You might think an NFT is a .jpg image or digital art. (Or you might think NFTs aren’t really a thing, depending on what you’ve heard.) But NFTs offer more substance than just a profile picture and can bring huge benefits to creators, brands, and consumers. We demystify NFTs and break down how you can take advantage of the space – and show you how to get started if you want to learn more and join the NFT community.
What is an NFT?
NFT stands for non-fungible token. An NFT is not a cryptocurrency, but like cryptocurrency uses blockchain technology to assign ownership of digital (and physical) assets. Think of NFTs and cryptocurrencies as trains running on a track (the blockchain). The blockchain provides the security and infrastructure that keeps the trains – NFTs and cryptocurrency – safe, without the need for them to be controlled by a central person or bank.
What makes NFTs special is that each NFT has a unique numerical identifier, which enables the tokenization of real-world objects. (That means the ability to securely buy, sell and trade assets on the blockchain.)
Let’s break it down. If you purchase a movie on Amazon Prime, you can only access that movie on the Amazon Prime platform. You don’t “own” that movie; you only have permission to access it. But if you buy a movie as an NFT, you have full ownership of that file – without needing access to the platform you bought it from. Your ownership of that file cannot be disputed, removed or cancelled.
What makes NFTs special?
NFTs are a blockchain-based tool that allows digital ownership for the first time in our lifetime. Digital ownership means we can access, use and share our funds, data, digital files, collectibles and more without the need for a third party. NFTs offer the ability to prove ownership, grant ownership, control scarcity and supply, and get paid and rewarded for the content and creative we put out into the world.
NFTs are often art, but NFTs can also be linked to any asset – digital or physical – including music files, restaurant and hotel reservations, experiences, goods, real estate and even voting lists. NFTs can also be used to verify products or items for counterfeit protection: an ownership record that confirms authenticity.
For creators, the ability to distribute their work on the blockchain as an NFT offers the potential to create more wealth than if they use a centralized third-party system – such as Spotify, iTunes or a traditional art agent – that takes a commission and cannot offer lifetime royalties.
Why should I buy an NFT?
Art, digital and physical, is the most widely publicized type of NFT right now, but NFTs offer additional utility. NFTs can provide access to community opportunities and clubs. One NFT can give us access to self-care tools and events, from sound baths to yoga sessions to external cooking classes.
Other NFT projects offer the ability to access IRL events and experiences, similar to a membership card. Other NFTs can be musical albums, such as Imogen Heap’s collection of six audiovisual album NFTs. Not only can she distribute her music as she pleases, but as an artist she can benefit from royalties, scarcity of settings and creative control.
Many NFTs also create impact IRL, from projects that donate to the worldwide education of women (like the Flower Girls NFT) to rebuilding coral reefs (like the SUPERCOCO-NFT). Other NFTs can be used as vouchers for unique experiences, where you can redeem the experience and keep the NFT as a souvenir afterwards.
How do I find and buy an NFT?
Although it may seem complicated, the process is not that different from buying a digital item (like an album from iTunes or a sewing pattern from Etsy). This is how you get started.
- Look at NFT marketplaces and start researching projects that strike your fancy. (We like OpenSea as a place to start.) Sign in with your cryptocurrency wallet to start surfing. If you haven’t set up a crypto wallet yet, you can download MetaMask, a software wallet.
- Choose three projects and start following the community on social media. (Discord is a popular channel for NFT projects.) See if the community and benefits NFT holders receive are right for you.
- When you decide to buy an NFT from a marketplace, make sure you have enough of the necessary cryptocurrency to both buy the NFT and cover the gas fee (a transaction fee required to move the NFT into your custody).
What you should know about NFTs
- When choosing a cryptocurrency wallet, make sure it is compatible with the NFT you are buying. (MetaMask, mentioned above, is compatible with Ethereum-based NFTs and tokens.)
- NFTs can run on many different blockchains. Gas fees, also known as transaction fees, vary by blockchain. Ethereum is the most popular network for NFTs, but tends to have very high gas fees. If you are looking for low gas fees for your NFT purchase, look for NFTs running on alternative blockchains, such as Polygon or Solana.
