“NFTs are a new technology and understanding them will give you an invaluable problem solving tool in your toolkit as an entrepreneur, a new way to raise money, access to golden investment opportunities, and so much more.”– Julian Alvarez
This was a monumental year for NFTs. The most expensive NFT was sold for $69.3 million. The market cap (total money in NFTs) of NFTs went from $17 million in January to $3.25 billion in August (19,000% increase in 8 months). The trading volume went from $4.75 million to $6.5 billion in the last year (141,000% increase). And finally, this year, the number of people that own an NFT went from 1 million to 25 million. This is truly insane exponential hockey stick type growth, and things are just getting started.
You may be thinking, “Alright yeah, that sounds pretty wild but WTF is an NFT and why should I care?”
WTF is an NFT?
No, NFTs are not Northern Fried Tacos and they are not Ninja Fighting Tattoos. NFT stands for non-fungible token. To understand what non-fungible means, let’s first understand what fungible means. When something is fungible, that means it can be exchanged for something else of equal value. For example currencies like the USD or Bitcoin are fungible. You can exchange any $5 bill for any other $5 bill and you’ll have the exact same thing.
On the other hand, non-fungible means that something is unique. There is only one version of that thing and it cannot be replaced with anything else because there is nothing of exact equal value. For example, an original painting is non-fungible because there is only one original painting. Real Estate is another example of something non-fungible. In fact, almost everything in the real world is non-fungible.
This may be a bit difficult to understand because we have never thought of anything that is digital as being scare and the concept of owning something digital has also never really existed — until now. For the first time ever, people can now create & use NFTs to genuinely own digital objects that are scarce.
[1:26] Why you should care about NFTs
💬 Discussed in this episode…
[2:42] Data on market cap, volume, & adoption growth
[4:28] WTF is an NFT?
[7:50] How do NFTs work?
[13:50] The different use cases for NFTs
[14:50] Use Case 1: Digital Art / Collectibles
[21:20] Use Case 2: Music
[27:10] Use Case 3: Access based NFTs
[30:33] Use Case 4: Gaming
[35:50] Use Case 5: Redeemable
[36:29] Use Case 6: Identity
[37:12] Use Case 7: Certifications / Credentials
[38:40] Use Case 8: Land in the Metaverse
[43:34] Use Case 9: Fractionalized Ownership
[47:15] How to think about NFTs
[49:25] How NFTs give financial power to creatives
[58:10] How to buy NFTs
[59:13] What to look for when investing in NFTs
[1:01:20] The future of NFTs
How Do NFTs Work?
NFTs are possible thanks to the technology of the blockchain, which is the same technology that powers Bitcoin. The blockchain can be thought of as a public decentralized database, where anyone can see what is currently stored on the blockchain and see the full history of all transactions. Therefore, with NFTs, you can see a record of when the NFT was created, who currently owns it, and the history of all the transactions for that NFT. These NFTs uniquely represent pieces of media that can be anything digital, including art, videos, music, gifs, games, text, memes, and code.
Use Cases For NFTs
There are many different use cases for NFTs today but given that it is such a novel technology, new use cases are continuing to be created every day. Here are a few of the use cases that are covered in this episode.
- Digital Art / Collectibles
- Access Based NFTs
- Certifications / Credentials
- Land in the Metaverse
- Fractionalized Ownership of Assets
In this episode, we also discuss how NFTs are giving unprecedented financial power to creatives, how NFTs will change internet culture, how to buy NFTs, and what to look for when investing in NFTs.
NFTs are still early, and will evolve. Their utility will increase as digital experiences are built around them, including marketplaces, social networks, showcases (virtual museums, your own space in the Metaverse), games, virtual worlds, and more. Someday every internet community might have its own micro-economy, including NFTs and fungible tokens that users can use, own, and collect.
💣 3 Value Bombs
💥 1. As an entrepreneur, you will only succeed if you have a viable business model. Without money, you will die. Therefore, I think understanding the tokenomics of different cryptos, NFTs, play to earn games, and other things happening in this space is critical. There are literally new business models being invented out of thin air every day in this space.
💥 2. By understanding the different use cases for NFTs, you will be empowered to come up with new creative solutions for existing problems. Additionally, you can think about how these use cases can be combined together and how NFTs can be used with other exponential technologies to create a truly unique and impactful solution.
💥 3. NFT projects are able to grow so efficiently with almost no advertising spend because users feel like owners — they have skin in the game. They have a financial incentive for the creator to do well, which means they will advertise the creator and their creations for free. It’s true peer-to-peer marketing, fueled by community, excitement, and ownership.
📚 People & Resources Mentioned
Chris Dixon → A lot of the ideas and notes for this ep were taken from Chris. I recommend following him on Twitter
NFTs and A Thousand True Fans by Chris Dixon.
Axie Infinity → The most popular crypto game with a play to earn model. Highly recommend learning more about this game even if you are not into gaming.
Royal.io & Sound.xyz → Two new platforms that use NFTs in the Music space. In Royal.io you can buy NFTs to get fractional ownership of a song
Opensea.io & Solsea.io → Two of the biggest NFT marketplaces.
CryptoPunks & Bored Ape Yacht Club → Two of the most popular and expensive NFT collections.
Sandbox & Decentraland → two of the most popular Metaverses where land NFTs can be purchased.
Deadmau Concert in Decentraland
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