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If you want to develop an analytical and intuitive approach to NFTs that helps you build a framework of thinking and decision-making, this blog is for you.
My name is Jon and I’m here to help you start with NFTs. You can learn more about me and my background on my About page.
(1) Never spend more than you can afford — this is not financial advice, it’s simply research and informed opinions.
(2) Be aware of FOMO (Fear Of Missing Out) — it’s dangerous and easy to get caught up in.
(3) Know what you own and why you own it.
(4) TFY (Think For Yourself) — I’m just a person on the internet. I’ll share how I think, but that doesn’t mean I’m right or wrong. Trust yourself first.
(5) Recently added but VERY important - NEVER GIVE OUT YOUR SEED PHRASE. Be VERY careful with any screensharing (a scammer used a screen share to steal over 100 ETH worth of NFTs to a friend recently), double-check who DMs are coming from.
NFT — Non-Fungible Token
I remember hearing the word “Fungible” while taking economic classes back in college. It’s ironic how 10 years later that this term carries much more exciting weight.
Example of Fungibility: Money
Imagine you’re at the grocery store check-out and you want to withdraw cash. Say you want $40.
The cashier might ask, “Do you want that in $5s, $10s, $20s, or a mix?”
This is fungibility. My $20 can be exchanged for 2 $10s. My $5 can be exchanged for 5 $1s, etc.
The same goes for Bitcoin — if I’m trading 1 Bitcoin for 1 Bitcoin, I’m left with the exact same unit of value.
Example of Non-Fungibility: Used Cars
Picture yourself at a car dealership looking to buy a used car. How many options do you have? How many of them are identical? Even for new cars, levels of trim, supply in the local market, incentive qualifications, etc. make it so that at any given time Car 1 does not automatically equate to the value of Car 2.
Non-fungibility is not a novel concept — sports cards and other collectibles are nonfungible. Even though each collectible is produced by the same company, its condition may vary, it may be part of a limited set, or it may have slightly varying characteristics.
In short, it’s unique and won’t necessarily capture equal value to its set counterparts.
Non-fungible tokens bring that same concept into our digital world. Each digital asset (event tickets, cards, art, animation) is unique on the digital ledger.
On appearance, some assets may in fact be identical. There may be a piece of art with multiple copies issued, but each one has a unique token. There may be a “first card issued” or “the first card sold” that might impact value for one token over another.
That’s part of what makes NFT’s so exciting (and risky) — the values can change.
The contents and attributes of the token are what give it value.
A blockchain is a ledger (records of transactions) that are distributed (everyone can see the records of transactions), it’s programmable (this is why VeeFriends doubles as a ticket of admission to VeeCon), it’s immutable (transactions can’t be reversed), it’s anonymous, unanimous (one party doesn’t control the rules, everybody who participates does) and secure.
Pretty cool, right?
Note: several blockchains exist.
For example, Ethereum is actually a blockchain and the currency it supports is Ether.
The blockchain supports minting (the creation of) digital assets on the ledger of record. That’s pretty fun, but we still need a platform to transact those digital assets from one party to another.
That’s where a P2P (peer-to-peer) marketplace comes into play.
Below are three of the most popular marketplaces to check out:
This is where you can mint, buy, and sell your NFT collections.
Before you can do so, you’ll need to join an exchange to purchase cryptocurrency.
In simple terms, a cryptocurrency exchange allows you to buy and sell cryptocurrency, which you would need in order to purchase an NFT on a P2P marketplace.
There are plenty of exchanges to choose from, each with its own pros and cons.
Personally, I’ve used Coinbase — it requires driver license verification and you must link to a bank account (many credit card companies block crypto transactions).
There are fees associated with transactions, and it’s important to remember it can take 5 days for your money to transfer into the account.