January 11, 2022 - 12 min read
This article breaks down why NFTs are more than just a picture in a way you can more tangibly understand.
I’m about to explain NFTs so they actually make sense to you.
And I want to put this out there... I understand why NFTs get so much hate.
Seeing digital pictures sell for the same price as a house is frustrating. The logic just doesn’t make sense.
But when you learn what’s under the surface of NFTs, you’ll understand why the big numbers might make sense. And maybe you’ll want to make or collect an NFT of your own…
“It’s easy to criticize something you don’t fully understand” - David Letterman, right before asking Bill Gates what the internet can do in 1995.
Bill Gates replies, “On the internet you can listen to a baseball game”
David Letterman replies, “Does radio ring a bell??”
The audience laughs.
Bill Gates continues, “On the internet you can listen to the baseball game anytime you want.”
David Letterman replies, “Does the tape recorder ring a bell?”
The audience laughs again.
David Letterman asks, ‘What am I missing here, what do I need?’
Bill Gates continues, “Well the internet also allows you to stay up to date with the latest cigars and auto racing statistics”.
David Letterman interrupts him, saying he’s subscribed to two British magazines devoted to motorsports that give him that information. So would the computer give me something more than I’m getting with those?
Finally, Bill Gates summarizes the internet in the simplest way possible back in 1995…
‘Well, on the internet you can find people with the same interests you do.’
And to this day, that’s all the internet really is. We go online to look at things we’re interested in.
As we know now in 2022, this simple idea changed how humans learn and interact with each other forever.
A year before the interview, in 1994, someone was working on making online commerce accessible. Jeff Bezos started a company called Amazon.com focusing on selling books online.
Hey Jeff, does a bookstore ring a bell?
In 1995, the same year of the Bill Gates interview, Pierre Omidyar started a website called eBay that allowed people to sell everyday items they own.
Hey Pierre, does a garage sale ring a bell?
4 years later in 1999, Elon Musk founded a website called X.com, allowing money to flow across the internet.
Hey Elon, does a Credit Card ring a bell?
People thought these tech nerds were wasting their time building things that already existed.
As we all know now, these breakthrough companies (Amazon, Ebay PayPal) revolutionized what was possible by delivering information in a way to benefit their users.
If you boil everything down, these revolutionary companies used the internet to deliver information in a new way that benefits users more than a TV or magazine.
Where the previous companies we mentioned redefined what it meant to deliver information, NFTs are simply redefining what ownership means to the consumer.
An NFT is a representation of ownership. And that ownership can represent anything.
The picture of the NFT is only the visual representation of the NFT, not the NFT itself.
Do you know how anyone can create a website to serve any purpose they want? Anyone can make an NFT for any reason they want.
It’s up to the creator to make owning the NFT worthwhile.
This hasn't happened yet, but what if the 8th most popular YouTuber MrBeast makes an NFT where collectors appear in one of his videos? With videos that consistently get 50,000,000 views minimum, do you think people would find that experience valuable?
If you bought it, you could be in one of his videos, and anyone who looks at your NFT wallet can see that you own the NFT that goes along with it. By owning the NFT, you prove you really were the one that was featured in the video.
Your NFT wallet would be like a social media profile of NFTs you’ve purchased.
You know that old saying ‘actions speak louder than words?’ Spending money is the most genuine form of expression because you’re showing what you value in your life.
We all know of at least one time an influencer faked being on a private plane, or faked owning a house to appear more successful than they really are.
And we also know how we feel about that person afterwards.
When someone looks through an NFT wallet, there’s no faking who owns it. You either do or don’t.
But this technology’s main use case isn’t catching fake influencers online.
In his 1995 interview about the internet, Bill Gates perfectly describes the revolution of NFTs.
With NFTs, you’ll find humans with similar interests.
When you find someone who bought an NFT from a creator you love, the connection to that person is more genuine because what you purchase shows your values more than how you choose to make your Instagram look.
For the collector, you receive a visual token in your wallet, plus whatever extra benefits the creator chooses to offer. Ex: Mr Beast featuring collectors in a video. The NFT in your wallet is a signal to the world showing what you enjoy, attracting people with similar interests into your life.
The creator of the NFT can continue adding new benefits to holders, just as video games developers give players new features. A few years down the line, MrBeast may offer an in-person mega-conference to all the holders of the NFT.
The benefit for the creator is they get to implement a royalty into every resale. This means every time a collector sells the NFT they bought, the original creator (MrBeast) receives a royalty. The creator can choose any royalty amount they want, often around 10% of the resale value.
The royalty continues paying the creator forever so it’s in their best interest to continue giving good benefits in order to sustain the NFT’s value.
If you want to, you can sell your NFT to an interested buyer with a click of a button. There’s no shipping, damage or returns.
It’s as easy to transfer NFT ownership as it is to Tweet about the NFT.
