CHAPTER 2

What Are NFTs?

Even before you think about non‐fungible tokens (NFTs), which in their most basic form are unique digital collectibles secured by the blockchain, you must understand how collectibles work. Perhaps the following eclectic Beanie Babies parable will clarify the erratic and eccentric psychology behind why we collect.

Why People Collect

Before NFTs, there were Beanie Babies…

From stamps to Civil War weapons to sneakers, people collect many different objects in various formats. So, it should come as no surprise that there is a market for collectibles in a digital form. Conceptually, it’s confusing. But on the sheer basis of wanting to own a unique item that others do not have, digital collectibles vary little from their physical counterparts. Therefore, to understand why people collect NFTs, we’ll draw a comparison to a physical collectible that took the world by storm in the 1990s: Beanie Babies.

From its inception in 1993, Ty Warner, the founder of Beanie Babies, built scarcity into his product. The plush toys were distributed in small quantities to small retailers, avoiding chain retailers and large orders altogether. Ty didn’t want people to be able to find or buy every Beanie Baby they wanted.

The company kept the number of Beanie Babies in circulation secret. It “retired” the production of certain Beanie Babies to create more exclusivity. It intentionally let misprints and faulty Beanie Babies through the cracks, which would become extra rare editions of the toys.

Around the same time as the Beanie Babies’ rise in the public consciousness, eBay emerged and positioned itself as the online marketplace for buying and selling collectibles worldwide. It was a synergistic relationship that ballooned the resale value of Beanie Babies and validated eBay as a valuable tool for speculators in all collectibles markets.

Those lucky enough to get their hands on one of the retired $5 plushies could, at minimum, see a two‐ or three‐fold return by listing it on eBay. Some rarer misprints, such as the “Pinchers the Lobster” misprint as “Punchers the Lobster,” yielded one collector more than $10,000.

The Beanie Babies craze was in full swing toward the end of the 1990s. Robberies and even murders ensued over the pursuit of the plush toys. For example, at a Hallmark store in West Virginia in 1999, a security guard was shot and killed when tensions were high due to a late shipment of Beanie Babies.

Sane adults searched far and wide for the chance to get a single life‐changing Beanie Baby. One set of divorcees battled over who got the Beanie Babies collection, believing it was the most valuable asset that the two had to divvy up.

Then in 1997, McDonald’s got in on the craze with Ty Inc. Together they launched the Teenie Beanies product line in McDonald’s Happy Meals and proceeded to sell 100 million of the mini plush toys in just 10 days.

Magazines, such as Mary Beth’s Beanie World, which sold 650,000 copies a month at its height, published entire spreads on Beanie Babies, discussing their value as a speculative investment, which, with the right strategy, could yield more than enough to send a kid to college.

Just when Beanie Babies seemed to be a collectible that would carry on for decades, it all came crashing down. Talk of their overvaluation sparked an avalanche of Beanie Babies hoarders to list their toys on eBay, causing a significant oversupply. In turn, the price of Beanie Babies plummeted.

Seemingly overnight, people’s collections of presumed valuable Beanie Babies became nearly worthless. The story of Chris Robinson Sr.—the man who spent more than $100,000 on Beanie Babies for the speculative investment—became the symbol for the crushing defeat that this collectible market experienced.

The Financial Times aptly called Beanie Babies “the dot‐com stock of the soccer mom world in the second half of the 1990s.” We don’t draw this comparison to say that NFTs are doomed to the same fate as Beanie Babies, that is, a collectible bubble bound to burst. Instead, Beanie Babies provide an excellent look into the dynamics of why people collect.

The same basic principle that drove people to collect Beanie Babies drives people to collect NFTs: scarcity. Although other factors drive collectors to collect, such as investment, speculation, emotional connection, the fear of missing out (FOMO), and “the thrill of the hunt,” at the core of collecting is scarcity. No matter what we collect, we do so because there are a limited number of those things.

Could the NFT market crash? Anything is possible. But unlike Beanie Babies, NFTs provide real‐world solutions to problems plaguing the art and collectibles markets, as we discuss in Chapter 3, “Why NFTs Have Value.”

Now that we’ve addressed why people collect, whether it’s physical or digital collectibles, let’s dive into the topic at hand: NFTs.

What Exactly Are NFTs?

NFTs are generally known as a particular type of digital collectible, such as digital art from Beeple, a digital trading card from Rob Gronkowski, a short video from Saturday Night Live, a picture of fortune‐telling Curly of The Three Stooges with an unlockable Curly‐esque fortune, or one of the CryptoKitties. But what exactly are NFTs?

