What is an NFT?

NFTs. Blockchain. Crypto.

This is 2021.

There's a lot to learn. And you'll need to learn quickly because chances are, your competitors are already exploring the NFT space.

But first, let's get the basics straight.

What is an NFT?

Put simply, a non-fungible token is a one-off digital asset. It’s individuality is guaranteed by a digital ledger called a blockchain, which can be used to identify and certify a specific copy of any file.

By ‘minting’ an NFT, the creator has established a secure, independently verifiable record that separates a file from any comparable versions.

The term ‘non-fungible’ refers to something that cannot be directly and straightforwardly replaced with an equivalent item. So where examples of ‘fungible’ items might include units of currency or mass-produced consumer goods, a work of art might be described as non-fungible. Sometimes an asset can become non-fungible when it is used or manipulated by a person of interest or becomes historically significant. In sport, that might include athlete-signed merchandise or a game-worn shirt.

NFTs are designed to bring that kind of scarcity to the digital space. Software files are designed to be easily replicated, so value has historically been driven by access to content or services like a powerful program or premium entertainment.That has made many models possible at scale but allowing for the creation and trading of unique assets can give rise to new types of digital marketplaces.

The markets that NFTs have enabled so far are digitised versions of the trade in fine art and memorabilia. Until this point, if an artist were to produce work digitally, the only way to recover value from it would have been to license it for mass reproduction. Similarly, images, video or audio clips and messages could either be shared freely or put behind a paywall but there was no way of determining an original source.

With NFTs, it is possible to make a record of what constitutes an original file, however many copies are made, and to denote the owner of that file. While many versions may exist, the rarity of that first version still makes it more valuable than any reproductions. A simple analogy is the comparison between an original painting and any prints that are made of it, or the first edition of a landmark book and later versions. In the collectibles market, a highlights clip that has been certified by an athlete or organisation carries a different value from one available onYouTube, much as an autographed photo is worth more than an unaltered one.

Over time, further uses for NFTs are likely to become more popular. In ticketing, the issue of an NFT alongside digital access gives buyers a permanent memento that retains its own intrinsic worth, much as a paper ticket does. NFTs also offer a vision of a different future for user-generated content, with the photos or videos captured by fans at major events having tradeable, as well as shareable value.

For now, NFTs are generated and sold in very specific ways. Trades on the blockchain are made using the relevant cryptocurrency, which requires the creation of a digital wallet. Trading in NFTs is therefore mostly conducted within controlled marketplaces and exchanges, such as OpenSea, Mintable, DraftKings,and Rarible, which affects the commercial dynamics and increases the importance of working with effective partners.

Want to learn more about NFTs? Download our whitepaper to learn about the opportunities in NFTs for stars, talent agents and brands.