You may have come across a news article or heard a story about NFTs and probably spent a good amount of time trying to figure out why anyone would waste their time on them. But more importantly, the real question is how are NFTs going to disrupt the business world. Before we answer this question, let’s break down what NFTs really are and how they work.
What are NFTs?
NFT stands for non-fungible token. In plain English, non-fungible means a completely unique item that cannot be easily replaced. A Lebron James rookie card is not the same type of card as a Michael Jordan rookie card. Now let’s take this analogy one step further. Imagine two Lebron James rookie cards, and the only difference is that both cards have different serial numbers. While both cards may be identical, neither can properly replace the other because their serial numbers make them unique. NFTs are not like cash or different types of cryptocurrencies because those items are fungible (one bitcoin can easily be replaced with another bitcoin).
How Do They Work?
Just like cryptocurrency, NFTs are created by using blockchain technology. Blockchains such as Ethereum or Tron allow digital files to become NFTs by turning them into verifiable assets that can be easily tracked and traded on their respective blockchains. Right now, any digital file can become an NFT. It doesn’t matter if it’s a picture of your grandma, an episode of sesame street, or that mixtape you created in high school with dreams of becoming a rockstar.
Why Are They So Popular Now?
While NFTs are not at all a new concept, they began getting popular with artists and social media influencers. Logan Paul, Kings of Leon, and even Jack Dorsey have started selling NFTs. Logan Paul for example recently sold $5 million worth of NFTs associated with his living streams event. Jack Dorsey’s first tweet is currently being auctioned off as an NFT and the bids are already up to $2.5 million. One possible explanation is that artists have a new way to interact with their fan base that provides fans with a certain level of exclusivity. Another possible explanation for the craze is that NFTs give Crypto millionaires a new way to diversify their assets. Most NFT transactions must be completed using cryptocurrencies in some form or fashion depending on the platform.
How Can founders Utilize NFTs To Disrupt Markets?
Right now NFTs are popular because they create an element of exclusivity. The next logical step is to use NFTs in a utility format to create new levels of access to premium features or services. Imagine having an NFT that gives you premier access to meet and greets with your favorite celebs. Imagine a talent agency gave this type of NFT and you could have instant access to special events with some of their famous clients. Retail stores could sell NFTs that always gave their owners special opportunities to be the first in line to buy new product releases or reserve products before the general public. An NFT that lets someone be the first person in line to buy the next version of the iPhone, would generate an insanely high bid price if it ever went to auction.
For more information about blockchain technology and cryptocurrency, check out Crypto 101: A Beginner's Guide To Cryptocurrency.
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