NFTs: Non-fungible tokens
2020 was known to be the year of Cryptocurrencies led by Bitcoin as it surges past USD 1 trillion in market value. With the increasing interest in alternative investment assets, many are searching for the next big thing in 2021 to gain a first mover’s advantage. If you have been following the news for the past weeks, you would’ve noticed that people are paying astronomical amounts for digital collectibles in the form of Non-Fungible Tokens (NFTs). Just last week, a digital artist known as Beeple sold a collage of his art pieces in an auction for $69.3million! Further, it is the third-highest price fetched by a living artist!
Not convinced by NFTs? The NBA came out with “NBA Top Shot” which incorporates NBA highlights in the form of NFTs. Just last month, people have spent more than $230 million on the platform with offers of over a million dollars made!
But why are people buying NFTs of digital images, GIFs, songs, or videos when you can watch them for free online? It sounds crazy and ridiculous, right? I felt the same too until I’ve tried it myself. Let’s talk about what are NFTs before I share my NBA Top Shot experience!
1. Are NFTs a recent phenomenon?
You may think that these tokens were a recent invention, but they have been around since 2017! It was not until recently that they gained traction and attention from the mass public. The pickup of NFTs is mainly attributed to the ongoing craze on cryptos and blockchain technology!
2. What is blockchain?
Blockchain technology is the backbone for the likes of cryptocurrencies, NFTs, and even smart contracts! It is a digital ledger consisting of networks of computers that record transactions while providing buyers with proof of authenticity and ownership. Through these servers and cryptography, all assets on the blockchain have a unique signature that allows for ownership that can be traced and verified. Further, the complexity in the layers of encryption and hashing makes the blockchain immutable and hard to hack!
3. What exactly are NFTs?
Non-Fungible Tokens are assets verified via blockchain technology, commonly on the Ethereum blockchain. In economics, non-fungible refers to assets with unique properties that are not interchangeable for other items. Unlike Cryptocurrencies, NFTs aren’t interchangeable or divisible. This means that you cannot exchange one NFT for another, unlike gold, bitcoins, or dollars. Moreover, NFTs demonstrate your ownership of a property with a unique signature that cannot be duplicated. This also means that no two NFTs are the same. This feature makes it rare by design which is the selling point of such tokens!
To summarize the differences between NFTs and what exists over the internet today, these are the two key features they differ in:
To blow your mind away, the picture below – “Everydays – The First 5000 Days” was sold for $69million! Crazy isn’t it?
4. Do you own the underlying art behind the NFTs?
Well, technically yes and no. This is why people are scratching their heads over the concept of NFTs. Purchasing an NFT gives you ownership rights to the digital asset and not necessarily the actual copyright or the sole access to the work. You’re not able to stop people from constantly downloading and sharing what you purchased via the token! For example, purchasing an NBA highlight of Lebron James dunking wouldn’t make you the sole owner of that clip on all platforms! One can easily watch and download the clip through YouTube or NBA TV. However, people are willing to throw piles of money to claim the “verifiable” ownership of it through blockchain.
5. Is it worth the hype?
This is something I read online that caught my attention, “There’s an assumption that having a physical version of a collectible is somehow more valuable than the digital one”. With our society being more open to digital assets like cryptocurrencies, will the mentioned assumption change as well? I believe that with the benefits of Blockchain, we might certainly see a change in people’s perception.
Like others, I struggled to grasp the concept of NFTs when I first read about them. Why should I pay money for something that can be obtained or consumed for free? However, I started to understand the concept and appeal of it after diving deeper into the tokens. Even before the arrival of the internet, trading card games like Pokémon ran on the same concept as these NFTs. Although you can watch Pokémon for free or even purchase cheaper versions of them through the likes of comic books, popular and rare Pokémon cards can fetch a substantial amount when sold! I’ll share more about my thoughts and experience of NBA Top Shot in the section below.
