What is NFT? today’s hot topic. Now to the latest trend that’s sweeping the internet they’re called NFT. They’re now selling for huge bucks 69 million dollars. So, what’s behind this latest craze that is the question to ask. There’s some super strange stuff happening online right now, and I need to tell you about it. Further below let’s look at what is NFT.
First look at this tweet the first tweet ever tweeted in the history of Twitter and the tweet was by Jack Dorsey one of the co-founders of Twitter and this tweet were somehow just purchased for two million nine hundred and fifteen thousand 835 dollars and 47 cents. It’s not just a tweet just last month a single jpeg sold 469 million dollars. Further lets look into what is NFT.
The NBA is selling little moments of basketball games for hundreds of thousands of dollars this is all sorts of digital things that people are purchasing a version of them for lots of money. There are three simple letters that you need to understand what’s going on here and those letters are NFT until the latest trend is sweeping the internet what exactly is an NFT. What an NFT is doing that stands for not safe for work, what is this NFT, what does this mean, and why would you pay for an NFT.
This story is much bigger than a six hundred-thousand-dollar cat gif or a three-million-dollar tweet it’s a story about human psychology and how the way we value things is shifting because of technology. A technology that some people think may revolutionize our society while at the same time accelerating the climate disaster it’s nuts. It’s all these things together and I want to explain it to you so let’s do this what NFT stands for non-fungible token there it is the explanation for fungible
let’s talk about the word fungible it’s this very specific word those economists use it has a very precise definition (of goods contracted for without an individual specimen being specified) replaceable by another identical item; mutually interchangeable.
I want to use a different word for fungible let use the word replaceable for fungible. Non-fungible means non-replaceable you can’t replace it and it’s unique. Consider an example let’s say you want to buy an orange jacket and you want to buy an orange jacket from an e-commerce shop you find a jacket costs 39 dollars if you purchase one of these jackets for 39 dollars you don’t care what specific jacket they send to you they’re going to make thousands of jackets in your size send them to stores send them to people and they will send one to you don’t care which one it is the jacket is fungible it’s replaceable as long as you get one that’s identical to the rest it’s worth the same to you they’re interchangeable. There are only one unsurprisingly non-fungible things are way more valuable than fungible things so that’s the NF in NFT non-fungible.
Now let’s talk about the T which is token this is a very internet word and to explain this I must explain something I have avoided explaining for a very long time the blockchain luckily there’s a way to understand this and I’m going to make it as painless as possible. Let’s say I want to buy three slices of pizza from my friend Amir he charges me six dollars for these three slices I don’t use cash anymore so I pull out my debit card my bank card. I swipe on his little terminal as soon as I swipe this card a message is sent to my bank, and it says hey Johnny who has an account at your bank wants to spend six dollars on pizza and that money needs to go to Amir’s bank.
This is like the bread and butter of what a bank does all day they document every transaction that comes in from all their customers they send out money to the other banks and at the end of the day they have a detail of all the money that went out of your account and into your account. They can give you a number based on all of these transactions you have fifty dollars in your bank account and so when that request comes in as I swipe my card my bank is like okay so based on all of your transactions you have 50 dollars in your account, I can send six dollars to Amir’s bank and they approve the transaction once that money comes into Amir’s bank. Amir bank is doing the same thing they’re like oh he had 80 dollar and now she has 86 dollars. They add it to her record and your money is just a number on a screen it’s the result of a bunch of transactions you don’t barter with physical things, and you don’t use cash as much so the bank keeping meticulous records of every transaction becomes important, we trust the bank to do this correctly so thank you banks.
The rise of the internet people started to wonder is there a way that we could do this same thing coordinate this transaction of transfer of money between two people without the bank. The result is a very clever concept called the blockchain. The blockchain fulfills the same thing the bank was doing but instead of doing this privately on my bank account and talking to Amir’s bank all the transactions are recorded publicly on the internet. So, let’s redo this example in a crypto world Amir charges me six crypto coins for my three slices of pizza I go to swipe my bank card to say yes I want to pay you six points instead of the bank seeing that request for a transaction and trying to validate it goes on to this public record where a bunch of people’s computers all around the world are keeping track of every single transaction of everyone.
