What are NFTs and Why Should You Care?

From Jack Dorsey’s first-ever tweet to Grimes exclusive artwork, it seems everything these days is being turned into an NFT. They seem to be the hottest ticket in town and every other day, there is some headline of the sometimes obscene amounts of money that are paid for them. But what are NFTs, why are they apparently worth so much money, and should you even care about them at all?

What are NFTs?

The acronym NFT stands for ‘non-fungible token’ and refers to a unique piece of data that is stored on a blockchain. ‘Fungible’ in this sense, means transferable or exchangeable and NFTs, by their nature, cannot be exchanged.

A dollar, for example, can be exchanged for another dollar and the value held by the owner does not change because there are billions of dollars that are the same and have the same value. Because NFTs cannot be exchanged in the same way, they are very rare and thus, quite valuable.

The data that is stored on a blockchain represents an asset, whether a digital or real-life asset and ownership of the NFT of the asset is what is sold in most cases.

How Do They Work?

Imagine you created a painting and wanted to sell it as an NFT. In this case, you would create a piece of data on a blockchain that represents the artwork (this is what is called ‘minting’ an NFT) and then you could sell this NFT to anyone who wanted to buy.

The NFT of this piece of work could only be made once and if someone bought it, they would be the only one in the world with ownership of it. Sometimes, the physical item is sold along with the NFT and sometimes, especially in the case of digital assets like memes, only the NFT can be sold.

Why Are They Valuable?

NFTs are prized first for their rarity as they are looked at as collector’s items. Additionally, the asset that is minted often dictates the value of the NFT itself (people would pay more for the NFT of the Mona Lisa than of a random painting).

NFTs are fast becoming an important part of the way we buy and consume content thanks to their innovation and easy accessibility.