Is Physical Art Getting Obsolete? Understanding NFT Digital Art.

NFT stands for Non-Fungible Token. Ok. That’s it. That’s the explanation. Make sense right ? NO. What my issues with this topic is that people throw around things like blockchain, crypto-art, ledger, NFT and they just expect me to understand what they are talking about and I didn’t and I think you feel the same . So let’s find it out.

This story is much bigger than a $69M jpeg image or a $3M tweet. It’s a story about human psychology and how the way we value things is shifting because of technology.

To understand what NFT is , we need to understand only 3 letters – Non Fungible Token. First , I want to use different word for Fungible, Replaceable. You can’t replace it. There is only one of them , it’s unique. It is only one on the planet that exists. It has emotional value. It has significance. It is a very valuable thing because it is scarce . So, there is only one of them. Everything in our economy is one or the other , fungible or non-fungible. A sack of rice is fungible , you just want a sack of rice, you don’t care which one it is. The Mona Lisa is non-fungible, there is only one. Unsurprisingly , non-fungible things are way more valuable than fungible things. So , that’s the NF in NFT, non- fungible.

Now, let’s talk about the T , which is Token. This is a very internet-y word. And to understand this , first you have to understand what is blockchain ? More and more your money is just a number on a screen. It’s the result of a bunch of transactions. You don’t barter with physical things, you don’t use cash as much. So the bank keeping the meticulous records of every transaction becomes really important . We trust the bank to do this correctly. Banks and other middle man have been keeping stuff like this running smoothly for centuries. I mean kind of smoothly. There have been a few bumps in the road. With the rise of the internet people started to wonder, Is there a way that we could do this same thing, coordinate this same transaction of transfer of money between two people without the bank ? The result is a very clever concept called the Blockchain. The blockchain fulfills the same thing the bank was doing, but instead of doing this privately on my bank account and talking to other’s bank , all of the transactions are actually recorded publicly on the internet. Let’s take an example in crypto world. James charges me 6 crypto coins for my 3 slices of pizza. I got to swipe my proverbial bank card to say yes I want to pay you six coins. Instead of the bank seeing that request for a transaction and trying to validate it, it goes on to this public record where a bunch of people’s computers all around the world are keeping track of every single transaction of everyone always. If I don’t indeed have the six coins in my account to pay James, all of the people’ s computers who are keeping track of every single transaction will notice that there is a discrepancy and my transaction will be rejected. If I do have six coins, all of the computers looking at the public record will see that request of transaction and they will be like, approved. And they will write that transaction into the public record. So, the T in NFT is “Token” of Ownership.

Now you can say that I can download the same image from internet. Why would I pay millions of dollars for a jpeg image ? You are right but you are also wrong. Because it is all driving on the most fundamental human psychological element of Scarcity. When anything is scarce , rare, unique , so to say, then we wish to have it even more. It is a simple way to prove to the world that you have something which even if you replicate n number of times , you would never be the rightful owner of it. In fact, “ The more the fakes, higher will be the value of original one”.
Most of the people think that NFT is a hype , it’s a bubble. But what it’s doing is. it is pushing our mind to think differently about how we validate and verify things. NFT might be a fad but NFT built on the technology of blockchain is here to stay.