Navigating the world of Web 3.0 can be quite daunting for the most part. There are tons and tons of terminologies to learn, new tools to get familiar with, and NFT projects launching every other day that could just leave you mentally drained, confused and ultimately uninterested. I get it. I was also in the same shoes a few months ago. Until I finally got to the bottom of the “why” behind NFTs. Only then did it start to make sense.
I decided to get practical and test my understanding of all I’d been learning and was ultimately able to create a “test NFT” on our marketplace. Here’s a link to the demo. And with that, we anticipate launching our very own NFT marketplace as an add-on to what we currently have in the near future!
I say all that to say that even if you might feel lost at the moment whenever you hear the words “Web 3.0” or “NFTs” being thrown around, it’s not too late to start learning. You’d be surprised how straightforward it all becomes once you understand the basics around what it is, how it works and why it is valuable.
Before we jump into the article, we should begin by first defining two key terms – fungibility and NFTs.
An item is said to be fungible if it can be replaced or exchanged with another item. For example, physical money e.g $100, is said to be fungible because it can be exchanged for two $50 notes without it being a problem as they have the exact same value.
An NFT which is short for Non-fungible token, on the other hand, cannot be exchanged or replaced because they are unique and have features that distinguish them from one another.
Now that those have been defined, let’s get into it!
1. NFTs live on the blockchain
The reason NFTs are unique and not exchangeable or replaceable is that they live on the blockchain. The blockchain is the technology that powers cryptocurrency and is simply a decentralized, digitally distributed public ledger that records transactions. Most NFTs are held on the Ethereum blockchain, however, there are many other blockchains such as Solana, Binance Smart Chain, Tezos etc that are becoming increasingly popular in the NFT space and come with the advantages of lower impact on the environment as compared to Ethereum (significantly less demand for gas) as well as lower transaction costs.
Photo: The Times
2. NFT artworks can either be limited editions or 1 of 1
An NFT is typically a limited edition or 1 of 1 item that is logged on the blockchain and is not exchangeable or replaceable. Even if two NFTs look very similar, they are not exchangeable because of their different unique identifiers.
3. NFTs are 1 of 4 ways to engage in the Web 3.0 space
The Web 3.0 creator economy is the future of the internet and is defining the way we would interact as we move into the future. NFTs are one of the 4 main ways to start playing in the Web 3.0 space. The other 3 are through Social Tokens a.k.a Creator Coins, Cryptocurrency & the Metaverse.
4. NFTs can be any digital asset
From 1/1 digital artworks or generative art (we’d talk more about this in future articles) that can be used as PFPs (profile photos) to music files, video game items, limited edition sports cards or moments, digital fashion for avatars used in the metaverse, tweets, memes, videos, articles, and much more, NFTs can take virtually any digital shape or form. As a general rule of thumb, if it is a digital file, it can be minted and made into an NFT!
5. NFTs are more than just the artwork behind them and ideally come bundled with utility
While art in itself can be the only value of a particular NFT, most NFTs go past just that by building utility into it.
This is possible through something called “Smart Contracts”. Smart Contracts are simply programs that are coded into the blockchain and run once certain pre-defined conditions are met. So for example, if you own “NFT A”, you get access to the exclusive members-only “newsletter Y”, but if you own “NFT A & B”, you get access to both the exclusive members-only “newsletter Y” as well as “a free staycation at 5-star hotel Z in Abuja, Nigeria”. And because the blockchain is decentralized, the implementation of a smart contract is verified by independent parties, ensuring that there is no chance of foul play.
With this layer of technology, NFT artwork becomes comparable to the logo of a company, for example. It is usually the first way to identify the company, but what really determines the company’s value to a customer is either the kind of services they are able to render or the status signalling that the brand offers, not what its logo looks like.
Hence NFT projects with utility essentially grant holders of their NFTs access to other things or an ability to execute specific activities. For example, the Afrobubble NFT project grants holders of its NFT discounted deals on holiday packages across various tourist locations in Africa as well as access to their Discord community. So now, not only do you get to own your very own piece of their NFT art but you also get to derive value from the fact that you own it.
6. NFTs allow easy exchange of value and verification of the authenticity of a digital asset
Because they exist on the blockchain, NFTs allow us to have access to details around the chain of custody of a digital asset and let us establish ownership authority. Once an NFT is minted (mint = recording a digital asset on the blockchain), its entire history will be recorded on the blockchain showing who minted it, who it was sold to or which wallet (storage for virtual currency) it was transferred to. This allows for full transparency and easy verification of the authenticity of any NFT.
7. The ability to have full ownership over a digital property is one of the biggest selling points of an NFT
Just like the particulars of your car, for example, serve as physical proof of ownership of your car, NFTs serve as digital receipts that shows ownership of a digital asset. This is why the question of why anyone would buy an NFT when they can just screenshot the artwork does not hold. Taking a screenshot of a house or car you see on the internet does not automatically make you the owner of that item. And if it were to appreciate in value, merely having a screenshot of it does not give you a claim to that benefit. Likewise, owning an NFT is the only way that you actually get to derive value either from the utility embedded in it or if it appreciates in value.
8. NFTs are not a fad. They are solving real problems
At the moment, not everyone understands the value that NFTs bring to the table. Many still believe it is a joke or a fad that will soon pass away. While the concept of NFTs is still relatively new and being explored, there are already some solid use cases in the “real world” that are setting the pace for how they can be used as we move into the future. For example, for creators or business owners that organize events often, NFTs are fast becoming a preferred method of issuing tickets to event attendees. This is because it brings transparency into the ticketing system, preventing the sale of fake tickets, reducing production costs and giving value to customers through other great utilities that can be built into them.
9. NFTs allow creators, artists, publishers and even collectors to earn lifelong royalties on their work
This value that NFTs bring is such a big deal in a world where creators have typically only been able to earn one-time revenue from the sale of their work. With NFTs, creators/artists/publishers are able to define a royalty rate when they mint their work such that after the initial sale, whenever it is re-sold, they earn a percentage of the re-sell price. Gary Vaynerchuk a.k.a GaryVee, for example, has an NFT collection that sold out in 90 days, earning him over $90 million in initial revenue and over $1.1 million a day in residual income from the re-sale of his NFTs on the secondary market. It’s pretty mind-blowing if you think about it!
10. NFTs are for everyone, not just the rich
With projects like Beeple’s NFT that sold for $69 million, Bored Ape Yacht club’s NFT that currently sells for around $198,000 (at the time of writing) & various CryptoPunk NFTs that have sold for $10 million+, it is easy to fall into the mindset that NFTs are only for the rich or that only big-time creators can make money from selling NFTs.
However, this cannot be further from the truth. One of the many beautiful things about NFT projects is that many of them are centred around building community. And while a few of these communities might seemingly be just for society’s upper class, there are thousands of other projects that are dedicated to building communities around subjects such as feminism, autism, mental health awareness, etc and have their NFTs priced reasonably (sometimes as low as $5) to allow everyday people like you and me have access.
And if you are an artist, whether emerging or established, the NFT world is yours for the taking! We will be showing you how you can turn your work into NFTs and create your own project in subsequent posts. Be sure to stay connected with us so you don’t miss out!