NFTs are unique items verified and secured by a blockchain, the same technology used for cryptocurrencies. An NFT provides authenticity of origin, ownership, uniqueness (scarcity), and permanence for any particular item. Let’s break the term non‐fungible token down a piece at a time.

Tokens

Let’s start with the word token. According to Dictionary.com, one of the definitions of token is “a memento; souvenir; keepsake.” Since NFTs are commonly known as digital collectibles, one might think the token in NFT is derived from this definition. Although it may apply (somewhat), the token in NFT is derived from something entirely different: the blockchain.

Some of you may be fretting, “Oh no, here comes the technical part. I just want to know what an NFT is.” To understand completely what an NFT is, you need to learn a little about blockchain. We promise not to make it too complicated.

You’ve probably heard of Bitcoin and perhaps some other cryptocurrencies. According to Investopedia, a cryptocurrency is “a digital or virtual currency that is secured by cryptography.” Just know that cryptocurrencies are digital currencies that exist on the Internet. You can buy and sell them for investment purposes, buy things with them, or even stake them (essentially lending them to earn interest).

Whenever someone transacts with a cryptocurrency, whether buying, selling, transferring, staking, or purchasing something with cryptocurrency, that transaction must be verified. The verification process determines whether the sender has the amount of cryptocurrency being sent. This is what keeps a cryptocurrency secure and reliable.

When cryptocurrency transactions are verified, for example, with Bitcoin, the verification is conducted on a group of transactions, not a single transaction. This batch of cryptocurrency transactions is known as a block. Each block has a certain storage capacity. After the block is filled and the transactions have been confirmed, the block of transactions is then appended to the previously verified block, creating an ever‐growing chain of blocks: a blockchain. The process repeats, and the blockchain grows longer and longer (see Figure 2.1).

So, the blockchain of a cryptocurrency is a list of all transactions (every single one) of that currency, going all the way back to the beginning of that cryptocurrency.

Every time someone buys or sells Bitcoin, buys something with Bitcoin, exchanges Bitcoin, or transfers Bitcoin, that transaction is listed on the Bitcoin blockchain. The number of daily Bitcoin transactions reached around 400,000 in January 2021, and Ethereum (the second largest cryptocurrency) was processed more than 1.1 million times per day (Statista.com). Think of a blockchain as an extremely long accounting ledger.

FIGURE 2.1 A blockchain

Coin vs. Token.

When speaking about certain cryptocurrencies, people often use the terms coin and token interchangeably. But that would be wrong because there is an important distinction.

Cryptocurrencies that are coins, such as Bitcoin, Litecoin, Dogecoin, and Ethereum, have their own respective blockchains. In contrast, tokens are cryptocurrencies that don’t have their own blockchains. Instead, tokens utilize another coin’s blockchain. For example, GameCredits (GAME) and SushiToken (SUSHI), among thousands of others, are tokens that use the Ethereum blockchain. Cryptocurrency tokens that exist on the Ethereum blockchain are also known as ERC20 tokens. ERC20 is the Ethereum standard for creating cryptocurrency tokens.

GameCredits is an interesting case because it was initially a coin with its own blockchain. But to take advantage of the greater functionality that the Ethereum network offers, it switched to become an ERC20 token. So, now all GameCredits transactions (and all other ERC20 token transactions) are recorded on the Ethereum blockchain. This is the reason why Ethereum processes so many transactions a day.

So, the token in NFT is a cryptocurrency token. An NFT exists on a blockchain. Currently, most NFTs are created on and live on the Ethereum blockchain. Some NFTs are created on and exist on WAX, the Binance Smart Chain, and some other blockchains.

Non‐fungible

So, we’ve got the token part down. Now let’s turn to non‐fungible. What does fungible mean? According to Dictionary.com, fungible is an adjective that means “(especially of goods) being of such nature or kind as to be freely exchangeable or replaceable, in whole or in part, for another of like nature or kind.” Let’s start with some examples.

Dollars are fungible. If we give you a five‐dollar bill and you give us back five one‐dollar bills, the exchange value is equal. It doesn’t matter which dollar bills you gave us. Say that you had a stack of one‐dollar bills. You could give us any five of them, and it wouldn’t matter. You could even Venmo us $5. The fact is that dollars are entirely interchangeable.

