I faced this issue recently. I had to explain what NFTs are to my Dad who is a Boomer. This is a summary of how I went about it. It will help you one day.
Let us say that you could afford to do so; would you pay $600k for a gif image of a flying cat? Me neither! A work called Nyan Cat by Chris Torres was sold for $590,000 and it represents the growing public interest in what are called NFTs.
Still image of Nyan Cat Gif by Chris Torres sold for $590,000!
An NFT of the collected works by an artist called Beeple was sold by the reputed auction house Christie's for an eye-watering $69M!
I went on from there: "So first things first, what is an NFT?"
NFT stands for Non-fungible Tokens, the name given for a token that cannot be exchanged for another. NFT is, therefore, one of a kind. These tokens usually exist on the Ethereum blockchain and have essential information about the asset being tokenized- usually digital art or collectibles. Token IDs point to the ownership of the NFT so that anyone can verify ownership.
NFTs are mostly built on top of the Ethereum blockchain that permits creating many more things than just a currency. Think of Ethereum as a programmable blockchain that can be used to make applications that "run" on the Ethereum blockchain "computer". All this becomes relevant when you think of art or collectibles that are created digitally. Before the advent of NFTs, you could copy digital art and replicate as many copies as you like.
If, as a creator, you tokenize your digital art by creating an NFT, then there is only one copy of it verified and marked as "original". Popular forms of NFTs include gifs, jpegs, videos, and tweets. Any digital asset can be converted into an NFT.
Now think of how physical art is handled - you have several middlemen who source, certify, auction, curate, and store it. The original artist usually gets a fraction of the art's actual value. All that can change with NFTs becoming a direct-to-consumer play that creators and artists of all kinds can exploit.
Since there is only one original version, the NFT version of a digital item comes built-in with immense supply restrictions that drive its value high. Also, you can code into the NFT so that every time the NFT changes hands, the original artist can get a percentage of the selling price, thus yielding an income in perpetuity.
Why would someone buy an NFT? It can be a sentimental purchase, a financial investment, a collectible for the loyal fan of a creator, a band, or a sports team. It is like how collectors pay for rare baseball cards, sneakers, and other eBay items. Only, in the case of NFTs, the assets are digital.
"How do you purchase it?", he asked.
Here was my reply, "So, how exactly can you purchase an NFT art or collectible? You go to NFT marketplaces like Nifty Gateway, Opensea or Rarible, and pay for NFTs in Ether (the currency for transactions on Ethereum blockchain). Right now, all trades are made in cryptocurrency."
How are brands getting into NFTs?
This is how you can bring in an example to relate to the man. Talk about how the NBA recently got into the game by tokenizing the most significant plays in basketball history and selling them to superfans. A clip of Lebron making a historic dunk for the Lakers sold for an insane amount of money (> $200k). Its value lies in the fact that the NBA will only sell one such clip of that particular dunk.
Le Bron James (of course!)
Other brands like Taco Bell got into the act by designing and selling “NFTacos” for $1. Its resale value has already gone above $3,600! That's one expensive Taco, proving that there is a market for super fans to feel close to their brands.
I said, "Some say this is how digital culture is going to be defined, and others tout it as the future of e-commerce." He said, "To me, all this looks like a scene from the movie- Ready Player One."
End with a strong statement like; "So if you are asking yourself if this is a fad or not, remember, the value of an NFT is set by what someone is willing to pay. Beauty is truly in the eye of the beholder."
Recreated from a blog post that I wrote on www.renjitphilip.com