Don't know what an NFT, a nonfungible token, is? You'd better find out. Why? Because someone as crazy as this writer could give you one. Or a better reason: They're everywhere.
Macy's is auctioning NFT balloons in the Thanksgiving Day Parade. Robert Mondavi's Centine are selling a limited run of wine in Limoges porcelain bottles linked to NFTs. Reese Witherspoon is crazy about NFTs, especially those made by women. Snoop Dogg is building a virtual house out of NFTs and people are spending as much as they would on a real house to "live" next to him.
At the heart of this vast and wild assortment of digital tokens is the same idea: People are buying and selling - mainly using cryptocurrencies - things that are unique online, verifiable and irreplaceable.
Again, why do they do this? Well, why do people do most things? For money! But that's not the only reason: Many believe that these digital objects will be the keys to the future of the internet.
I know. You are confused. I've been there too. This world of mystical objects puzzled me: Why should I pay for a stupid GIF that I can already send to a friend? And why do some of these cost more than a Faberge egg?
I realized that the best way to understand it - and to explain it - was to roll up my sleeves and build myself an NFT. In other words, I turned my son's 'Masterpiece Unicorn Rainbow' into a non-fungible token, a token of my respect for my mother. I'm not suggesting you try the same at home. But I'm encouraging you to read the five steps I followed so you too can make sense of the NFT fever.
#1: Know the blockchain.
When I gave my mother her NFT, she asked an intelligent question: "So does this art live in the cloud?" To which I replied, "Sort of. But not necessarily. It's actually on a blockchain." Think of a blockchain as a giant computer party – sans music and appetizers. Each computer on a software network runs its own copy of an identical program. No computer or person controls the network: it is decentralized.
And the party never ends. The network is constantly processing transactions and maintaining a database, often called a ledger, with every single transaction that takes place - every transfer, every purchase, etc. These transactions are grouped into blocks, which are connected in a chain. So... blockchains!
Blockchains are used to manage cryptocurrencies, but they can also manage other things, such as NFTs. Most NFTs are on Ethereum-compatible blockchains, tied to the digital currency ether (Eth). There are other blockchains for bitcoin, dogecoin and so on.
#2 Put your thing on the blockchain.
One big reason experts give for wanting an NFT is to own something from an artist I love. And the artist I love more than anything is my 4 year old son.
So I took one of his works, scanned it with my iPhone and asked a motion graphic artist to animate it for me. The result was a simple video file.
Sure, I could have just uploaded it to social media and wsj.com (and we did), but then it's just a copy. There is nothing to verify the originality of the piece, its title ("Masterpiece Unicorn Rainbow"), description (unicorn made by a 4 year old), or the owner (Joanna Stern).
This is what minting an NFT does. In this process you take a file and turn it into a token with an ownership record on the blockchain.
There are many places to mint an NFT. The most popular are NFT marketplaces such as OpenSea, Rarible and Foundation. But since I wasn't interested in a marketplace, I chose a dedicated service called Cxip (pronounced "chip"). I uploaded the video file "Masterpiece Unicorn Rainbow" and its bio information to Cxip's website. But before it could officially enter the blockchain, I had to pay a “gasoline tax” with some… dun, dun, dun… cryptocurrencies.
#3 Get cryptocurrency and a wallet to hold it.
Buying my first cryptocurrency was like buying my first bottle of vodka after I turned 21. Scary but surprisingly easy.
I went to Coinbase, a cryptocurrency exchange, and bought $400, 0.092 et at the time. Now, I needed to put them in a crypto wallet, an online tool made to hold digital cash and NFTs.
Coinbase has its own wallet, but I signed up for MetaMask, one of the most popular Ethereum wallets, through its iPhone app (it's also there for Chrome and Android). When you sign up, you get a secret 12-word recovery phrase, an extra layer of security you'll appreciate when you hide your $2,000 virtual can of Bud. You need the phrase to log in, and if you lose it, not even MetaMask can help you re-enter.
(Many NFT marketplaces require payments in crypto, although some, like Sweet.io or the NBA's Top Shot, have started accepting dollars via credit card. There are still fees, but these platforms hide all this. Up these sites, your NFT lives in a wallet provided by the platform).
#4 Pay the gas tax.
With some Eth in my wallet, I could buy gas.
Conducting a transaction across the many real computers on the Ethereum network requires energy, and someone has to pay for it, hence "the gasoline," Jeff Gluck, the CEO and co-founder of Cxip, explained to me.
Ethereum has some of the highest taxes on gasoline, and they fluctuate like other energy costs, based on activity and network usage. Energy use is also an environmental concern, since not all energy sources are CO2 neutral. I chose to pay an extra $3.30 for C02 compensation. Besides that and a few other first-time expenses, it cost $145.18 or 0.033 et to mint my son's masterpiece.
Once the transaction was made, I confirmed the presence of our unicorn on the blockchain via Etherscan. Etherscan is a website that lists all Ethereum transactions. It was there, right on block 13734952.
Not being in the art business, I have chosen not to sell Unicorn Rainbow on a site like OpenSea. Instead I built her MetaMask wallet for my mother and transferred it to her. (more petrol to pay!)
Buying an NFT on one of the marketplaces does not require so many steps. But buying something almost always costs more than making it yourself, and this case is no different.
#5 Think about the meaning of the property.
As I was doing all of this, I questioned many people. Why would you want an NFT more than, say, a rare Beanie Baby in 1996? Here are some reasons.
You want to make money. You buy with the intention of selling in the future. Just look at how crazy the NFT art market has become.
You want to have stuff in the metaverse - you know, the future virtual world where we work and shop and hang out and stuff. In the future, you may own virtual NFT land, with an NFT house decorated with NFT art.
“The beauty of it is that it allows you to facilitate transactions that aren't possible in the physical world or that would be really complicated and expensive,” Merav Ozair, a blockchain expert and fintech professor at Rutgers Business School, told me.
He said NFTs can also be used to authenticate and transfer ownership of physical objects, such as a rare bottle of scotch, in the real world.
You want special access. NFTs are already used as tokens or passes in private online groups. At the Bored Ape Yacht Club — which counts Steph Curry and Jimmy Fallon among its members — your unique cartoon ape image comes with privileges, including invitations to real-world events. Only $200,000 to enter!
You love an artist or a brand. This allows you to own something unique from them. Who knows? Maybe my son will become the next Beeple.
For now, however, my mother seems to much prefer the digital picture frame in the living room - displaying my son's drawing - to the NFT itself. Oh, that poor untouched cryptocurrency wallet!
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