own versions of NFTs. (Some already have.)


What’s worth picking up at the NFT supermarket?

NFTs can really be anything digital (such as drawings, music, your brain downloaded and turned into an AI), but a lot of the current excitement is around using the tech to sell digital art.

Dogecoin isn’t an NFT. But this GIF of a dogecoin is. |  NyanCat on OpenSea


You mean, like, people buying my good tweets?

I don’t think anyone can stop you, but that’s not really what I meant. A lot of the conversation is about NFTs as an evolution of fine art collecting, only with digital art.

(Side note, when coming up with the line “buying my good tweets,” we were trying to think of something so silly that it wouldn’t be a real thing. So of course the founder of Twitter sold one for just under $3 million shortly after we posted the article.)

Do people really think this will become like art collecting?

I’m sure some people really hope so — like whoever paid almost $390,000 for a 50-second video by Grimes or the person who paid $6.6 million for a video by Beeple. Actually, one of Beeple’s pieces was auctioned at Christie’s, the famou—



Wow, rude. But yeah, that’s where it gets a bit awkward. You can copy a digital file as many times as you want, including the art that’s included with an NFT.

But NFTs are designed to give you something that can’t be copied: ownership of the work (though the artist can still retain the copyright and reproduction rights, just like with physical artwork). To put it in terms of physical art collecting: anyone can buy a Monet print. But only one person can own the original.

No shade to Beeple, but the video isn’t really a Monet.

What do you think of the $3,600 Gucci Ghost? Also, you didn’t let me finish earlier. That image that Beeple was auctioning off at Christie’s ended up selling for $69 million, which, by the way, is $15 million more than Monet’s painting Nymphéas sold for in 2014.

This last sold for $3,600, but the current owner is asking for $16,300.

Whoever got that Monet can actually appreciate it as a physical object. With digital art, a copy is literally as good as the original.


What’s the point of NFTs?

That really depends on whether you’re an artist or a buyer.

I’m an artist.

First off: I’m proud of you. Way to go. You might be interested in NFTs because it gives you a way to sell work that there otherwise might not be much of a market for. If you come up with a really cool digital sticker idea, what are you going to do? Sell it on the iMessage App Store? No way.

Also, NFTs have a feature that you can enable that will pay you a percentage every time the NFT is sold or changes hands, making sure that if your work gets super popular and balloons in value, you’ll see some of that benefit.

I’m a buyer.

One of the obvious benefits of buying art is it lets you financially support artists you like, and that’s true with NFTs (which are way trendier than, like, Telegram stickers). Buying an NFT also usually gets you some basic usage rights, like being able to post the image online or set it as your profile picture. Plus, of course, there are bragging rights that you own the art, with a blockchain entry to back it up.

No, I meant I’m a collector.

Ah, okay, yes. NFTs can work like any other speculative asset, where you buy it and hope that the value of it goes up one day, so you can sell it for a profit. I feel kind of dirty for talking about that, though.

So every NFT is unique?

In the boring, technical sense that every NFT is a unique token on the blockchain. But while it could be like a van Gogh, where there’s only one definitive actual version, it could also be like a trading card, where there’s 50 or hundreds of numbered copies of the same artwork.

Who would pay hundreds of thousands of dollars for what basically amounts to a trading card?

Well, that’s part of what makes NFTs so messy. Some people treat them like they’re the future of fine art collecting (read: as a playground for the mega-rich), and some people treat them like Pokémon cards (where they’re accessible to normal people but also a playground for the mega-rich).

But what do The Youth think of them?

Ah yes, excellent question. We here at The Verge have an interest in what the next generation is doing, and it certainly does seem like some of them have been experimenting with NFTs. An 18 year-old who goes by the name FEWOCiOUS says that his NFT drops have netted over $17 million — though obviously most haven’t had the same success. The New York Times talked to a few teens in the NFC space, and some said they used NFTs as a way to get used to working on a project with a team, or to just earn some spending money.

Can I buy this article as an NFT?

No, but technically anything digital could be sold as an NFT (including articles from Quartz and The New York Times, provided you have anywhere from $1,800 to $560,000). deadmau5 has sold digital animated stickers. William Shatner has sold Shatner-themed trading cards (one of which was apparently an X-ray of his teeth).