Similarly, cryptocurrencies are fungible. If you send us a Bitcoin, we don’t care what wallet it came from; a Bitcoin is a Bitcoin, just like a dollar is a dollar.

Even some goods or commodities (as the previous definition points out), such as barrels of oil, are considered fungible. It doesn’t matter which barrels you send me. Any barrel of oil of the same grade would do.

Using the previous definition, it seems evident that non‐fungible items can’t be freely exchanged or replaced by similar items. For example, diamonds are non‐fungible. Each diamond is unique in size, color, clarity, and cut. If you bought a particular diamond, it would not be easily interchangeable with another diamond.

Likewise, NFTs are non‐fungible. Each NFT is unique. You cannot freely exchange or replace one NFT for another.

But what makes each NFT unique? After all, isn’t it easy to download, copy, and share images from the Internet? Yes, but you can take a photo (or preferably create an image) and mint that image into a token that exists on a blockchain. We use the term mint like minting a physical coin.

When cryptocurrency coins and tokens are created, they are minted. Usually, millions or even billions of coins or tokens are mined or minted for a particular cryptocurrency. Generally, a cryptocurrency has a circulating supply, the number of coins or tokens already minted, and a max (maximum) supply, the total number of coins that can be minted. The max supply amount is baked into the original code that created the cryptocurrency and cannot be altered.

Contrast this with a fiat currency, such as the U.S. dollar, the supply of which can be continually inflated by printing more dollars. As more dollars are printed, the value of each dollar decreases, assuming that the demand for dollars remains the same. Thus, there is no max supply of dollars or other fiat currencies.

Bitcoin has a max supply of 21,000,000 coins, whereas Uniswap (UNI), an ERC20 token, for example, has a max supply of 1,000,000,000 tokens. Each NFT functions like a cryptocurrency, but NFTs have a max supply of 1. That’s what makes NFTs unique and non‐fungible; they cannot be freely exchanged with something of like kind because there is nothing of like kind. Think of an NFT like an original painting: there’s only one. There can be copies of a painting or prints made, but there’s only one original.

Even though we just said that an NFT has a max supply of 1, it is possible to mint an NFT with a supply greater than 1. For example, you could mint 100 “copies” of the same NFT. Technically, it’s 1 NFT of 100 tokens. Each of the tokens could be exchangeable with the other tokens of the same NFT because they would be the same in every respect. Although these multitoken NFTs are considered NFTs, we would not technically refer to them as NFTs because they are fungible, albeit with a limited supply, but they are still fungible.

FIGURE 2.2 The Three Stooges “All Stooge Team” NFT, #19 of 30

We need to distinguish between a multitoken NFT and a limited edition or series of NFTs of a particular design. For example, Rob Gronkowski issued four series of NFTs, the design of each series representing one of his football championships. Each series has 87 (being the number of his jersey) editions, and each NFT is individually marked 1/87, all the way up to 87/87. Similarly, The Three Stooges NFT series “All Stooge Team” is an edition of 30 individually marked NFTs. Figure 2.2 shows #19 in that series.

Albeit part of a series of 30, the NFT pictured in Figure 2.2 is a unique token with a supply of 1, which indeed makes it an NFT. Similarly, each of Gronk’s NFTs are also unique NFTs.

One can make an analogy of such limited edition, individually marked NFTs to a series of prints of a painting that are also individually, sequentially marked. Whereas an analogy to the multitoken NFT could be a statue that is cast from a mold a limited number of times, and then the mold is broken. Each statue is an original, but also identical to the other statues from the mold. If each statue is sequentially marked, making each one unique, then this analogy would not be applicable in this case.

Edition numbers can have different valuations. With physical art prints, we generally assign the greatest value to the first edition of the print series, that is, edition 1 of 500. However, with NFTs, the driver of edition valuations can vary. For example, with the NBA Top Shots NFTs, it’s common for the edition number that matches the player’s jersey number in that specific NFT to be the most valuable edition. For LeBron James, edition #23 is often the most valuable, as is edition #77 with Luka Doncic or edition #11 with Kyrie Irving. Absent such an alternate value driver, edition 1 would likely achieve the highest value, like an art print.

Also, note that in the Rob Gronkowski and The Three Stooges NFT editions, each individually numbered NFT had to be minted separately. In the case of a multitoken NFT, all of the tokens of that NFT are created in one minting.

