Updated: Mar 31, 2021
We are at an interesting vantage point of being able to collectively determine how humanity ought to approach the metaverse. Communication mediums such as Clubhouse, Discord, Slack, as well as sites like YouTube, Twitter, and Reddit have all been instrumental in the peer-to-peer exchange of information. Tech support and education is happening in real-time, which is why I also felt inclined to document how I learned about NFTs in a way that made sense to me. And while current mechanisms of learning have been sparked globally, by no means has it been equitable.
This is my feeble attempt at capturing all that I’ve learned these past few weeks.
(If you’re an educator and you like this breakdown, feel free to use and adjust the presentation version of this post attached here. Exhaustive resource list can be found at the bottom)
Let’s start with the basics, what’s blockchain technology and why is it “the future”?
A blockchain is a system that allows peer-to-peer (P2P) properties to be stored on transactional records on databases known as a digital ledger. In short, it records and verifies money that is kept by everyone on a “chain” or a decentralized, digital platform. Every exchange is traceable. Here is a video that explains this simply.
For example, if I took a photo of both of us and you wanted me to text it to you, the original photo is still stored on my phone. This makes sense for the purpose of sharing information. While we may be able to exchange information with each other on the internet, what we actually share with one another are copies of our work. But what happens if you’re sending money?
Don Tapscott, co-founder and Executive Chairman of the Blockchain Research Institute, explains the “double-spend” problem of current intermediaries and the lack of individual ownership and protection of one’s data and digital assets. Current intermediaries, such as banks or social media companies, can still be hacked and manipulated, and Tapscott proclaimed that these groups have “appropriated the largesse of the digital age asymmetrically [where] we have wealth creation but have growing social inequality.”
Tapscott also notes that there is a whole system of content creators who haven’t received fair compensation because the internet disrupted the inherent system of intellectual property. This was back in 2016.
The potential for blockchain technology to revolutionize the world economy is massive, and it’s already happening. Alex Pruden from A16z breaks down crypto terms and some of the popularly used technical language here.
What’s cryptocurrency then, and what’s an example of one?
Cryptocurrency is a digital, decentralized, and encrypted currency that can be used to buy goods and services. There is no central authority that manages the value of a cryptocurrency. Bitcoin (BTC) is regarded as the first cryptocurrency and uses P2P technology to manage instant payments. Every payment and transaction is recorded on the blockchain, and Bitcoins act essentially as computer files stored on a digital wallet app on a phone or computer. Ethereum (ETH) is another form of cryptocurrency.
So what is an NFT, and why is it booming now?
NFTs, or Non-Fungible Tokens, are collectible digital assets that represent a wide range of unique items. Unlike Bitcoin, an NFT is one-of-a-kind and is non-fungible, with most NFTs being a part of the Ethereum blockchain. While they have been around since 2017, the value in the NFT is the user’s ability to secure royalties and ownership over an asset, such as digital art.
Wait hold on, what does fungible mean?
Fungibility refers to a currency, share, or good, that can be easily exchanged for another currency, share, or good for equal value. Dollar bills or goods such as oil or grains are fungible. Non-fungible goods cannot be exchanged for equal value. Diamonds, land, baseball cards, and paintings are non-fungible because they are not equally interchangeable. Fungibility can be further explained here.
What gives NFTs value over a digital copy of that same NFT?
An NFT cannot be exchanged for one another for equal value, and each token has an authentication hash that distinguishes it from other NFTs. These crypto collectibles are valued based on how scarce they are, which rapidly evolves the gaming, artwork, and collectibles industry from the traditional economy to what is now being called the internet economy.
For independent artists, “minting” or uploading an NFT allows digital art to be listed as tokens in order to be recorded on the blockchain, mainly ETH. While copies or screenshots of digital art may circulate its value is determined by ownership of the original.
The authentication hash NFTs offer gives the original “uploader” the ability to receive royalties as their NFT asset continues to be resold on the secondary market.
Another avenue of value NFTs offer is its unlockable features. Unlockable features essentially mean that upon a successful transaction, certain content may only be available to the buyer. Digital art may have additional layers of multisensory (visual, audio, etc) content upon purchase. Another example of unlockable features may be related to the social engagement of the original lister - including additional promotional offers, VIP access to events, and discount codes on other products and services.
How does buying, selling, and minting an NFT work?
For the sake of this answer, I’m going to assume you have never invested before either in cryptocurrency or the stock market. Let’s also assume you’re an artist and you want to list your work.
First, you’ll need a cryptocurrency wallet
A wallet is used to send, receive, and store digital assets such as Ethereum (ETH). They can be built into your browser, an extension to your browser, hardware to plug into your computer, or an app on your phone. To understand how cryptocurrency wallets work click here.
Note* In order to make purchases using a cryptocurrency wallet you’ll need to have an existing debit card or bank transfer.
