Have you ever borrowed five thousand Naira from a friend and when it’s time for you to pay back, you were expected to pay back with the same Naira notes you borrowed? Is that even possible? Except you didn’t spend the money and kept it.
Even banks can’t give you the same money you deposited when you want to make a withdrawal. You’d most definitely laugh off such a friend and call it wickedness right?
Do you know why? Because a 500 Naira note can be exchanged for another 500 Naira note and that does not reduce the value of that money if it’s exchanged for the same denomination so paying back that five thousand Naira in another different note does not reduce it from five thousand.
This is what is called “Fungible” –a Naira note can be changed for another Naira note.
Or imagine borrowing oil from your neighbour to make beans and when you went to the market, you bought a gallon of oil and returned it to your neighbour but your neighbour wants the exact oil that was given to you. Your response would be “oil na oil”. It’s because oil is “fungible” give oil, get another oil back, it’s still the same thing – oil.
If you understand the above explanation, then you will understand what technological people call an “NFT” Non-Fungible Token.
Unlike the five thousand naira you borrowed from your friend and returned with a different five thousand naira note, it is not so with NTF.
If the same friend gives you a painting to hang in your house for some time and decides to get his painting back, you can’t give him another painting but are expected to return the same painting that is given to you.
This concept is what is called ” non-fungible” the painting or image cannot be changed for another painting because it is unique.
So with the two illustrations above, what are NFTS? It stands for a non-fungible token, it is a digital asset that cannot be changed or replaced with a similar one. Irrespective of how many people own it, it is still the same as our painting illustration above.
If you noticed, it is a combination of two words:
1. Non-fungible, which we explained above
2. Token – in the digital world means money. It is what you use to buy what you want online, just like you would use the money to buy anything offline. You can also invest them like you would invest your money.
So in a simple term, I can say NTF (non-fungible tokens) are valuable properties (or assets) that are unique and special and cannot be replaced with something else. Just like our illustration of the painting your friend borrowed from you above.
If your friend gives you 3 NFTS, you have to return the same NTF you collected from him to avoid “Wahala”.
That’s what Non-fungible means. Errr!!! We can simply call it Non-replaceable token.
What does NFTs look like? Think of going to the market to buy either a car, TV or even buying a house or landed property. After your purchase, you are given a receipt in the case of the car, TV and a deed of ownership for the house or land.
This receipt or title deed represents your ownership of the car or house. It shows you are the true owner of the said property and no one can lay claim to it without showing proof of ownership right? The same goes for NFTs, they are just digital certificates of ownership that states that you own a piece of either a jpeg image file, video or music stored in a server somewhere online. (remember no technical jargon).
It’s just a digital certificate that shows ownership of anything online made possible by “blockchain technology”.
Why are NFTs so popular and expensive?
1. Because NFTs are unique and cannot be changed, it makes it that all NFTs are original and rear.
The Mona Lisa is one of the most famous paintings in history, created by the legendary artist Leonardo da Vinci. While there are many other Mona Lisa paintings, imagine owning the original copy made by da Vinci himself or the original copy of the Nigerian constitution. That is what makes NFTs valuable, as it’s based on rarity and originality.
2. Utility (The real-world benefit) – imagine if Michael Jackson was still alive and he sold just 60 NFTs and by owning one of them, gives you lifetime access to his shows. This will cause the NFTs to quickly become very popular and expensive as a lot of people will want to own them due to the real-world benefit of getting access to Michael Jackson. This is the direction NFTs are heading to, creators, and musicians will explore this.
3. History of Ownership – Imagine Davido decides to auction the shirt he used to perform at the O2 Arena in London for $100, some people would be willing to buy that shirt for close to $1000 because it is owned by Davido and he used it for his show. The same applies to NFTs. Someone might decide to pay 1 million dollars, just to own an image of a car that Nelson Mandela owned at a point. Because of the history of who owns it, this gives value to it and people are willing to own it as digital art collectables.
These 3 factors make NFTS popular and expensive. Either it is an original and rear artwork like Mona Lisa everyone wants to have it or it can give you access to a real-life benefit or it’s historic and you want to own a piece that represents that history and as a form of art collection all these are why people buy NTFs.
Beyond the fuss, does NFTs have value?
NFTs are important innovation if you think about the possibility it creates especially for people in some industries.
1. It helps artists to get their works directly to the clients and consumers without the middlemen getting involved.
2. It gives assurance to art collectors that the work they are paying for, are original.
3. Musicians can also issue their music as NFTs to their fans and get paid directly without record labels or distribution.
Are NFTs a good investment?
While there is so much buzz around NFTs and a lot of people are cashing out, overall NFTs can be a high-risk investment and you should know it’s no getting rich quick scheme. However, they are cases where NFTs can be bought at $20 by one person and resold at $60,000. The NFT market is relatively new so you’d want to understand the risk before going into it as an investment.
Who can get into NFTS?
If you are an artist who creates paintings or artwork, a photographer, good with drawings and sketches or a musician, game creator e.t.c you can create your work and sell it as NFTs
As for buying NFTS, anyone interested in owning or collecting digital artworks or want to invest.
P:S -This post focuses on giving a beginner overview and basic jargon-free explanation of what NFTs are. No technical details are covered so if you want to know about the technicality behind NFTs, I advise you to make a Google search.
