Thread by @DCLBlogger

Why do people spend Millions on NFTs when you can just download the JPEG?

$6M for a punk instead of a beautiful house?

Is it Money Laundering?

Is it legit?

1/ Let’s explore 👇

2/ This industry kind of jokes about “buying JPEGs”, when of course there’s more going on here.

To understand NFTs you must understand the basics of blockchain, (The tech behind Bitcoin).

3/ What does it mean to own 1 Bitcoin?

It means the blockchain, (an open ledger - record keeping system), has denoted that your digital wallet has '1' Bitcoin token.

Like the below wallet,

4/ Bitcoin, (BTC), along with ETH, ADA, XRP, etc are all FUNGIBLE tokens, (Are of equal value among each other), and can be traded on the blockchain.

Who gives these value?

The market.

Today, if you want to buy a Bitcoin, the market rate is ~$45k USD

5/ But the blockchain can ALSO be used to store tokens that can store "metadata", ie, links to images, name, description, other properties that can move alone with the transfer of tokens.

Enter "NFTs", Non Fungible Tokens.

6/ Early NFT or "embedding data into coins/token" experiments started as way back as 2012 with Colored coins.

Where people started thinking of the blockchain as storing any data not just Bitcoin transactions/ownership.

7/ I've made a whole thread on how these early experiments lead to what we have today.

https://twitter.com/DCLBlogger/status/1424061001209507841

NFTs going for millions has been 8-10 years in the making.

8/ What started with people experimenting with pegging data to tokens lead to others experimenting with storing images/gifs.

This lead to others thinking hmm what if we build apps on these parameters.

9/ Which then lead to early games, (Spells of Genesis), Meme projects, (Rare Pepe's), Virtual Land, (Etheria), and many other apps that started to suddenly have gameplay, collector and creative value.

Suddenly there wasn't just currency on the blockchain.

10/ Fast forward to 2017 when these experiments continued on Ethereum which took smart contracts to another level.

This is where Cryptopunks made their debut, (under the radar for a long time), coz not many cared or knew about NFTs.

11/ Experiments continued along with Cryptokitties introducing a "breeding" mechanic which would go on to inspire Axie Infinity,

Decentraland, Cryptovoxels, Somnium Space, The Sandbox, creating virtual worlds with land, wearables, names and other goods transacted as NFTs,

12/ Known Origin, Superrare, Makersplace creating dedicated marketplaces to collect NFTs as "Art".

Again, much of the above was developing slowly between 2017-2020.

Then came some home run marketplaces/projects.

13/ Dapperlabs made NBA top shot which used the tech to create collectible sports moments, (cards).

Nifty Gateway brought on mainstream artists, intro'd them and made Art buying more accessible with Credit Cards.

Axie Infinity player base started to grow to 1M+

14/ Finally studios were putting all the pieces and experiments together to build amazing products disrupting mainstream industries.

Now there's 8 years+ history of real people spending real $ to collect NFTs, (Art, game items, collectibles, virtual land, etc).

15/ These real communities have gone on to be over 1M people collectively who are realizing that this didn't just come out of nowhere.

There's depth here. Maybe, just MAYBE, this is the new way of transacting digital goods.

16/ With that in mind and history on our side, the NFT community along with big money, (VCs, Angels, large funds, etc), are taking a bet on blockchain/NFTs being the way of the future.

Suddenly NFT Art can be the future Mona Lisa's of the digital world.

17/ Cryptopunks are one of the first Collectible NFTs released on Ethereum, that had a LOT to do with mainstream paying attention.

With only 10,000, and being a way for people, brands, firms to signal their interest in NFTs, this demand has people paying top $ for rare punks.

18/ These NFTs are mostly seen as investments.

It's not just a "JPEG" but a token that comes timestamped, from the creator, that can be traded on a marketplace.

This officially released token is what people collect/buy.

19/ So yeh you can copy paste a JPEG, but you don't have the token.

Just like I can copy paste someones Bitcoin balance but not own the Bitcoin.

Collectors pay for NFTs not the image.

The NFT lives on blockchain, not on your phone.

20/ No one "decided" NFTs have value, people just came together and started trading them.

Some paid more than others and suddenly what started with a couple hundred people exchanging art/memes/game items has now become million+ people exchanging all kinds of digital goods.

21/ Who knows what the future holds.

But this tech is going nowhere, people will continue experimentation, and many of us will be here just enjoying the show.