“What’s an NFT?” — A Practical 5-Minute Explanation for Normal People

An NFT or non-fungible token is a piece of digital data stored on a blockchain. “Minting an NFT” is the act of making that digital file — music, images, videos, etc. — available on the blockchain.

With SEO out of the way, here’s a caveat before we dive in: This post isn’t a comprehensive guide for tech bros, crypto speculators, or folks who have Cyber-anything Twitter photos.

Instead, this is meant to be a friendly gateway to help normies like me understand mass media conversations about NFTs. By the end, I zoom out a bit and illustrate what this technology could mean for our lives and work. As a bonus, we gain enough understanding to call BS on a crypto Chad who talks like they have a Ph.D in crypto, but has never actually read the Wikipedia page. 1

A short message: If you’re into NFTs, you’ll probably enjoy my weekly newsletter. Subscribe below to get more posts on web3, creativity, and the creator economy, or check out previous editions to “try before you buy”.

But first, the question of the year:

What does “non-fungible” mean?

First, let’s talk about what “fungible” means.

You know how any $5 bill can be exchanged for another, even though they’re physically two different items? Fungible tokens are like that: they’re exchangeable and can’t be told apart. 

In contrast, a non-fungible $5 bill could be a collectible or limited edition one. Although it holds the same value as other $5 bills, it has special properties that set it apart; it’s non-fungible.

Putting an NFT on the blockchain gives each copy of the digital item a unique ID code — made up of a string of numbers and letters — that certifies its authenticity and proof of ownership. 2

This is why selling art was the initial use case for NFTs. 3 Even if Beeple sold multiple copies of his artwork, the blockchain gives us a way to identify one copy from another and to ascertain each one’s authenticity.

Why should normal people care about NFTs?

If you’re not a game developer, artist, or a Gen Z memelord, why should you care about NFTs? 4

Here’s why: Within each NFT’s smart contract is metadata where the artist (or whoever published the NFT) can specify certain properties that immutably alter how the NFT functions. 

For example, it could specify that 10% of all proceeds goes to the artist and 10% to their favourite charity. This contract will continue to be in place, even if the NFT/art gets sold to someone else. The next time it changes hands, both the artist and the charity will still get a cut of that sale. 

This is cool because NFTs allow creatives to multiply their income streams while still making the art their audience wants.

Here’s an excerpt from a tweet I published a couple of weeks ago:

In the future, buying an NFT will be like backing a Kickstarter but receiving both the product AND a piece of the company. 

NFTs unlock creative new business models that roll ecommerce, Patreon, Stubhub, Kickstarter, eBay, and the good ol’ stock market into one technology.

NFTs quantify social capital and allow creators to compound and profit from their clout, immediately and in[to] the future.

This is angel investing and [the] patron/subscription model rolled into one, [and] made available to the mass market. 5

NFTs allow artists to profit from their brand’s secondary market, including concert tickets, limited edition albums, and secondhand merch. 6

Zoom out: This means that if you have any sort of aspiration to make a living doing what you love, you haveto pay attention to NFTs. They are the vehicles by which creativity, influence, and attention will be redeemed to put food on the table in the near future. 

If you’re not into the passion economy thing, at least you know that NFTs exponentially increase the number of ways we can make money in this life, beyond a 9-to-5 job or a traditional business.

And money — more than happiness, or love, or purpose — is something normal people like us can always have more of. 

I’m joking, of course.

Maybe.

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footnotes

1. For a more comprehensive guide on getting started with NFTs, check out this Reddit thread. ↩︎

2. Since UPCs and barcodes were invented for physical products in the mid-90’s, we’ve had the idea of giving items unique identifiers. But now, the blockchain lets us stick barcodes on absolutely any digital item we can dream up. ↩︎

3. The first one-off NFT was a GIF that artist Kevin McCoy minted and sold to Anil Dash Onstage at the Seven on Seven Conference in 2014. ↩︎

4. Many valuable companies and technological breakthroughs started out as toys for kids, tinkerers, and hobbyists, as experiments, or as “useless” apps. Like the Apple II personal computer, the internet, and Facebook (although its net usefulness to humankind is… Questionable). ↩︎

5. Blow this idea up to the macro level and you realize that:

   - The blockchain is a ledger to track one’s social status

   - NFTs are a tangible way to display that status

   - Cryptocurrency is a way to acquire, trade, and quantify it ↩

6. To gain a bigger understand the future, real world impact of NFTs, I recommend listening to this episode of Gary Vee’s podcast. ↩︎