NFT

NFT stands for non fungible token. It is a way of showing ownership for a digital item. Lets first talk about what a fungible tokens is:

Fungible tokens

Fungible tokens are tokens that has the same value. If I have one bitcoin it has the exact same value as one bitcoin someone else owns. That means that dollars are fungible tokens. 1 dollar has the same value as another dollar

Non fungible tokens

So non fungible are the opposite of fungible tokens. That means that if I have a token it has a different value than some other token. You can see it much like a basketball card. Two different basketball cards have different value. One might be fairly common and one is maybe super rare which gives it more value.

Okay so two different tokens have different value, so what?

What are NFT's used for?

The most common use of NFT's is buying digital art. You basically buy a token that is signed by the artist himself. Its not signed as in the artist wrote his signature on the token. It is digitally signed through a process called minting. This process is then saved on the blockchain. Connected to the token is then some metadata (extra data). That is typically an image that shows the artwork.

So basically an artist signs a piece of art through minting. Now a buyer can buy that token proving that there is a connection between the artist and the buyer. The minting process can not be done again on that piece of work. That means that there will only be that one token that has a direct connection to the artist.

So why even bother?

Imagine you got a person to paint a fake Rembrandt in your living room. You would not be able to know that it was not Rembrandt. But that does not have the same value as a real Rembrandt. You would probably prefer to have the real thing hanging right!? So why I ask you? Well just knowing that the artwork was created by Rembrandt has real and true value even though you could not see the difference!

Typical NFT stuff

The extremely normal NFT project is the 10.000 NFT's. This is where a set of 10.000 NFT's are minted. They are all within the same category, but each NFT is varied. Giving them different traits. Fx this CryptoPunks project where the character can have different hair color, skin tone, ears, etc. The traits are randomly generated and different traits have different rarities (how rare they are). The rarer a NFT the more expensive it is. There is a website for figuring out how rare your NTF is: https://rarity.tools/

So how do I buy a NFT?

There are lot's of ways to buy NFT's. Typically you would go to a NFT marketplace like

https://opensea.io/- Marketplace for trading NFT's on the Etherium blockchain
https://www.hicetnunc.art/ - Marketplace for trading NFT's on the Tezos blockchain
https://objkt.com/ - Marketplace for trading NFT's on the Tezos blockchain

Then you can buy NFT's through those sites. That typically works by connecting a crypto wallet containing all your crypto. You can now buy NFT's. Sometimes it can be a bit of hassle though

The technology behind

The technology behind in in some sense the blockchain. Diving even further it's a smart contract (code hosted on the blockchain).

Etherium NFT

If we talk strictly Etherium NFT's has to own up to some rules/standards. Those standards are called ERC721. You can read more about them here: https://ethereum.org/en/developers/docs/standards/tokens/erc-721/

Tezos objekt

On Tezos the NFT's are called objekt's (because everything in crypto has to be impossible to understand). It's another smart contract just hosted on the Tezos blockchain

Where are NFT's stored?

It depends.

Sometimes it is hosted on just a server
Sometimes they are hosted on this site https://ipfs.io/ which provides the possiblity to upload hypermedia in a peer-to-peer fashion (images, gifs, videos, etc.)
The NFT's can be hosted on the blockchain itself aswell: https://www.larvalabs.com/blog/2021-8-18-18-0/on-chain-cryptopunks

Why are people buying NFT's?

So tons of people think it's the dumbest shit in the world to buy NFT's. It's often accused of money laundring, bad art and just a lot of negativity towards NFT's

I have been thinking a lot about really trying to answer the hard way by buying NFT's, selling NFT's, FOMO buying NFT's, thinking about NFT pricing. Here are my preliminary findings (that might be totally wrong)

Some people really enjoy a piece of work and actually enjoy the thought of being the only person that has a token for that piece of art. There is a direct connection from the artist to the owner (through the token)
Some people really wants to support digital artists and does that though NFT's
Some people are in it for the money. Buying a piece of art and then selling it to a higher price
Some people are not really sure why they bought
Some people buy out of FOMO. There is this new hot NFT and you can only buy it today
Some people buy NFT's for the community that is formed with other people owning the same type of NFT. Here are a few examples: https://www.lootproject.com/, https://secretscrollsociety.com/

There are probably 1000 more reasons but I think a combination of actually liking the piece of art (even though you can just download it) but also maybe selling it to a higher price later