What is an NFT?
How do I Buy one? Why would I want to buy a digital file
that I can just copy in a second? Is it just another bubble? Well, stick around, in this episode
of Crypto Whiteboard Tuesday we’ll cover these questions and more. Hi, I’m Nate Martin
from 99Bitcoins.com and welcome to Crypto Whiteboard Tuesday where we take complex cryptocurrency
topics, break them down and translate them into plain English. Before we begin, don't forget to like the video
and subscribe to our channel to receive the best explainer videos
about Bitcoin and cryptocurrencies in the industry. Today’s topic is NFTs. NFT stands for Non Fungible Token,
but what exactly is “Fungible”? Well, you can think of something
that is fungible as interchangeable or as having no unique properties. For example, if I have a one dollar bill
and ask you to trade it with me for a different one dollar bill you probably won’t have
any issue with that, since they are basically
two of the same thing. Meaning both dollar bills
are fungible. However, if by chance, you happen to have a rare dollar bill
with unique markings or a unique serial number
like, say, 12345678 or a true binary serial number
where all of the digits are either 0 or 1, you probably won’t be
so inclined to trade it. These one dollar bills
are extremely rare and can be traded for
up to 5000 dollars and more. In other words,
these bills are non fungible, they are unique
and have specific attributes that distinguish them
from the rest of the bills. So a non fungible token
is like a unique dollar bill. It’s a digital coin that has
unique attributes attached to it. Fun fact, Bitcoin
and many other cryptocurrencies are considered non fungible
in the sense that you can attach a certain history
to a coin. Meaning, if a certain Bitcoin was used
for illegal activity it may be worth less than a newly
minted Bitcoin with no history, but more on that in another video. Coming back to NFTs, they are basically unique coins,
but what are they used for? Well, they are used to prove ownership
of a certain digital file, or a digital certificate of authenticity. Confused?
Don’t worry, let’s break it down. When we look at a piece of art,
a painting for example, the original painting is always
much more valuable than its copies. And there are specific methods you can use to validate
the authenticity of that painting. For example, receiving a certificate
of authenticity. But when it comes to a digital file, how do you know what is the original
and what is a copy? And does it even matter? Well apparently it does. In the same way that people
collect physical art, digital goods are becoming
very popular. For example, I can write an ebook
and sell the first copy of it as an NFT. Whoever buys it from me
will have the right to say that they own the first ever copy
of my book. But here is where it gets tricky. You see, it’s not that I gave the buyer
any rights to my book or anything tangible for that matter. I only gave the buyer the right to brag
that he or she owns the first copy. So unlike buying a painting in real life
and taking it home for example, with an NFT you don’t have any power
over the goods that you’re buying. That’s why it’s questionable as to
how valuable NFTs actually are. I mean, an NFT is worth only as much
as the next guy is willing to pay for it. And if it doesn’t even exist
in the physical world, well… some people find it
a hard concept to grasp. Now let’s talk about
how an NFT is actually created. A creator creates a digital good, this could be an image, a video,
a tweet, a website or anything else that lives
in the online world. The creator then creates a coin,v or more accurately a token, on a blockchain that supports
smart contracts like Ethereum, Cardano or Solana. This token holds within it information about the digital goods
that are being sold. This information includes
the token name, the token symbol and a unique hash that proves
the authenticity of the NFT. Keep in mind that
the digital goods themselve aren't stored inside the token, only attributes relating to them. So while the NFT may point to where
the file can be found online, anyone can use that link
and it’s not unique in any way. Once the token is created
the creator can sell it to someone else, and that someone will be the new owner
of that digital good. To sum it up, an NFT is a token on a blockchain that acts as a digital certificate
of authenticity. It can be verified instantly and also show the history
of its previous owners. Aside from being non fungible,
or unique, NFTs are also indivisible,
easily transferable, fraud proof and programmable. This means that NFT creators can decide
that royalties will be paid to them each time an NFT changes hands. Some examples of popular NFTs
include cryptopunks - a collection of 10,000 eight bit style
