RAMSEY KHABBAZ: I'm Ramsey Khabbaz, an editor
at Harvard Business Review.
And today, I'm going to be trying
to understand, what are NFTs?
I've been seeing this new acronym in the news a lot
lately.
NFTs seem to be everywhere.
Everyone's talking about them.
But I'm having a really hard time understanding.
What are these things?
How do they work?
What's the point of them?
And what are the implications on business?
So in order to unpack it, I called up
my colleague, Tom Stackpole.
He is a senior editor of technology here at HBR.
Tom, NFTs, explain them to me.
THOMAS STACKPOLE: Absolutely.
They are kind of confusing.
NFT stands for non-fungible token.
And basically, what this means is it's a digital object,
and it's one of a kind.
RAMSEY KHABBAZ: Can you explain this term non-fungible?
Because aside from just being a fun word to say,
I feel like it's a key term in this acronym.
THOMAS STACKPOLE: Right.
Totally.
So yeah, fungibility is the key here, right?
Fungibility means you can exchange something
for something that's exactly the same.
Dollars are fungible, but the Mona Lisa is not.
There's one Mona Lisa.
You can look at replicas or posters of it,
but there's really just one of them.
RAMSEY KHABBAZ: Could you explain to me
how NFTs relate to two other key tech buzzwords--
Bitcoin and blockchain?
What's the relationship between those three terms?
THOMAS STACKPOLE: So NFTs and Bitcoin--
or cryptocurrency in general--
are built on blockchain.
Blockchain is a term we hear a lot,
but it basically means a technology
that uses a distributed ledger.
So the trick about a distributed ledger
is it basically means the same information is stored
in a bunch of different places.
With cryptocurrency, it's a way to verify that digital money is
real, that it's worth something, And it's not just like--
I don't know-- a PDF that I made that says,
I have this much money.
With NFTs, basically you get a stamp that says,
I bought this gift, and this is the original gift.
This is the real one.
RAMSEY KHABBAZ: So in real world terms,
blockchain is basically just creating a certificate
of authenticity that you would get
with any expensive piece of art or expensive collectible.
THOMAS STACKPOLE: Yeah, exactly.
And the way that it works is that it's
stored in a bunch of different places at the same time.
So it's like, you can't forge it because it's on all
of these other computers.
RAMSEY KHABBAZ: Can you give us some examples of where NFTs
are popping up in real life?
THOMAS STACKPOLE: I mean, basically, the reason
they're in the news is because people
are making a ton of money.
A piece of art by an artist named
Beeple was sold at Christie's for $69 million.
Also, artists like Grimes have been making NFT pieces of art
that they've sold for bunches of money.
The NBA is getting in on the game.
They've been making these trading-card-style NFTs called
Moments.
So you're an NBA guy, right?
You collect cards.
RAMSEY KHABBAZ: I used to collect cards.
But I don't know if I'm going to be getting into the Top Shot
craze.
[CHUCKLES]
THOMAS STACKPOLE: So basically, with Top Shot,
it's basically clips that you can find on YouTube,
but they're an authenticated part of a series.
So yeah, basically, there's this new collecting craze,
and people are burning through cash.
RAMSEY KHABBAZ: Are the people spending on NFTs right now
and putting their money in there?
Do you think that they're doing so
because they see a real collectible
value in these things?
Or do you think it's a more cynical money move,
and they're just going to plan on flipping and riding
this wave?
THOMAS STACKPOLE: I think a lot of people
are asking that question.
And so if you think about collecting
and why people collect, they collect
for all kinds of reasons.
And on some level, most of them are irrational, right?
Beanie Babies are a couple dollars of--
maybe, not even that-- but a little bit
of fabric and stuffing, and those were worth a ton of money
at some point.
A Michael Jordan rookie card is just paper and ink,
but some people are investing in it.
Some people, maybe, are just super into basketball,
and like the history, and like the fact
that they own an object that other people can't
get their hands on.
I think the thing that's driving this is scarcity.
So if you think about the digital economy, up until now,
scarcity has been really hard to create.
It's like, I make a funny GIF.
Give me some credit for trying to do that.
But let's say I made a GIF that's great,
and it went viral.
With NFTs, all of a sudden it's like, you can create scarcity
on the internet.
You know the flying Pop Tart cat with the rainbow, Nyan Cat?
RAMSEY KHABBAZ: Nyan-- yeah, I don't know how to say it.
[CHUCKLES]
THOMAS STACKPOLE: I think that's how you say it.
I don't know either.
I hope it's how you say it.
But now, you can be like, oh yeah, I own Nyan Cat.
Everyone can see it, but you're the guy
who owns the Nyan Cat GIF.
RAMSEY KHABBAZ: What happens if people
stop believing that the scarcity actually
makes these things valuable?
THOMAS STACKPOLE: Yeah.
I mean, that is a great question.
I think if people stop believing in it,
then the price of these things is going to come crashing down.
[MUSIC PLAYING]
RAMSEY KHABBAZ: What are the implications of all of this?
Because it seems like the applications of NFTs
is kind of endless.
As you're explaining this to me, I'm
imagining so many different possibilities
for this technology.
So what do you predict is going to be the biggest story to come
out of this craze?
THOMAS STACKPOLE: You know, I think
that it shows a couple of things, one of which
is it's one of these use cases for how you use
a blockchain that we've been hearing about for a long time,
that blockchain can do all of these things.
And we're finally seeing a new example
other than cryptocurrency.
This is an interesting case of how you create value
and how you can really lean into the distributed
nature of this technology, that you don't need gatekeepers.
You can make art.
You can find a way to sell it yourself,
which people have obviously been able to do.
But it's sort of upping the scale.
I also think that NFTs, possibly,
do have more mundane business uses.
And so that's something that I'm curious to see if people look
at this and they're like, well, if this works for a flying
rainbow cat, then maybe I can find a way
to use this for contracts or securities.
There are probably more mundane business uses for this.
RAMSEY KHABBAZ: So just moving forward,
do you think that this is a story that I,
as someone who isn't really a tech specialist,
should I keep an eye on this?
Or is this one of those things that I could just kind of
scroll past the next time it comes up on my news feed.
THOMAS STACKPOLE: To me, NFT is kind of a--
this whole hype thing is a fun thing to watch.
It's people engaging with blockchain
in a new way, outside of cryptocurrency.
And so, I think it is bringing this a little bit
closer to the mainstream.
And it's helping people understand
the multitude of uses that blockchain really has.
But don't cash out your retirement
to fund your NFT art collection quite yet.
RAMSEY KHABBAZ: Well, all my money
is tied up in Kevin Durant rookie cards anyway, so--
THOMAS STACKPOLE: [CHUCKLES] A safer bet.
Stick with Kevin Durant.
[CHUCKLES]
RAMSEY KHABBAZ: Yeah, I'm sticking with paper for now.
Tom, thank you so much for chatting with me.
This has been really helpful.
THOMAS STACKPOLE: Thanks, Ramsey.
I'll see you on [INAUDIBLE].
[MUSIC PLAYING]