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  • Writer's picturePatrick Aloisio

What are NFTs?

Updated: Jul 15, 2022

Originally posted on Twitter, you can view the full thread on Twitter here

 

Hey! Don't be a stupid idiot!


Why do you still not understand NFTs?


"It's just crazy prices for ape pics & art.”


Everyone gets this WAY WRONG.


This is the easiest explanation ever for NFTs and what they REALLY are...


1/ This thread covers:

  1. What fungible vs non fungible means.

  2. The art aspect of NFTs.

  3. NFTs: think of it as a Certificate of Authenticity.

  4. The true full potential of NFTs.

First, NFT stands for Non-Fungible Token. What does FUNGIBLE even mean?


2/ Fungible just means something is not unique and can be switched out without changing anything.


If you have a $20 bill and I have a $20 bill, we can switch them and it’s still the same for both of us.


They are both INTERCHANGEABLE. That’s FUNGIBLE.

3/ NON-FUNIGIBLE would be if you’re Da Vinci and you painted the Mona Lisa, then I created the most perfect replica ever of the Mona Lisa.


We still can’t switch paintings because yours is the original worth millions, mine is a fake. NOT INTERCHANGEABLE.

4/ Next, the "token" part of NFT is just describing everything that's involved with the item is together as one whole piece, or token.


Image, code, transaction history, etc. is stored digitally as one whole piece on a blockchain.


5/ What makes the big news and clickable headlines are the absurd prices for jpgs of apes, punks, and toads. (More on valuing art below)


So people unfamiliar with the space see that happen, think "that’s ridiculous," and discount the whole point of NFTs. (More here)

6/ It would be easy to discount phone apps if the only one you knew was Doodle Jump or Angry Birds.


“So all apps are Doodle Jump games?”


Umm no not at all...


Or if the only website you saw was YouTube.


“So the internet is just cat videos?”


No you stupid, stupid idiot.

7/ The use case is MUCH BIGGER THAN JUST ART.


When you hear NFT, think of a CERTIFICATE OF AUTHENTICITY.


The current way of the world needs a certificate of authenticity for something to be verified by a “trusted 3rd party.”


As we've seen, "trusting" doesn't always work.


8/ NFTs enable the new way of the world to “not trust, VERIFY.”


Now, a blockchain like Ethereum is all you need to verify if the item is authentic or not. Since the transaction ledgers are public, you can instantly look up and see if the item for sale is the original or a fake.

9/ You might be thinking:


I don’t care about art.

I don’t ever deal with any collectibles.

I don’t care about NFTs.

YOU, Pat, are the stupid idiot!


Well, take one last second to consider the most important part...


10/ What else counts as a Certificate of Authenticity?

  • Think a deed for a house

  • Your signature on a contract

  • A ticket for a concert, movie, or game

  • A receipt

  • Anything that’s supposed to be confirmed 1 of 1 and not interchangeable

THIS is where the uses for NFTs are endless!

11/ For the above examples, here's rough estimates on how big NFTs' potential is:

  • The US has roughly 140 million homes

  • DocuSign claims to have over a billion users worldwide

  • MLB, NFL, NBA are +110 million tickets per year

  • Receipts are basically offered on every transaction

12/ These numbers add up very quickly...


But you might say, "the current model works fine. What's the difference?"


The real utility is in the functionality NFTs allow but normal receipts don't.


13/ Let's take the tickets example from above. Depending on the source, the secondary ticket market is upwards of $15 billion dollars per year!


That's an extra $15 billion per year that teams, bands, artists won't see a dime of.


But now NFTs can change how value is captured.


14/ With tickets as NFTs, it allows the creator to program the code to pay a royalty for any future sales. (I wrote more about this in my thread below).


Mark my words: EVERY EVENT WILL DO THIS TO CAPTURE VALUE IN THE SECONDARY SALES MARKET.

15/ New and improved tech will always have the advantage over the old ways.


Old receipts, tickets, contracts, etc. won't be able to compete with the new tech of NFTs which allows a myriad of extra functionality. (More here)

16/ NFTs are such an exciting space, and we still are super early on. Who knows what the next functionality will be.


Here are great follows to learn more:

@cdixon

@punk6529

@MilkRoadDaily by @ShaanVP & @benmlevy

@gregisenberg

@packyM

@metavestor

@twobitidiot

@balajis


17/ If you thought this thread was interesting or helpful, follow me @Patrick_Aloisio for more threads like this.


Share this so you can help other people not be stupid idiots about NFTs. Follow for more plain easy analysis.

 

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