Thoughts on the future of work, from the people and teams creating it.

What Are NFTs And How Do They Work

The last quarter of every year always gets everyone in a great mood. There are the holidays that we look forward to celebrating with loved ones. Then, of course, November is the best part of the college football season when the games start getting serious. Even McRibs celebrates its birthday every November. In fact, on November 1,2021, McDonald’s celebrated the 40th anniversary of the cult classic by giving away a limited number of McRibs NFTs. That’s right — NFTs.

Of course, you’ve probably heard of NFTs from tech guys and crypto speculators for a while now. But the move of McDonald’s shows that there’s a whole lot of interest about NFTs that even the big boys from mainstream want in on the action. Maybe it’s about time you should too.

So what are NFTs?

Non-fungible. Google says NFTs are non-fungible tokens. But that doesn’t really mean much right? Well, let’s break it down a bit and try to get an NFT meaning in non-techie terms. Something non-fungible is non-interchangeable; it’s one of a kind. Say you have a Honus Wagner T206. You can take a picture of it or even have copies made of it. But there’s only one that’s original, and that’s the one you own. And until you sell it or pass it on, you’re forever the sole owner.

As Tokens. What about an NFT being a token? You’re familiar with tokens. Back in the day, you may have dropped a gift as a thank-you token. That token represents something, your gratitude, or some other kind of affection. So going back, NFTs, as unique tokens, also represent something — this time, digital or real-world assets. Before you hang up, know that these buzzwords aren’t all that complicated.

Digital and real-world assets. Digital assets just means anything that’s stored, well, digitally. Or you can call it digital content (in digital format), which could mean anything from photos and videos to slides and essays, even tweets. And these must come with the right to use. Content or data that can be used by anyone for free are simply called assets, not digital ones.

Real-world assets, on the other hand, mean anything of value that physically exists, like fine paintings, gold, and real estate. It’s the ownership of these assets which are turned into digital tokens.

So, to sum it up, NFTs are unique digital representations of anything with intrinsic value in the digital or real world, which are restricted in their use by the owner’s rights.

More than just digital assets

Yet NFTs, in a sense, are not just digital assets. In a way, an NFT is really like a certificate of authenticity or proof of ownership of the digital asset itself. You’ll need some proof that what you have is unique, the “real thing.”

Imagine an NFT as a safety deposit box where you put the digital asset (like the digital token of an artwork), historical info on its ownership, an I.D. number, the contract (also called a smart contract), and other ownership specs. While that cleared the air somehow, you may still be wondering, “How does NFT work?” or “What’s the entire point of NFTs?” Let’s get down to it.

How do NFTs work?

Minting an NFT. To create or “mint” an NFT, you’ll need a digital asset or a real-world asset. The minting happens when you execute a code in a smart contract. Sounds kinda high-level right?

Nope, it’s actually surprisingly easy. You don’t need to be a coder or developer to create one. There are tons of online tutorials for beginners or non-coders, even NFT apps, that can make minting a breeze.

NFT platforms. The easiest way, though, is to use an NFT platform like OpenSea or Rarible to mint your own NFT. Some of these platforms will also allow you to buy, list, sell, and trade NFTs, even if you don’t have any technical blockchain knowledge.

ETH network. Although a few other blockchains can support NFT, the Ethereum or ETH blockchain is where most NFTs are created and stored. It’s in the crypto blockchain where a record of who owns what is kept.

The idea is that since the blockchain is a shared ledger maintained by thousands of computers, the records can’t be easily forged. This means that your digital certificate of ownership can’t be readily breached and copied, making it unique and “original.”

The cost. The cost to create would typically be in the area of $70 and $100. But this only covers the “gas” or the network transaction fee that you’ll need to “tokenize” your asset (or converting a digital asset into a digital token). It excludes the commission fees that you’ll need to pay the NFT marketplace once you decide to sell, much like how you’d pay other online selling platforms.

What’s the point of NFTs?

Digital scarcity. NFTs create digital scarcity. Each tokenized asset has a unique identifier that is linked to only one ETH address. Your private key is your proof of ownership that makes your digital token rare or one-of-a-kind.

How valuable or scarce the NFT would be depends on the creator. Of course, they can always make replicas (each still with its own unique identifier), but then, that would diminish the rarity of the NFT.

Opportunities for creators. For content creators, such as artists and athletes, NFTs provide a great opportunity to maximize earnings. They can mint and sell their digital assets. And it’s not just a one-time deal. Every time content is sold by a new owner, since the creator’s address is part of the NFT (remember that safety deposit box?), the content creator automatically earns royalties.

Popular examples. There are probably as many cool NFT examples as there are digital assets that are yet to be minted into NFTs. And some of these have sold for absolutely crazy prices. Here are an amazing few that have turned up the valuation in the NFT Metaverse:

- Beeple’s digital collage “Everydays: The First 5,000 Days” ($69 million)

- Edward Snowden’s photo “Stay Free” ($5.4 million)

- Reggie Jackson’s trading cards — Action Jackson’s Sports Cards ($2.08 million)

- Whisbe’s video “Not Forgotten, But Gone ($1 million)

- Brett Gardner’s blockchain game — MLB Champions ($21.28 million)

- Kevin Abosch’s photo “Forever Rose” ($1 million)

- Pak’s digital artwork “The Switch” ($1.4 million)

- Jermall Charlo’s signed card — Lions Only GOLD ULTIMATE ($19.1 million)

Is it game on?

NFTs have only been around for just a few years, and already, they are creating unprecedented opportunities for many. And it’s not just big-name celebrities and pro league superstars who can profit from the boom. Even college football athletes are joining the fray. NFTs are definitely here to stay, and it looks like they’re going to be a big part of our future reality. You might want to check it out early to have that quarterback advantage.

At Draftly, a platform especially focused on Sports NFTs of high school and college athletes, we’ve put in a lot of time and hard work to make things easier for you to jumpstart your NFT sports experience.