pixel art images of… well… punks, that are sold as NFTs and their price has already surpassed
several millions of dollars. Another example is NBA Top Shot - a marketplace where fans
can trade NFTs of NBA moments. These moments are video clips
packaged as an NFT, a bit like the trading cards
we used to have back in the day. Using NFTs for sports highlights is another way players can make money
by getting royalties when a Top Shot moment
that they are highlighted in gets sold as an NFT. Additional popular examples
include Jack Dorsey, the founder of Twitter,
selling his first ever Tweet as an NFT and the artist Beeple selling an NFT
of his work for 69 million dollars. Now that we’ve covered the theory,
let's get down to practice - how do you actually buy an NFT? In general there are two types
of NFT marketplaces - centralized and decentralized. The centralized marketplaces
allow you to sign up and fund your account using a credit card
or other form of payment. For example, Nifty Gateway
is a centralized NFT marketplace owned by the exchange Gemini. There, you can buy NFTs
using your Gemini balance. On the other hand, if you want to make NFT purchases
through a decentralized marketplace you’ll need a wallet that’s compatible
with the blockchain your NFT was created on. For example, in Ethereum’s case,
MetaMask is the most popular option. It’s a wallet that was built
as a browser extension and you can use it to log into
decentralized NFT marketplaces such as OpenSEA, Rarible or SuperRare. We’ll leave links to all
of these Marketplaces and to MetaMask in the description below. Once you fund your account or wallet you can just buy or bid on
different NFTs in the marketplace. In the end, an NFT is just a coin,
or token to be more precise, that is stored on your wallet
just like any other cryptocurrency. Keep in mind that unless
you’re an avid collector you’ll also need to sell the NFT
at some point, and NFTs aren’t very liquid. In other words, they don’t always have a market
of people who want to buy them. Just like it might be hard
to find someone who’ll pay thousands of dollars
for a rare baseball or pokemon card. As you can imagine,
this market is very hype driven. This could lead to a situation where a person buys an NFT
for millions of dollars only to find out that
he can’t sell it later on since the interest in that
specific NFT is no longer there. So now we come to the question - if all an NFT is basically bragging rights
about a digital file, what can I actually do with it? Well, most people find some
creative way to show it off. For example, some NFTs are displayed
digitally across art galleries. Another creative idea
that’s been getting quite popular is to use a digital frame
that can display the NFT and hang it up in your house. Alternatively you can use
a physical print of the NFT with a QR code next to it pointing to your proof of ownership
on the blockchain. There are also online galleries
inside virtual worlds that are used for displaying NFTs. As you can see, the opportunities for displaying
your latest digital artwork are abundant. But NFTs aren’t used only for art. Actually, anything that is unique
or needs a proof of ownership can be created as an NFT. In simple terms, an NFT is a term used for tagging something
in the digital world as your own. So anything that requires such tagging
can benefit from the NFT technology. For example,
Decentraland is a virtual world where users can buy digital land
that can be sold or used for advertising. Online games can use NFTs to prove
ownership of rare digital items that players can then start trading
amongst themselves. Unstoppable domains,
which we’ve covered in the past, uses NFTs to establish ownership
of domain names. NFTs can also be used as collateral
in DeFi instead of cryptocurrencies. It’s the equivalent of pawning
something you own in order to get a loan
in the real world. NFTfi is one example of a marketplace
for NFT collateralized loans. As you can see,
the ideas are endless. So are NFTs the next big thing or are they just a craze
like the 2017 ICO mania? It’s hard to say. On the one hand, it seems like
everybody's talking about NFTs and all the big companies are moving
into this space. On the other hand, it’s hard to wrap your head around the concept of people paying
millions of dollars for a digital proof of ownership
without any claim in the real world. I guess only time will tell
what the future holds for NFTs. That’s it for today’s video. Hopefully by now you know what NFTs are - cryptocurrency tokens that provide
proof of ownership for a digital item. You may still have some questions. If so, just leave them
in the comment section. Finally, if you’re watching
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