#Techjargonsimplified
Have you ever borrowed five thousand naira from a friend and when it’s time for you to pay back, you were expected to pay back with the same naira notes you borrowed? Is that even possible? Except you didn’t spend the money and kept it.
Even banks can’t give you the same money you deposited when you want to make a withdrawal.
You’d most definitely laugh off such a friend and call it wickedness right?
Do you know why? Because a 500 naira note can be exchanged for another 500 naira note and that does not reduce the value of that money if it’s exchanged for the same denomination so paying back that five thousand naira in another different note does not reduce it from five thousand.
This is what is called “Fungible” a naira note can be changed for another naira note.
Or imagine borrowing oil from your neighbour to make beans and when you went to the market, you bought a gallon of oil and returned it to your neighbour but your neighbour wants the exact oil that was given to you. Your response would be “oil na oil”.
It’s because oil is “fungible” give oil, get another oil back, it’s still the same thing – oil.
If you understand the above explanation, then you will understand what technological people call an “NFT” Non-fungible token.
Unlike the five thousand naira you borrowed from your friend and returned with a different five thousand naira note, it is not so with NFT.
If the same friend gives you a painting to hang in your house for some time and decides to get his painting back, you can’t give him another painting but are expected to return the same painting that is given to you.
This concept is what is called ” non-fungible” the painting or image cannot be changed for another painting because it is unique.
So with the two illustrations above, what are NFTS?
It stands for a non-fungible token, it is a digital asset that cannot be changed or replaced with a similar one.
Irrespective of how many people own it, it is still the same as our painting illustration above.
If you noticed, it is a combination of two words
1. Non- fungible, which we explained above
2. Token – in the digital world means money. It is what you use to buy what you want online, just like you would use the money to buy anything offline. You can also invest them like you would invest your money.
So in a simple term, I can say NFT (non-fungible tokens) are valuable properties( or assets) that are unique and special and cannot be replaced with something else. just like our illustration of the painting your friend borrowed from you above.
If your friend gives you 3 NFTS, you have to return the same NFT you collected from him to avoid”Wahala”.
That’s what Non- fungible means.
Errr!!! We can simply call it Non-replaceable token. What does NFTs look like?
Think of going to the market to buy either a car, Tv or even buying a house or landed property. After your purchase, you are given a receipt in the case of the car, Tv and a deed of ownership for the house or land.
This receipt or title deed represents your ownership of the car or house. It shows you are the true owner of the said property and no one can lay claim to it without showing proof of ownership right? The same goes for NFTs, they are just digital certificates of ownership that states that you own a piece of either a jpeg image file, video or music stored in a server somewhere online. ( remember no technical jargon).
It’s just a digital certificate that shows ownership of anything online made possible by “blockchain technology”.
Why are NFTs so popular and expensive?
1. Because NFTS are unique and cannot be changed, it makes it that all NFTS are original and rear.
The Mona Lisa is one of the most famous paintings in history, created by the legendary artist Leonardo da Vinci. While there are many other mona Lisa paintings, imagine owning the original copy made by da Vinci himself or the original copy of the Nigerian constitution. That is what makes NFTs valuable, as it’s based on rarity and originality.
2. Utility (The real-world benefit) – imagine if Michael Jackson was still alive and he sold just 60 NFTs and by owning one of them, gives you lifetime access to his shows. This will cause the NFTs to quickly become very popular and expensive as a lot of people will want to own them due to the real-world benefit of getting access to Michael Jackson. This is the direction NFTs are heading to, creators, and musicians will explore this.
3. History of Ownership – Imagine Davido decides to auction the shirt he used to perform at the O2 Arena in London for $100, some people would be willing to buy that shirt for close to $1000 because it is owned by Davido and he used it for his show. The same applies to NFTs. Someone might decide to pay 1 million dollars, just to own an image of a car that Nelson Mandela owned at a point. Because of the history of who owns it, this gives value to it and people are willing to own it as digital art collectables.
These 3 factors make NFTs popular and expensive. Either it is an original and rear artwork like Mona Lisa everyone wants to have it or it can give you access to a real-life benefit or it’s historic and you want to own a piece that represents that history and as a form of art collection all these are why people buy NFTs
Beyond the fuss, does NFTs have value?
NFTs are important innovation if you think about the possibility it creates especially for people in some industries.
1. It helps artists to get their works directly to the clients and consumers without the middlemen getting involved.
2. It gives assurance to art collectors that the work they are paying for, are original.
3. Musicians can also issue their music as NFTs to their fans and get paid directly without record labels or distribution.
Are NFTs a good investment?
While there is so much buzz around NFTs and a lot of people are cashing out, overall NFTs can be a high-risk investment and you should know it’s no getting rich quick scheme. However, they are cases where NFTs can be bought at $20 by one person and resold at $60,000. The NFT market is relatively new so you’d want to understand the risk before going into it as an investment.
Who can get into NFTs?
If you are an artist who creates paintings or artwork, a photographer, good with drawings and sketches or a musician, game creator e.t.c you can create your work and sell it as NFTs
As for buying NTFs, anyone interested in owning or collecting digital artworks or want to invest.
P: S- This post focuses on giving a beginner overview and basic jargon-free explanation of what NFTs are. No technical details are covered so if you want to know about the technicality behind NFTs, I advise you to make a Google search.
#Techjargonsimplified
