20
It's estimated that people spent around $25 billion
on them.
To put that into context, that's how much the World Bank
spent on purchasing and deploying COVID19 vaccines.
Anyway you look at it, that's a lot.
So what exactly is an NFT and why are people spending
so much money on them?
Are they here to stay or is it just a passing fad?
This is
Have you ever heard of the
It's one of the most popular NFTs
and recently, Justin Bieber purchased one
for $1.3 Million US.
but he's not the only one.
There's a long list of celebrities who have purchased
Bored Ape Yacht Club
like
Well, essentially it's a piece of digital art.
Check it out.
I mean, it's pretty cool, but $1.3 million
for a JPEG?
Enter NFTs, NFTs stand for non fungible tokens,
but if I'm going to be honest,
that really doesn't help me understand what it is.
There's a lot of terms in the script that we're going to need
to understand in order to even hope to understand NFTs.
Let's start with fungible.
Essentially, it means something that can be exchanged
for something of equal value or broken up
into smaller parts and still equal the whole
it was split from.
Think money, if we have one five dollar bill,
you can exchange it for another five $5 bill
or a digital transfer of five dollars.
If you break down that $5 bill into five loonies,
they're just smaller pieces of a five dollar bill,
and when you add them back up, it's still five bucks.
It's the same thing with gold or crypto currency.
Nonfungible means that something can't be exchanged
or broken down into smaller parts.
It means that it's unique or one of a kind.
Next up, token.
A token is defined as something resembling
a coin that is issued for a use by a particular group
with specific terms.
It's also a form of crypto currency
like a Bitcoin token.
Enough terms for now, we know what the words in NFT means,
but what is an NFT?
Andreas Park is a Professor of Finance
at the
and he said...
An NFT is in principle, just a digital certificate
that shows that you own a digital item.
OK, I get it now.
[chime]
An NFT is a way to give ownership of something digital
to an individual.
Think of it like a digital signature.
Where an artist would sign or write their name
on their painting,
A digital artist would create an NFT.
Let's say you don't collect fine art or digital art,
and you play video games instead.
Andreas thinks that NFTs could apply to this as well.
♪ [upbeat]
If you play
you create a game where you create a character or the like,
you can be the owner of it, but only as far as
is concerned.
Now what an NFT is is something more general,
it means that you're an owner of a digital item,
irrespective of a firm like
♪ ♪
Lots of things can be NFTs.
Some popular examples are digital art like
the
or sports moments like
even virtual houses in a digital world.
Meet Krista Kim, a digital artist who created and sold
a digital home for a lot of money.
I wanted to create a digital house that
I can visit in virtual reality.
The Mars House is the first Metaverse house that
was sold in the world.
You might be thinking, that's crazy.
Someone spent that much money for a virtual house
they can't even live in?
Well, it comes down to ownership.
Buying the NFT proves they own that unique digital house,
but that doesn't explain why it's so valuable.
The Mars House is one of the first artworks
that really made the world pay attention
to the possibilities of owning property and assets
in the Metaverse,
and the only reason why the Mars House can be considered
a Metaverse house or an asset
is because it was minted as an NFT.
Another reason why NFTs can become so valuable
is because they are unique, and when something
is unique, it creates scarcity.
OK, it's time for another definition.
Scarcity means that there isn't very much of something
it can be an object or in this case,
a piece of digital art.
When it's only one of its kind, that can lead to people
willing to pay extra for it.
OK. This is still really confusing,
even with all of our definitions.
So let's imagine I become a digital artist and I create
my own version of the
I created it on my computer, and now I have a finished
piece of digital art,
but if I just posted online, that means that anyone
can copy it or claim it to be their own.
In order to make it unique and prove that what I had
is the original, I need to add
my digital signature so I make it into an NFT.
This process is referred to as minting an NFT.
Hold on. We need another definition.
Minting or to mint
is a term that is most commonly used to describe making coins,
tokens or metals.
In this case, we are minting NFTs.
So how do I mint this cool piece of art that I created?
Well, there's programs online like
where you can sign up for an account,
pay a fee, and mint your artwork into an NFT.
Now that my art has been turned into an NFT,
I can sell it online and ensure that the buyer
knows that they're getting the original piece of art.
But how does an NFT make sure that the ownership
can be verified?
Well, it uses something called
Another definition?
Are you kidding me?
Let's let one of the experts take this one.
Blockchain
if you want, a database, it's an infrastructure,
which allows the storage and transfer of something valuable.
It's often referred to as a digital ledger,
a place where you can keep track of transactions
of an item or currency,
and because
and verify who owns it, who sold it and bought it,
and who created it.
It's really this
and track the ownership of a digital asset.
Sounds pretty good, right?
Certifying ownership of digital art, selling it,
which generates value.
Pretty cool, right?
But not everyone thinks NFTs are a good thing.
The biggest criticism is the environment,
According to Matt Powell, a senior sports industry
advisor who's written articles on NFTs...
it takes a tremendous amount of energy
to maintain this history in
There are similar criticisms about crypto currency
and crypto money.
For example, Bitcoin takes up more energy per year
then the whole country of Finland
and there's 5.5 million people living there.
Another criticism?
They are elite. The NFT market is hyped
because of wealthy people like celebrities
buying and selling these pieces of digital art,
which increases their value
and their value is volatile.
Matt Powell thinks the values of NFTs could crash,
meaning they can be super expensive today
and worthless tomorrow.
If people keep driving the value of NFTs up and up and up,
and all of a sudden, once one day somebody says,
wait a minute, I don't think this is worth that...
..the whole thing could collapse.
We saw that happen with crypto last month,
where crypto currency had gotten to a very high level,
and all of sudden people decided to head for the exits.
It's like trading cards.
You spend a lot of money on specials,
hoping they're going to be worth more money in the future
and then something bad happens like the hockey player
loses their mojo and you realize that
no one's going to buy that card anymore.
Anything can happen, it's the Wild West.
But the Wild West, as Matt puts it,
didn't last.
So will NFTs?
Right now, they might be associated with digital art
and virtual houses, but...
You could attach an NFT to a sneaker or expensive
perfume or an expensive handbag, and that creates authenticity
for, for those physical items.
So maybe
and be the dominant NFTs,
or maybe NFTs and
for things we can't even imagine.
Krista Kim even thinks that...
NFTs are the building blocks of the Metaverse,
so eventually NFTs are going to become the architecture
of all human exchange, exchange of ideas
and exchange of commerce and exchange of digital assets.
Wow, what a wild journey into the world of NFTs.
Maybe once we publish this video, we can mint into an NFT
and sell it.
Oh, one sec, my producer is talking to me...
Oh, we can't?
Because we're a public broadcaster,
we're not in the business of profit...
Oh, OK.
But you get the idea.
That's it for
For
♪ ♪
These super smart people helped me navigate the world of NFTs.
Andreas Park is a Professor of Finance
at the
Krista Kim is a Metaverse artist and NFT creator.
Matt Powell is a Vice President and senior industry advisor
for the
I also referenced information I found at the following sites.
Reuters, New York Times, Wall Street Journal,
♪ ♪