We’re going to see entire economies built around creators and their communities. If it’s your style, you could invest in individual creators early in their career as if they’re a stock of a company. The good creators will rise to the top, and early adopters will benefit right alongside them as they rise.
If rookie cards are worth the most of all athlete’s physical cards, it would be easy to assume the first NFTs created by popular creators will have the same kind of collectable value.
With money and digital ownership flowing more easily across the world, it makes it easier for you to make a living by doing things you’re interested in.
Video Games are an industry that will be transformed by NFTs. Many of us have spent money on an in-game skin for our video game character.
They're useful for displaying our personality. In some cases, we need to complete tough challenges in-game to unlock a skin. When players see that skin, they know the hours of gameplay and skill it took to unlock the skin.
But what happens when we're done playing the video game? We don't get to take the skins with us to a different game or sell the skins to other players? And if we do get to sell, it's often on the black market because trading skins isn't encouraged by the game developers.
With NFTs, the items you unlock in-game are digital assets that you truly own. You can buy and sell these skins to other players when you're done playing the game.
Many games have a loot system where you buy a randomized pack for a chance to get a rare item (Rocket League, Warzone, Apex Legends). When that item is an NFT, you'll be able to sell it to other players with a click of a button. You'll be able to earn money playing video games, without having a large audience watching you play the game.
My favorite part is when you're done playing the game, you'll be able to sell all your items and get some, all, or more of your money back from buying the game originally.
Some game developers will allow NFTs earned from other games to be used in their game, giving your in-game item utility in other games, not just the one you unlocked it in.
What’s especially interesting is that an NFT is virtual property that can also act as a financial instrument.
There are peer-to-peer marketplaces like nftfi.com that allow you to use your NFT to secure a loan. These markets are available across the world. Anyone, anywhere can submit an offer to borrow or lend money.
Imagine having an NFT from your favorite creator that grows to become worth $50,000. A lender from anywhere in the world submits an offer to lend you half of the NFT’s value at $25,000. That could be enough for a down payment to a house that you use as a cash flowing rental property. You’ll get to use the value from your NFT without even selling it.
Things aren’t always sunshine and rainbows in the NFT world. The technology is new, and the user experience is a little bit clunky. The internet could only transmit a radio show back in 1995 because the internet could only transmit small amounts of information at a time. 25 years later, we’re watching movies in 4K resolution at our home.
It takes time for technology to improve, and we’ll see the user experience of acquiring and owning an NFT get better over time. For now, it’s a little clunky and expensive to move NFTs around due to gas costs. But it works. And it will get better.
Get your hands dirty!
Most communities share information on Discord and Twitter, so you can start there. Join a community you enjoy being around and use the expertise you’ve gained throughout your life. Many communities are friendly because they all have common interests, so don’t be afraid to say hi and ask questions.
Being in the crypto space for 4 years myself, I’ve made incredible business connections who I call friends by simply being myself and talking about things I’m interested in.
The same concept will work for you too.
Imagine creating an NFT around something you’re interested in, attracting people of similar interests and earning royalties as long as you continue to provide value.
Selling a virtual item with membership perks for like-minded individuals is a lot more accessible than launching a physical good and shipping it around the world.
But you don’t have to start an NFT project to benefit. You can benefit just as much by being part of a project’s community.
Once you find a community you enjoy, you can simply hang out and make connections. Or you can go a step further and fix tech issues if you’re tech-savvy. If you’re a marketer, find ways to communicate in this space.
If you happen to make a connection with the next Elon Musk of NFTs, your life could take an entirely new direction.
But keep this in mind… Web3 & the promises of digital ownership are not a get rich quick scheme. If you think it is and make desperate moves, you’re going to get poor quickly. This is a technical revolution and it will take time.
NFT prices are very volatile, and it’s basically guaranteed that your assets will go down in price by a shocking amount. Possibly down 80% or more. But if you find an NFT community you love, the price won’t matter as much.
Be smart, don’t spend money you can’t afford to lose. Sticking around and continuing to engage with other people of a similar value may be the best decision you’ve ever made in your professional career.
I hope the main thing you learned from this article is that an NFT represents ownership, and it’s up to the creator to give good benefits.
NFTs are both a collectible, and a financial asset that’s incredibly easy to transfer. We’ve never seen this type of technology and the final form of how NFTs will benefit users has not been created yet.
When David Letterman critiqued the internet based on what it could do in 1995, there was no guessing that social media and YouTube would eventually emerge.
NFTs are a little clunky right now. But they will get better, and the earliest adopters who take a risk spending their energy here will benefit the most.
Thank you so much for reading, truly. I love writing articles about NFTs and I spend my days learning and writing about this technology.
If you have any feedback on what you read in this article, or any questions at all, don’t hesitate to reach out to me on Twitter.
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