If I don’t indeed have the six coins in my account to pay Amir all the people’s computers who are keeping track of every single transaction will notice that there’s a discrepancy, they’ll be like whoa dude you don’t have six coins. We’re looking at every transaction ever and you don’t have six coins your transaction is rejected.
If I do have six coins all the computers looking at the public record will see that request for a transaction. They’ll be like yep approved you have six coins and now Amir has six coins, and they’ll write that transaction into the public record now Amir having those six extra coins is now the business of everybody. The point here is that the group verifies the legitimacy of every transaction by keeping an eye on every transaction to make sure that it adds up.
So, you’re wondering what does the blockchain and this public record have anything to do with Cat Gifts that sell for six hundred thousand dollars. Well, I’m about to tell you so in my pizza example we talked about blockchain to verify currency transaction. I pay you this much you pay me this much and everybody knows how much everybody has because it’s all public. But this is where it starts to bend my mind a little bit what if we apply this to something that isn’t money or currency. Let’s say one day you’re just looking at the ledger and the ledger’s like johnny wants to give Amir six coins okay he’s got six coins approved and then a transaction comes up.
This is like a Malaysian businessman wants to give three million dollars’ worth of coins to Jack Dorsey in exchange for a little token or digital certificate that says that the tweet is now somehow owned by the Malaysian businessman. The only thing that the blockchain cares about is does the Malaysian businessman have three million dollars’ worth of coins. So, a bunch of computers all around the world look at the whole entire list of transactions and say like yeah, this guy has more than three million dollars’ worth of coins they approve the transaction and now it is written in a public record that is unalterable that says that this Malaysian businessman owns this tweet.
The token has been transferred to somebody new non-fungible token NFT and if there’s anything that gets human psychology to value something. There are tens of thousands of NFTs of all kinds some music is being given tokens, lots of art is being minted as tokens and being bought or sold and then there’s NBA top shot who’s taking advantage. These highlight top shot moments from your favorite NBA players have been turned into non-fungible tokens. Jesse made headlines the other day when he paid 208,000 dollars for Lebron James top shot. The weirdest thing as soon as humans have enough abundance and have their basic needs met food shelter warmth etc. the next frontier is to create value in things that have no inherent value. The value turns into psychological hype excitement around a certain thing we’ve been doing that forever I mean that’s the whole art industry is based on the idea of a bunch of people deciding that this painting this little bit of canvas and paint is valuable.
The only difference is we have the technology to do this in a non-physical way using this very sophisticated internet technology that is maturing very quickly. A lot of hype and I know you’re probably thinking like cool there’s a bunch of rich people online buying and trading digital art. There’s millions of dollars’ worth of cards and this was going to have the potential to change the world and I’m getting there but first I need to talk about the crazy flip side to the NFT.
The reality is that the technology that is the backbone for all the blockchain stuff relies on the public ledger thing. I talked about like that is the sort of heart and soul conceptually but mechanically like physically what it relies on is computers doing a bunch of little calculations all day and night forever these computers aren’t real computers they don’t have any memory or screens or anything they all they do is just make little micro calculations all day all night. The most of NFTs are stored on a blockchain called Ethereum and as of now the Ethereum blockchain is using 33 terawatt hours of electricity and a terawatt hour of electricity is the same amount of power as the country of Serbia. The generating electricity usually comes from power plants that are burning fossil fuels that are putting carbon into the atmosphere which is a big freaking problem a man-made disaster on a global scale.
The power consumption of the Ethereum blockchain is exploding it is just quadrupled in like eight months and it is showing no sign of slowing down it is a lot of energy. We are probably in that stage of NFTs it’s hype, it’s novel it’s exciting but what it’s doing is it’s pushing our minds to think differently about how we validate and verify things. if someone buy a house there is a whole thick stack of paperwork and a bunch of middlemen to make sure that it is very clear who owns the house and how that money gets transferred from one person to another. It is like a nightmare of an experience if suddenly technology existed that took away the centralized middleman and made transactions between people able to be authenticated verifiable and much smoother that could change our world. This is a crazy moment where we’re getting our heads around a new technology and what it means and eventually, we’ll adapt this won’t be crazy this won’t be novel anymore prices will go down but the technology that allowed it all to happen will probably stick around you.