On the flipside, NFTs do not have any tangible ownership to them. It is to note that the value of these tokens is solely based on people’s perception! People are paying large amounts for these tokens with an expectation that someone would pay them even more for it. For now, it looks likely that NFTs are here to stay at least for the coming year!
6. Where can you purchase these NFTs?
There are several online marketplaces for people to either participate in auctions or to just buy and sell these tokens. Some prominent and legitimate marketplaces are Nifty Gateway, Yellowheart, OpenSea, and NBA Top Shot. On these sites, you’ll be able to buy NFTs in any form such as a Tweet, GIFs, Videoclips, and many more!
Here is a list of sites that sell NFTs:
With NFTs gaining massive publicity, many people are rushing into these marketplaces. On some platforms, scammers are making use of the hype to sell fake NFTs. If you’re interested in hopping onto the NFT bandwagon, one tip would be to ALWAYS make purchases from verified sellers.
7. My experience with NBA Top Shot
NBA Top Shot is a blockchain-based trading card system where users can buy and sell NBA “moments”. These moments come in the form of dunks, shots, and assists made by players in games. Every moment you purchase on the platform is authentic and it comes with a unique serial number, an edition type and it tells you the total number of that particular collectible is circulated in the system.
Your moments and deposited money are stored in “Dapper” which is the first blockchain interface that uses smart contract technology for your digital wallet. Unlike other wallets that store your digital assets on corporate servers that may be hacked, your assets are secured and kept in the blockchain!
Example of NBA moments you can find on the platform
To provide you with a gist of the platform, below are three separate snapshots of NBA Top Shot. The circled area of the picture shows how rare the cards are and the number of collectibles that are circulated in the system. Further, “LE” reflects that that number stated in the system is final while “CE” means that the number may increase as time passes by. For example, the picture on the right is a legendary highlight with only 59 unique and finalized copies that are circulated in the system. Of course, the legendary moment fetches the highest amount followed by the rare and common.
How to purchase these NBA moments?
These moments can be purchased through Packs or the marketplace as shown on the snapshot above.
Packs like the picture below are released periodically and moments you receive are randomized and based on your luck! Normally, these packs sell-off instantly once they are released and queues waiting to purchase them.
Another way to purchase these packs will be through the marketplace. Below is an example of it! Every moment you purchase comes with a serial number as shown in the red rectangle below. The lower the serial number, the more expensive the moment is. Further, some significant numbers will fetch a high price such as #23 as it is Lebron James’ jersey number!
Once you’ve got your eyes set on either way to obtain an NBA moment, there are two ways for you to make purchases.
How to make purchases on NBA Top Shot
Dapper Wallet
All transactions you make via NBA Top Shot will be stored in your Dapper Wallet which is easily accessed on the NFT site. Therefore, any moments, sales proceeds, or cash deposited will be reflected in your digital wallet. For ease of transfer, you can store your card details to facilitate quicker transfers!
Cryptocurrencies
If you have existing cryptocurrencies with Coinbase, you’ll also be able to make purchases with your digital coins! Dapper wallet accepts ETH, BTC, BCH, DAI, and USDC. I do not have a Coinbase account and have yet to try this mode of payment!
8. My thoughts after playing with NBA Top Shot
Being a basketball fan and someone that invests, I feel like it’s two different worlds I enjoy colliding together. On top of enjoying basketball, I can get to earn some money through these NBA moments. After writing about the NBA Top Shot, I found myself getting carried away by the system myself! I truly understand the appeal behind NFTs and it has been fun for me so far!
Conclusion
Whether or not NFTs are here to stay, they have certainly become a new plaything for the uber-rich and there is real money to be made if you can make it happen. NFTs gives new meaning to digital art, and the prices seen at sale indicate it is a real part of the future of art, and collectibles in general.
For those who are adventurous enough, you might consider allocating a smart proportion of your portfolio into NFTs. Just don’t bank on NFTs to fund your retirement.
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