Welcome to No Bad Questions, a series that helps answer some basic questions about blockchain, crypto, and web3.
It seems like you can’t go anywhere on the internet these days without hearing about NFTs. Contrary to popular belief, NFTs aren’t just pictures of apes — it’s an exciting new functionality which could change the internet. But unless you cut through the jargon, it’s hard to see their potential.
“Fundamental innovations in the history of computing are being introduced to the world through art projects” says Stephen Hess, CEO of Metaplex Studios, which provides a standard NFT protocol for Solana projects. “I don't think that people are fully aware that's happening and how profound that is.”
This guide will help you understand how NFTs work, and how you can get started.
NFT stands for “non-fungible token.” But that name is a bit confusing, right? Let’s break it down.
“Non-fungible” means that something is unique and cannot be replaced. Say you have a copy of a book. You could easily swap it out with another copy of the same book. Or a dollar bill — they’re all fungible, it doesn’t matter which you hold. But say it was a limited edition of the book that is now out of print, or it was given to you by someone special, or you wrote your name in it. That now makes it unique and special – and therefore non-fungible and can’t just be swapped out for any other book!
“Token” refers to a token on a blockchain, such as Solana. Many blockchain protocols allow people to build tokens on top of them, which can be capped at a certain amount or unlimited. Tokens can be used to represent things — think of the tickets you use to go on rides at a carnival, or a certificate of authenticity.
Together, an NFT is a unique token that cannot be swapped out, that is decentrally stored on the blockchain.
“More precisely,” says Hess, “that means a digital asset that you can own through your online identity within web3.”
Not exactly. The most important feature of NFTs is that they are unique – and the uniqueness is recognized by everyone else on the blockchain.
And while some of the most famous NFT projects are related to generative profile pictures (or PFPs) that are popular to trade among enthusiasts, an NFT can really be anything, says Hess. “There's a wide variety of use cases that NFTs are now finding for themselves.”
For example, an NFT can be a profile picture, like from the popular Degenerate Ape Academy project. It can also be an item in a video game, like the starships in Star Atlas. It can be a short looping animation, a video, a photo… most any sort of digital asset! It could even represent a loan, or proof you bought a ticket to a concert!
Once you can prove something is unique, you can prove something can be linked to a specific wallet. This type of uniqueness and ownership is a huge deal in the digital world. The idea of ownership on the internet has been very fuzzy — meme accounts stealing jokes, bots stealing art to make tee shirts and profit, and countless other stories of people whose online works have been reproduced.
And once you establish unique digital ownership, you can build some very interesting functionality.
- Several NFT projects have started DAOs, or decentralized communities, that share a treasury and work towards goals. The DeGods NFT project purchased a basketball team; several other NFT projects launched their own validator nodes to secure the greater Solana network.
- Hess suggests that NFTs could serve as a form of digital identity going forward, replacing current login systems that require accounts on web2 companies like Facebook and Google. “I think that when you login in the future,” he says, “you likely will log in with an NFT.”
- Atlas Cafe in San Francisco teamed up with Solana Pay to launch a special, limited-edition NFT that gave users a discount on products in the store.
- “As for media and music,” Hess also says, “I think we will see both tokenized access for content and content itself being sold as discrete units through NFTs.”
And that’s just the tip of the iceberg.
“I think when you look closer,” said Hess, “what you see are the beginnings of web3 communities and decentralized social networking.”
You can get an NFT a few different ways — you can “mint” an NFT directly from an NFT project, you can purchase one on a marketplace, or you can be given one. All of these methods require a wallet.
To mint an NFT, all you need to do is connect your wallet to the project page when NFTs are available, pay the minting and minor processing fees. As long as it’s available and all goes well, once you purchase it, the NFT will be in your wallet!
Purchasing an NFT from a marketplace is a great way to get an NFT directly from an NFT owner. Users set the price they want for the NFT, and you can buy it.
If you’re an artist who wants to create an NFT, minting an NFT can be very easy. At the most basic level, all you need is…
- A wallet.
- The art file (or files).
- A description.
- A small amount of cryptocurrency to pay processing fees (on Solana, these fees are a few cents or even a fraction of a cent).
“I would encourage anyone that's interested in building in the Solana ecosystem, or building an NFT project, to take a look at Metaplex and the tools that we provide,” Hess says. Metaplex provides a number of tools to help artists create their projects — which can range from simply minting your NFT to creating your own customized storefront for your community. Each tool is different and supports different uses — so be sure to check out their guides for each individual tool.
Get building!