What Is Ethereum?


Ethereum is a blockchain platform with its own cryptocurrency, called Ether (ETH) or Ethereum, and its own programming language, called Solidity.

As a blockchain network, Ethereum is a decentralized public ledger for verifying and recording transactions. The network's users can create, publish, monetize, and use applications on the platform, and use its Ether cryptocurrency as payment. Insiders call the decentralized applications on the network "dApps."

  • Ethereum is an open-source blockchain-based platform that creates and shares business, financial services, and entertainment applications.
  • Ethereum users pay fees to use dApps. The fees are called "gas" because they vary depending on the amount of computational power required.
  • Ethereum has its own associated cryptocurrency, Ether or ETH.
  • Its cryptocurrency is now second only to Bitcoin in market value.

Understanding Ethereum

Ethereum was created to enable developers to build and publish smart contracts and distributed applications (dApps) that can be used without the risks of downtime, fraud, or interference from a third party.

Ethereum describes itself as "the world's programmable blockchain." It distinguishes itself from Bitcoin as a programmable network that serves as a marketplace for financial services, games, and apps, all of which can be paid for in Ether cryptocurrency and are safe from fraud, theft, or censorship.

How do NFTs work?
NFTs are different from ERC-20 tokens, such as DAI or LINK, in that each individual token is completely unique and is not divisible. NFTs give the ability to assign or claim ownership of any unique piece of digital data, trackable by using Ethereum's blockchain as a public ledger. An NFT is minted from digital objects as a representation of digital or non-digital assets. For example, an NFT could represent:

  • Digital Art:
  • GIFs
  • Collectibles
  • Music
  • Videos
Real World Items:
  • Deeds to a car
  • Tickets to a real world event
  • Tokenized invoices
  • Legal documents
  • Signatures
  • Lots and lots more options to get creative with!
An NFT can only have one owner at a time. Ownership is managed through the uniqueID and metadata that no other token can replicate. NFTs are minted through smart contracts that assign ownership and manage the transferability of the NFT's. When someone creates or mints an NFT, they execute code stored in smart contracts that conform to different standards, such as ERC-721. This information is added to the blockchain where the NFT is being managed. The minting process, from a high level, has the following steps that it goes through:
  • Creating a new block
  • Validating information
  • Recording information into the blockchain
NFT's have some special properties:
  • Each token minted has a unique identifier that is directly linked to one Ethereum address.
  • They're not directly interchangeable with other tokens 1:1. For example, 1 ETH is exactly the same as another ETH. This isn't the case with NFTs.
  • Each token has an owner and this information is easily verifiable.
  • They live on Ethereum and can be bought and sold on any Ethereum-based NFT market.
In other words, if you own an NFT:

  • You can easily prove you own it.
  • Proving you own an NFT is very similar to proving you have ETH in your account.
  • For example, let's say you purchase an NFT, and the ownership of the unique token is transferred to your wallet via your public address.
  • The token proves that your copy of the digital file is the original.
  • Your private key is proof-of-ownership of the original.
  • The content creator's public key serves as a certificate of authenticity for that particular digital artefact.
  • The creators public key is essentially a permanent part of the token's history. The creator's public key can demonstrate that the token you hold was created by a particular individual, thus contributing to its market value (vs a counterfeit).
  • Another way to think about proving you own the NFT is by signing messages to prove you own the private key behind the address.
  • As mentioned above, your private key is proof-of-ownership of the original. This tells us that the private keys behind that address control the NFT.
  • A signed message can be used as proof that you own your private keys without revealing them to anybody and thus proving you own the NFT as well!
  • No one can manipulate it in any way.
  • You can sell it, and in some cases this will earn the original creator resale royalties.
  • Or, you can hold it forever, resting comfortably knowing your asset is secured by your wallet on Ethereum.
And if you create an NFT:
  • You can easily prove you're the creator.
  • You determine the scarcity.
  • You can earn royalties every time it's sold.
  • You can sell it on any NFT market or peer-to-peer. You're not locked in to any platform and you don't need anyone to intermediate.
Referred Articles:- Ethereum