Mainstream news outlets clamored to cover Christie’s online auction of Beeple’s “Everydays — The First 5000 Days,” which sold for 69 million dollars. While this event should be applauded for introducing NFTs to the general public, the massive news coverage included tons of misinformation — for instance, titles like “JEPG File Sells for $69 Million, as ‘NFT Mania’ Gathers Pace,” from the New York Times is misleading.
The NFT community understands the culture-changing capabilities behind this wave of technology. Chances are that if you are reading this article, you do too, so we’ve answered common questions that will help you start your journey as an early adopter:
NFTs (non-fungible tokens) are a one-of-a-kind digital asset that uses blockchain technology to facilitate ownership, buying, and selling. Some essential qualities that make them unique from other tokens or forms of digital art include:
Uniqueness: NFTs cannot be duplicated after their original minting. While derivative sets may pop up with modifications to an original digital asset, your NFT, say CryptoPunk #9, is the only one in existence.
Verifiable: Existing on a blockchain and using smart contracts, the transaction history and ownership of an on-chain NFT is visible, simple to locate, and allows for ownership to be traced back to the original owner. An NFT owner or creator can set a price and place their NFT for sale in a secondary market.
Indivisibility: Your digital asset cannot be fractionalized; You own it in its entirety and cannot own 1/10 of a Bored Ape Yacht Club #9. This is an immutable quality and cannot be altered by the originator of the asset.
The properties that make a digital asset an NFT can be assigned to tickets, art, domain names, music, trading cards, etc. — the possibilities are endless.
Digital tokens, cards, and coins have been around since the creation of blockchain technology that also included gaming and virtual world concepts. NFTs, as we know them now, first appeared in 2017 when Larva Labs dropped CryptoPunks. The 10,000 algorithmically generated pixelated PFPs were free to mint and currently have a floor of around 250K when this article was written.
In the “NFT Summer” of 2021, there has been an explosion of PFP (profile picture) NFT sets. Starting off as simple images, many evolved into projects that build community, airdrop incentives, offer staking, IP ownership, metaverse meetups, and allow owners to directly participate with the company leadership. The popular projects are developing ‘real world’ tie-ins and a strong sense of community. Well-known “blue chip” projects like Bored Ape Yacht Club has had in-person gatherings, while VeeFriends holders have access to VeeCon, a four-day conference held in Minnesota next year.
Whether you are looking to invest in the early stages of a new brand, support an artist, or day flip, everyone has their own motivation for getting in the NFT game.
Marketplace data showed sales of NFTs surged into the billions this summer with the number of projects dropping daily skyrocketing. An intuitive question emerges— how do I decipher between projects with legs and potential rug pulls?
The Dev Team
First and foremost, you are investing in the team behind the project. Art is subjective, what is visually appealing to one person can be a hard pass to the next person. However, the people behind the project have a history of industry wins or losses— or they may be anonymous (which should be a red flag). Inexperience doesn’t mean the project can’t be a potential blue-chip, but more risk can be involved. Jump on their social media, discord, and website to learn more about the capabilities of the people behind the project.
Intellectual Property: Stoner Cats and DeadHeads
Do you actually have any ownership over the intellectual property (IP) of your NFT? In terms of IP, let’s compare two projects that have produced an animated series around their project— DeadHeads and Stoner Cats.
Stoner Cats — an adult animated series with some big-name celebrities behind it, dropped their NFTs with buyers having no IP rights.
Checking out the DeadHeads website statement on their IP plans:
“When you own a DeadHead, you own the NFT and the intellectual property of the underlying art itself. You own a character in the multi-media universe, with commercial and non-commercial rights.”
This may or may not be of importance to their communities, but it is worth being aware of as a consumer and community member.
Roadmaps and Utility
What are you actually purchasing when you buy an NFT? It could solely be the face value — the art. However, the concept of utility is essential to consider when researching NFTs.
Wicked Craniums is a strong example of creators striving to develop utility around their NFTs. In addition to airdrops and collaborations, this project is the first to provide staking opportunities to their community. Users can stake a Wicked Cranium and a Wicked Stallion to receive additional NFTs, comparable to the concept of a dividend. Staking wasn’t included in their original roadmap and suggests a dedicated and capable team.
The world of NFTs is new and quickly evolving. After you have your questions answered, actually going through the motions — converting your fiat to crypto, setting up a wallet like MetaMask, and connecting to a secondary market to purchase your first NFT, provides the best learning experience.