This question has been cropping up all over Twitter, in conversation, and was even the first question that came up when I started typing into YouTube. So what is an NFT, is this going to be similar to the Dot Com Bubble or the Tulip Mania in 1634? (Yes, this is where Dutch people thought that tulips were super cool, so much so to the point that a tulip bulb could cost 10 times the annual income of a skilled worker.) Let’s dive a little deeper into the internet’s latest craze.
Let’s start with the basics- NFT stands for ‘Non-Fungible Token’. To be honest, the word ‘fungible’ was one that stood out to me, not because I like that word, but because its definition is so specific and complicated that it’s easier to just say ‘replaceable’. Essentially, this means that an NFT is unique, one-of-a-kind, like the Mona Lisa or the Venus De Milo. An NFT is unlike any other. The T, token, is all to do with blockchain. Essentially, blockchain is a public record of transactions; so if one person makes a transaction, everyone else can see it, and it’s almost impossible to change, hack or cheat the system. This kind of technology has become very popular as peoples’ mistrust of centralised banks increases.
This is all well and good, but what do all these concepts have to do with GIFs? Or random pictures online? In theory, this all boils down to human psychology. Who decided that gold was valuable? Or paper money, or fine art, or….anything for that matter? If a large enough group of people decides that something is of value, then it becomes so. A large group of people basically decided that things online (tweets, pictures, music, highlights of an NBA game, you name it) are valuable enough to have a numeric value to them. But, how can someone buy something that doesn’t tangibly exist? Well, with blockchain, we have the technology to be able to put these purchases on public record, so that no one can dispute that a specific person has bought a specific image, or whatever it may be.
Does anyone remember Nyan Cat? That strange little GIF way back when Myspace was a thing? It’s a GIF of a pixelated flying rainbow cat? Well, in February, Nyan Cat’s creator Chris Torres sold the NFT version for roughly $580,000 USD. This was the first ever meme to be sold as an NFT, and I think it does mark a new era where digital artists can have the same recognition as normal ones.
And I know that all this may seem ridiculous to some, ‘how can you own something that doesn’t exist’, but the reality is that our world is now moving online. Back in the 90s, the internet was taking off; people would never have imagined that all our banking can be done online, we can send people money via our phones or that we wouldn’t need a physical credit card or cash to make payments. Isn’t that the same as us thinking that NFTs aren’t real? Money is no longer just tangible cash or card- it’s a figure on our computer screen. So I think it’s only natural for the world of investments to head in this direction. I think that the stage our world is at with NFTs, is the stage we were with the internet in the 90s. It’s a hype right now, the new technology is exciting. But, will it crash or burst like the Dot Com Bubble, the Real Estate Bubble or Tulip Mania? Is this all a fad that will burn out- the brightest star burns quickest…will that be the same for NFTs?