What Is An NFT?

Hello, and welcome to the lesson.

In this lesson I want to explain what an NFT is?

NFT stands for Non Fungible Token.

Non Fungible means non replaceable or in other words — Unique.

Now in the physical world, what items do we consider unique, and what items do we consider non unique?

A great way to understand that is to simply open one of the drawers in your house.

In your house drawers you might find a few 1 dollar bills, and you might find a baseball card.

Now, how does this relate to unique, and non-unique items in the physical offline world.

A baseball card is a unique item.

Why?

Because different baseball cards have different values. The value of a baseball card is determined by the player on the card, the card’s condition, and the card’s rarity. Those factors give different baseball cards different values.

So, a baseball card is a unique item. Now, what is a non-unique item

A 1 dollar bill, for example, is a non unique item. If you have a few 1 dollar bills in our drawer, it will not matter which one of those you will take with you to a Whole Foods supermarket, for example, to buy apples because all 1 dollar bills hold the same value.

So, the baseball card and the 1 dollar bill are physical items in our physical drawer in the physical world.

But we also have a digital world (the Internet), digital drawers (meaning computer folders), and digital assets (aka digital files).

Digital files, exactly like Physical items can also be unique and non unique.

Let’s take an example of a non unique digital file.

A Bitcoin, for example, is a non unique file.

In the same way that you can buy apples at. Whole Foods with any one of your one dollar bills, you can buy apples at Whole Foods with any one of your bitcoins — all bitcoins have the same value, and there isn’t a certain bitcoin worth more than another bitcoin.

So, Bitcoins are non unique digital files like the one dollar physical bills (that we might find in our drawer), but what about the baseball card that we may also find in our drawer.

What is the equivalent of a rare baseball card in the digital world?

The equivalent is a rare file.

The more rare the file is, the more it’s worth.

Now, how does a digital file become rare?

It becomes rare in the very same way that a physical item becomes rare.

If a certain person creates a file, (let’s say a digital image) that many people want to have, and it is one of a kind (for example) then this file becomes rare.

This was exactly the case in the world’s first live auction for digital art.

In that auction a digital card called Homer Pepe was sold for $320,000.

So, now going full circle to what NFT means.

As I said NF stands for Non Fungible (meaning non replaceable) — a unique item like the rare digital Homer Pepe card card.

And, the letter T in the word NFT stands for Token (meaning a digital certificate).

When you buy a digital file you also get a digital certificate that proves that you are the only rightful owner of that file.

So, we can also say that NFT stands for

Unique Digital Certificates.

Now, some may think that the Homer Pape digital file that was sold for $320,000 was just a rare occurrence, and that digital artworks overall can’t sell for much, but nothing can be further from the truth. Digital art pieces are sold all the time.

For example, an NBA top shot, basically a basketball highlight, of James Labron. sold for nearly $400,000

The music band Kings Of Leon has made nearly 2 million dollars from NFT album sales.

The CEO of Twiiter, Jack Dorsey. His first tweet was sold as an NFT for $2.9 million dollars.

There is also the artist Grimes who has sold NFTs for a total worth of 6 million dollars.

Lastly, in my list of examples, the digital artist Beeple sold a single digital artwork, as an NFT, for 69 million dollars.

Ok, so that’s it for this lesson, and I will see you in the next lesson….goodbye.

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