What Are NFTs and How Do They Work?

Welcome to the internet's art gallery.

You see that header image above? That’s a flying cat with a Pop-Tart body complete with a rainbow coming out of its butt.

Yes, that might be the weirdest sentence I’ve ever written.

That meme is known as the ‘Nyan Cat’, created by Chris Torres. It’s an NFT and sold for $747,181 in February this year.

So, you're probably wondering: why would anyone pay that insane amount of money for it, especially since it's available for free via Google images?

Well, this is all part of an emerging digital economy, and it’s finally paying artists for what they’re owed for their work.

Okay, so what are NFTs?

Basically, NFT stands for non-fungible token.

If something is fungible, it means that what you have isn’t unique and therefore exchangeable.

Money in your wallet is fungible, fruit is fungible, movie tickets are fungible. All of those things can be given to anyone else to use.

Of course, other things in life aren’t fungible. A plane ticket, for example, can’t just be given to someone else standing next to you because you decide not to fly. That is your ticket, and it belongs uniquely to you.

That is what fungible means. Still with us? Great.

NFTs are digital artwork.

Ever heard of The Mona Lisa? You could Google an image of her, print it out and stick it on your wall.

However, it wouldn't be the same as it doesn’t have the same value as the real Mona Lisa sitting in Paris. That makes the Mona Lisa non-fungible as it is unique.

Just think of NFTs as digital artwork, and the internet is the gallery that it is on display in.

That ‘Nyan Cat’ with the rainbows is an original piece of artwork like the Mona Lisa. Unlike the Mona Lisa though, ‘Nyan Cat’ doesn’t have a hard copy original, but a digital original.

So, what's the point of NFTs?

Great question. It’s very early days, so it is actually a little hard to tell at this point.

A case can be made that it's simply a bubble that will burst, hitting the hip pocket hard of people who overinvested. However, critics said the same about Bitcoin 10 years ago, and look at that now.

It feels like I'm missing something on this NFT stuff. Like, people are paying 500k for a nyan cat mp4...that is already everywhere...why?

— Jake Nolan (@jaken) March 4, 2021

What NFTs are good for are paying artists what they are owed.

Musicians, graphic designers and meme creators can actually make money out of NFTs instead of having their work pirated and distributed around the world for free.

From local artists selling original work, to Kings of Leon selling the original of their latest album, NFTs are offering a new opportunity for artists to earn a living.

Where can I buy NFTs?

There are heaps of marketplaces to buy NFTs, but some of the more commonly used websites are Foundation and OpenSea.

Seriously, check out these sites just for the fun of it. You’ll find some very cool NFTs for sale like these collectable tokens based off The Office.

Annnnnd then it gets slightly weirder, like this gif of a man pushing a slice of pizza on a swing.

Different strokes for different folks I guess.

If you want to purchase NFTs, you’ll need to get yourself some cryptocurrency because they don’t accept normal methods of payment.

Unsure what cryptocurrency is too? Find out everything you need to know about it here.

Header Image: Chris Torres