Opening an account on an NFT Marketplace
You will then need to open an account on an existing NFT Marketplace. These are platforms that display different NFTs available for purchase and enable P2P transactions. These sites include NBA Top Shot, OpenSea, Sorare, Rarible, Foundation, SuperRare and more. NFT marketplaces require you to connect your digital wallet.
After setting up your account, you may either browse the marketplace for digital art or collectibles to purchase, sell an existing NFT you own, or “mint” (upload) your art either as a single item or as a collection.
Minting digital art
In order to mint your art, it must be uploaded through a supported file such as PNG, GIF, WBP, MP4, or MP3. From there, you’ll need to set a sale price and choose whether your piece will have unlockable content.
Minting digital art is not free, and requires gas fees in order to continue and process the applications of NFT marketplaces and the Ethereum blockchain.
So now that your accounts are set up, it would be best to have a firm understanding of two things: gas fees and smart contracts.
What is gas?
Gas, or ETH is not only a currency, but also a mechanism that allows other blockchain applications to be built on it. Listing and purchasing NFTs require Ethereum in order to ensure that transaction history and token metadata is publicly verifiable. You will need ETH to run smart contracts and applications on the Ethereum blockchain. More on Ethereum can be found here.
What is a smart contract?
A smart contract is an agreement between two individuals in the form of a computer code. P2P (peer-to-peer) transactions are stored on a public database and cannot be changed. This article explains smart contracts in depth.
So going back to before, smart contracts are beginning to replace middlemen, or current intermediaries like banks and social media companies. Smart contracts may reduce fraud, delays, and the overall cost in the operations of many different industries in the global economy. Since they are decentralized and free of commission, it provides the user total ownership.
Smart contracts are also not entirely financial, and may be used for trades and services, crowdfunding, as well as other legal and governmental processes, such as voting.
Click here for a more visual step-by-step breakdown.
Ways Creators and Supporters Can Get Involved
Funding & Non-Profit
Mint.af - Founded by Ameer Sirsu, the Mint Fund is a community project that provides artists with funds to cover gas fees in order to promote diversity and inclusion within the NFT community (prioritizes BIPOC and LGBTQIA+ artists especially outside of North America and the European Union)
The Giving Block - Founded in 2018, the Giving Block offers a nonprofit specific solution for organizations to accept cryptocurrency donations
Binance Charity - A donor system dedicated to achieving global sustainable development goals and decentralizing worldwide poverty alleviation through blockchain. Allows people with non-smart phones to own crypto wallets and transfer cryptocurrencies
NFT Plazas - Founded in 2018, a news site dedicated to tracking the growth of NFTs and the Virtual Blockchain world
The Arcade - A Black led collective dedicated to bring authentic social interaction among everyday people with breaking down trends, advice, and information
NFTsDaily - A platform that connects NFT artists and collectors through interviews, drops, and more
Other Clubhouse Thought Leaders I Recommend to Follow
Michael Rutledge - Entrepreneur and collector who frequently hosts rooms to promote emerging artists and offer best practices, also an amazing mentor that I met through Clubhouse
De Kai - AI Ethics professor, musician, and activist often leading discussions debating the impact of AI
X Eyeé - Otherwise known as TechWithX, an AI researcher for Google and Microsoft who offered my favorite breakdown of NFTs
MC HAMMER - One of the most observant and accessible celebrities on the platform
Drake Bell - Thanks for my first ever minting experience, also another celebrity who uses platform to support smaller artists
Gabe Weis - Bay Area Cubist Artist who can often be found in more casual Clubhouse rooms with other artists
Wylie Styles - Game developer looking to help create more diverse videogame devs
Em Bergie - Multimedia artist who uses NFTs to support organizations that help low-income menstruators afford menstrual health products
Ali Sabet - Iranian-American painter who sold 300+ NFTs since February 2021, can often be found in rooms providing advice for emerging artists
Justin Fredericks - CEO of Art House, an AR publishing platform, and Partner of Modern.com, the first art marketplace where every purchase includes a physical and digital artwork via AR and NFT. Known in the Clubhouse community for engaging in critical discussions regarding NFTs and blockchain technology, Justin and I met through Clubhouse and not only offered his mentorship but also hired me as part of the Art House team. Thank you Justin!
Whew. That was a lot. And there’s probably a lot more to unpack.
Now that you understand the basics of blockchain technology and the mechanisms of NFTs, it’s important to acknowledge the implications these raise for the future.
Some questions to consider
Who is ultimately controlling the market?
Does the value of art come from the NFT or is the NFT simply a medium of exchange?
Should the market be entirely deregulated/decentralized? What does ethical management look like?
How can NFT misinformation be prevented? Is Clubhouse an appropriate medium for educational conversations?