NFTs have taken the world by storm. In 2021, Beeple auctioned off an NFT for $69 million, making it the 4th most expensive selling piece of art by a living artist.
Jack Dorsey minted his first tweet into an NFT and then sold it for nearly $3 million. That buyer recently sold it for a fraction of what they paid.
After news of these sales hit the internet, everyone wanted to know about NFTs. What are they? Why are they? The questions were neverending, and many of the answers left people unfamiliar with these JPEGs with more questions.
Today, I hope to clarify what an NFT is and what the future holds for this kind of technology.
What Is an NFT?
An NFT is a non-fungible token, hence the name. To better understand what it is and what it is not, let’s look at the definition of fungible.
“(of goods contracted for without an individual specimen being specified) able to replace or be replaced by another identical item; mutually interchangeable.”
A dollar can easily be replaced by another dollar. The same is true for cryptocurrencies like Bitcoin and Eth. One of these is always worth one of these. Their values may change over time, but you can always trade one Bitcoin for one Bitcoin.
NFTs are different. They aren’t fungible. You can’t transfer one NFT for another NFT for the same value. Some are one of a kind. Others are minted in small batches.
Auctions also work differently from project to project. When a new project is announced, some artists will allow people to go into a pre-sale. You pay your money, then pick the jpeg you want; upon release of the project, you get it placed into your wallet.
Sometimes the jpegs are randomized. Some NFTs have rarities attached to them. You can get an NFT for almost anything now. They are even occasionally used as incentives. I’ve seen crypto projects give out NFTs for people who often participate in Discords.
Digital Art - The JPEG Frenzy
There are still plenty of artists out there doing the JPEG thing. As long as there are people who are into this form of art, there will be artists selling it.
This shouldn’t strike you as odd. Art has been sought after by enthusiasts and investors for hundreds of years. It has the potential to rise in value, it’s easily transferred to buyers and heirs, and it’s pretty to look at. What’s not to love?
Currently, there are multiple ways to seek out and find the NFT that suits your tastes. The first is to use Twitter to find artists. As someone who probably wants to get paid so they can eat, you can bet they’ll be promoting their NFT project long before it goes to any kind of pre-sale or auction.
Secondly, look at the crypto chains you’re already using. Most chains have a draw for one reason or another. If you love NFTs, you can find sub-communities within that chain that are NFT fanatics.
Ethereum has a big draw for NFTs. But most of us aren’t massive fans of those gas fees. Solana is an excellent place to look as well. They have a large NFT community. The fees are cheaper, and the network is fast. Unfortunately, that chain has a habit of breaking…
Lastly, Avalanche has a growing NFT market. This chain was the rising star of 2021, thanks to the now-infamous Time Wonderland defi project, but it continues to grow a community of NFT artists, projects, and new defi protocols.
FNFTs and Staking NFTs
Some projects allow for NFT staking. This works much the same as staking a crypto asset. You stake, you earn rewards. The rewards you receive vary from project to project.
Some gamefi projects allow you to stake to earn rewards that can give your NFT better attributes. Others allow you to earn rewards to bet on head-to-head matches. Some defi projects also have NFTs and are looking to add staking in the future, which will allow users to earn extra rewards on their liquidity pools.
Financial NFTs, or FNFTs, are a different type of monster altogether. Many protocols use the ve model (Curve) to incentivize investors. You lock up their tokens for weeks, months, or years, and are rewarded based on the length of time you decide to lock for.
The purpose of these FNFTs is to take something that is not liquid and make it liquid. A great example is what Revest Finance is doing. Their tech is capable of locking up funds however the developers want, essentially creating an NFT with tokens locked inside.
These NFTs still operate the same as the illiquid locked versions, but they can be bought and sold on the secondary market, allowing investors to both receive rewards and get out of a locked position if they choose.
The Future of NFTs
I’d really like to say the future of NFTs looks bright. But that would make me a fortune teller and I don’t work at a carnival. So what I will say is the future of NFTs has a ton of potential. The technology, at least for the most part, is already in place.
What’s holding us back is adoption. There are still a lot of people out there who don’t believe in digital currency or art. Maybe they think it’s a scam or a fad. But the truth is many people aren’t going to invest in what they don’t understand and education in these spaces is lacking.
However, the future possibilities are nearly endless. It’s possible that we could eventually see the sale of things like cars and even houses using NFT technology.
Worldwide adoption could give us the ability to lock up assets in NFTs and stake them, such as insurance policies, where you could buy a policy and then stake it to earn rewards or discounts on services.
The Bottom Line
I don’t think NFTs have hit the “too big to fail” status yet. But it’s definitely getting close. I think Bitcoin and Ethereum are both at that point.
If crypto markets continue to grow and people continue to invest in digital art and find more use cases for NFTs, what we’ve seen so far is just the tip of the iceberg.
What do you guys think? Are we just getting started? Or will NFTs soon be a thing of the past? Let me know in the comments.
