Thread by @FinFloww

What exactly are NFTs, what's the concept of ownership? Explained in a very easy to understand way.

A thread 🧵

NFT is something being spoken about a lot everywhere on twitter, instagram, youtube, where ever you go. @garyvee is shouting out loud about it. Mark Cuban, and other people too.

They are being seen as the future, while most of the people are confused about their real value.

Let's declutter everything here. NFT is Non-Fungible Token. Something that holds it's own individual value, it can't be replaced by anything of the same value.

To understand NFTs we first need to understand how do we give something value? How do we know something has value?

Only when we collectively believe it has value. It could be because of any rationale. It could be because that thing unlocks something: like status, money, utility.

Just like coins, NFTs are also minted. They are minted on blockchain using smart contracts.

Smart contract is a digital agreement in the form of a code. In this case it's the agreement on ownership.

All this could be a tad-bit confusing, but we'll use examples to understand it better.

If the smart contract says the owner is you, then you own the asset.

An extremely common question arises that what if we screenshot an NFT, how do we not become it's owner?

So, to understand this consider you are going to buy an Audi. Can you claim it to be yours without paying money for it and just by clicking a selfie🤳🏻 with it?

Similarly if you take a photo or a screenshot of an NFT which is owned by someone else.

Meaning it's code is owned by someone else and he/she is binded by the smart contract to own it, then you can't claim that NFT's ownership.

Next question is very important: "Why do people pay for something digital and something which cannot be felt?"

Okay so we are basically living in a mix of a digital and the virtual world right now. Our attention span in the digital world is increasing.

So, just like we value intangible things in the real world, we start valuing things in the digital world.

GaryVee very famously talks about the value of the Bluetick. What do you think a value of 2D digital tick in front of your name is? It's a lot. Why? Because it gives people identify. It's a symbol. And we collectively gave it that value.

Why do people buy and own NFTs?

Because that NFT could be a status symbol, an identity, an unlock to a valuable thing or just something which is worth owning.

How does the price of NFTs appreciate?

It's just like the stock market, where when the underlying value of the company appreciates, the price of the stock will for sure.

What's the underlying value people see in NFTs?

1. IP or intellectual property: when the value of a franchise increases, gets more traction, it's NFT would appreciate in price.

Something like Marvel launching a superhero and it gaining traction. Slowly the IP of such characters becomes stronger.

2. Utility: The use case that the NFT enables could be a major factor fot it's value to appreciate.

GaryVee's Vee Friends NFT enables people to come to the VeeCon in 2022. You can't go if you don't own a VeeFriend.

And because that event is actually amazing, people do want to go. That increases the value of the project.

And there are many other reasons, it could be network effect of value, adoption by big players or famous people or anything else that could make the value appreciate.

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More such indepth threads on NFTs coming soon.