Hey Taylor: I finally gave in and looked up NFTs. I guess the letters stand for Non-Fungible Token, and I’m probably more confused than before I did the research. Can you break this new trend down for me? - Marty
Hey Marty: I’ll do my best! NFTs are surging in popularity along with the crypto boom, though we’ve been experimenting with and gaining understanding about cryptocurrency for over a decade so it’s easier for us to wrap our minds around that one. I’ll give a basic rundown, and I apologize in advance if this doesn’t clarify anything.
Fungible. We can make sense of the words “token” and “non,” so it’s really the “fungible” that makes NFTs a head scratcher. In simpler terms, it means something that can’t be replicated. The reason people care and so much money is flying at NFTs, is that people are figuring out the digital version of an original Monet. Spend enough money and you are the only person in the world to own a specific graphic, video, GIF, etc. People might be able to create a visual replica, just like with a painting, but you’re the only one with the proper coding that makes it a unique part of a certain blockchain (almost always through Etherum at present).
What can an NFT be? The answer to this question is why the concept might never make sense to some people. Anything can be an NFT, as long as it’s able to live in the blockchain. Music, a crypto coin, digital art, a YouTube video, a Google document. Online artwork is making the biggest waves, as the idea is that this will be the next big thing in art collecting. The blockchain coding that serves as proof of ownership has people thinking this will be a safe way to invest in original pieces even if it’s incredibly easy to make a billion copies of the piece. The speculation has its hooks in people, and digital art from creators you’ve probably never heard of has been selling for many, many millions of dollars.
Passing fad or here to stay? As weird as the NFT concept might seem, it can’t be shrugged off. The amount of money these tokens have already generated means there’s value to the idea. If people are spending that kind of money, it means there’s no shortage of attention, and while we might not have discovered the truest value of NFTs, the process will keep getting refined and eventually take hold on a large scale. I don’t think you should empty your bank account to buy a specialized video made by your favorite YouTuber, but I think we should all keep an eye on this new financial arm of the blockchain.
I’m guessing you’d still have a hard time explaining an NFT to someone else, but hopefully I’ve made you a little less confused. Thanks for asking!
Disclosure: Information presented is for educational purposes only and is not an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. To submit a question to be answered in this column, please send it via email to Question@GoFarWithKovar.com, or via USPS to Taylor Kovar, 415 S 1st St, Suite 300, Lufkin, TX 75901.