Week 7: Non-fungible tokens (NFTs)

You've probably heard about NFTs in the media during the last couple of years whether in the form of the 'Bored Apes club' selling for millions or 'Beeple's Everydays the first 5000 days' selling for $69.3 million at Christie's a few years ago. NFT mania has been everywhere but what are they and why are they important..?

NFTs represent ownership rights to a unique digital or real-world asset.?They can be used to make it more difficult for digital creations to be copied & shared.

Brands can offer NFTs alongside real products & services which can be ‘updated’ with offers in the future.?NFTs can also be exchanged or sold through digital wallets so self-custody (like crypto) is an option too.

Their use-cases are numerous & to date, we have only seen the tip of the iceberg, mainly in a speculative form, but things are about to move up to a new level.

NFTs & Web 3.0

Before we continue, it's important to understand where NFTs fit into the bigger picture that is Web 3.0 of which there are effectively four pillars - crypto, NFTs, DeFi & the Metaverse.

Web 3.0 puts users back at the forefront of the web experience by facilitating ownership & control of data & value. This is a fundamental shift away from the Web 2.0 model which has been dominated by big tech. Remember the phrase "If you're not paying for the product, you are the product"?

Fungibility

Let's get back to NFTs & at a root level, first, we need to be reminded of what fungibility is.

• Fungible item: Example - Bitcoin or Euro which can be exchanged like for like.?
• Non-fungible item: Example - unique piece of art, essentially a one-off item or offer that has its own specific characteristics or identity.?

NFTs are therefore a powerful use-case of blockchain as they allow content creators to prove ownership rights as an example. The business applications of NFTs are just starting to become clearer from certificate authentication through to supply chain, the metaverse & beyond!

Four concepts to understand

1. Minting: Essentially means publishing a digital asset on a blockchain so that it can be bought. Every digital asset that is minted has metadata associated with it which holds information about the author, creation date, file format, policy ID among other things. The minting process on the blockchain records & verifies the transaction to ensure that an NFT cannot be tampered with or hacked in any shape or form.?
2. NFT marketplace: A digital space where users can buy, sell, or trade NFTs. It's an NFT platform that gives users the ability to own, collect, or trade digital assets that are unique. Examples at the time of writing include; OpenSea, Binance & NFT Launchpad.?
3. Wallet: This stores cryptocurrencies & allows you to send, receive & manage your crypto assets. A digital wallet can also be used to store non-fungible tokens (NFTs).
4. Transaction fees: These are the charges (gas) users need to pay to buy, sell, or trade NFTs. These fees go towards maintaining & supporting its operations, long-term storage, security.?

So, now we understand these concepts, let's look at how to create (mint) an NFT.

Minting in 5 steps

1. Choose digital item to make into an NFT.
2. Create account &/ or prepare your digital wallet.
3. Top up wallet with the crypto that you'll use to mint the NFT (typically ETH or ADA at the time of writing but many more are being used every single day).
4. Connect digital wallet to the minting website of your choice (OpenSea, NFT Launchpad etc.). The minting process sually takes just a few minutes and once complete, your NFT will appear in your wallet.
5. Store, share or sell your NFT. You now have full custody of your NFT in your digital wallet.

Important: Your digital wallet allows self-custody of your digital assets including crypto & NFTs. Do not reveal your private key or seed phrase to anyone as this could result in your assets being stolen & lost forever.

Big brands leveraging NFTs

Coca-Cola & Nike are two brands which have jumped head first into the NFT space with Coca-Cola going with vintage collectibles which raised nearly $575,000 in an online auction & Nike embarking on a digital collectibles initiative called dotSwoosh aimed at selling unique Nike shoes for the Metaverse!

Takeaway

Looping back to what I said earlier, NFTs are here to stay & once we get through this early speculative stage, they will likely evolve into some very useful & meaningful applications that will be valuable to us in ways we can't even imagine now.

As well as a revenue generator, NFTs are a fun way to foster customer engagement & coupled with social media, this is a powerful driver for many brands that'll be hard to resist.

Disclaimer

This series of newsletters complements the weekly blocklunch45 sessions and is for educational purposes only as my mission is to educate as many business leaders, entrepreneurs and consultants as possible about the miriad of amazing use-cases of blockchain. It is not financial advice in any shape or form and the examples given are to illustrate the content only.

If as a result, participants and / or readers decide to invest on any of the companies or brand names mentioned, then that is entirely at their own risk. Please do your own research (DYOR).

If you are interested in joining the blocklunch sessions then please email me at [email protected].

Jeremy Williams.