NFTs: The Simplest Explanation You’ll Find
Still confused why someone would pay $69 million for a JPG file anyone can download for free? You’re not alone. Despite all the articles explaining the technology of NFTs (“non-fungible token,” “blockchain,” the usual buzzwords), no one has explained why anyone would spend a penny — let alone eight figures — to “own” an image you can Google in two seconds.
Well, the mystery ends here.
Understanding NFTs (or “crypto art”) is simple. You know how collectors go crazy over the first edition print of a baseball card, or the first print of a comic book? NFTs make it possible to attach a “print number” to a digital file, allowing anyone to turn their work into a collectible. In other words, NFTs are just digital trading cards.
In fact, owning an NFT is exactly like owning this 1988 Michael Jordan Fleer basketball card (the seventh of its kind ever printed). Buying it doesn’t give you exclusive rights to this image of Jordan dribbling. It doesn’t allow you to decide how it’s used (i.e. whether it’s featured in a movie or printed in a book). But it does give you full ownership of this specific card, which means you can sell it for however much you want.
Why Are People Buying NFTs?
Some time in 2017, a group of people decided that owning digital trading cards was cool. Eventually, they convinced their friends that it was cool, who then convinced their friends, so on and so forth.
Thus, a market was born.
Like with any other collectible, the market is entirely artificial. It only exists because there are enough people who genuinely think digital trading cards are cool.
If you’re having trouble wrapping your head around this, think about Pokémon cards. Fundamentally speaking, cardboard cards are almost as meaningless as digital files. Sure, you can eat them if there’s a famine or burn them for warmth if the electricity goes out, but apart from extreme circumstances, they have almost zero real-world value. And yet, the fourth ever printed Charizard recently sold for $360,000.