Types of NFTs

Generally, when you think of NFTs, you think of digital art and collectibles. These are the NFTs that are getting all of the press, especially with some of the lofty sales prices. But there are several other types of popular NFTs as well, and we’ll cover them all in this section.

Digital Art and Collectibles

Digital art is a relatively new form of art, which had its origins in the 1950s. When computers became ubiquitous in the 1980s and 1990s, the medium exploded. Artists not only create their art with digital tools, such as a computer or smartphone, but the digital nature of the art is the medium itself. The art exists only in a digital format. Sure, an image could be printed out, but true digital art is intended to remain digital.

Digital collectibles are similar to digital art in that they are created digitally with the intent to remain in digital format. However, collectibles generally have a specific popular theme to which they pertain. Examples again would be the Rob Gronkowski digital trading card NFTs and The Three Stooges NFTs. Of course, a significant amount of artistic creativity went into these collectibles, and they are digital art pieces in their own right. For example, the Gronk NFTs were illustrated by artist Black Madre, with creative direction by Gronk, and some of The Three Stooges NFTs were created by artist Patrick Shea.

But in addition to digital art pieces, the collectible value is the NFT’s association with Gronk or The Three Stooges. Digital collectibles are like actual collectibles, such as football cards, but exist only in digital format. Note that digital collectibles don’t necessarily need to be digital art per se. A digital collectible could simply be a digitized photograph.

Digital art or collectibles could also be existing nondigital material with digital artistic elements added. For example, The Three Stooges NFT called “That’s My Bitcoin!” is an existing photo with a digitally created Bitcoin digitally inserted (see Figure 2.3). This example happens to be obvious, given when the original photo was taken and the time that Bitcoin was created, but sometimes it’s not so obvious.

FIGURE 2.3 The Three Stooges “That’s My Bitcoin!” NFT

Generally, digital art or collectible NFTs can take on one of the following forms:

· Images

· Videos

· Gifs

· Audio

· 3D models

· Books and prose

Images.

Many NFTs are just still images, such as one of the CryptoPunks or a Beeple creation. Images can include any type of photograph, whether taken digitally or digitized (scanned) into a digital format. Of course, images could be original works of art or, as discussed earlier, a combination of the two. There is absolutely no motion in a still image.

With NFTs, there is no limit on the size of the image or its resolution, although some NFT marketplaces may limit the size of the file that you may mint. Generally, you would want to provide images in high resolution, which would allow them to be displayed on larger screens.

An image can be either raster (sometimes referred to as bitmap) images or a vector graphic. Raster images, such as .jpg and .png , files are more common. These are images that are made up of tiny squares (pixels). The issue with raster images is that if you enlarge them (scale them up), you will lose image quality. Vector graphics on the other hand, such as .svg files, use mathematical equations to draw lines and curves (vector paths) between various points. The advantage of this is that the image can be scaled up to any size without losing image quality. Vector graphics file sizes are generally smaller too. The advantage of raster images is that they allow for much more color depth, as each pixel can be one of millions of colors, so they’re ideal for photographs.

Videos.

Videos are another popular format for NFTs. NBA Top Shots NFTs, which contain highlight videos of moments in NBA history, has reached more than $500 million in sales. Not surprisingly, the LeBron James NFTs have been the most popular.

Videos are not limited to actual video footage, but also an increasingly popular form of digital art as well. For example, the Rob Gronkowski collectible cards are not static images, but videos. They were designed with a cool effect. Not only does the artwork of Gronk enter the cards from the side, but the cards also “flip over” to show you more detailed information on the back, such as the edition number and some of Rob Gronkowski’s football‐related stats.

Although most video formats don’t repeat by nature, some sites, like OpenSea, will loop videos automatically. Because of this, the last frame of the video is often designed to line up with the first frame, creating a seamless loop. For example, one of the Sean Mendes NFTs features a rotating figure of a cartoon‐like statue of Sean continuously rotating. In some cases with videos, the last frame does not line up with the first frame, and the image jerks back to the beginning. This can have a slightly jarring effect, which is why when creating videos or GIFs (discussed next), it’s better to create a seamless loop.

However, when dealing with actual video footage that wasn’t intended to loop seamlessly, the characters seem to jump back to their original positions. It’s not necessarily bad, but a seamless loop, at least to us, is more aesthetically pleasing. An example of this would be The Three Stooges “Disorder in the Court” NFT, where Curly “soitenly” has an odd way of preparing himself for the witness stand. There’s not too much that you can do when dealing with old video footage except try to find a short “scene” that ends close to where it starts. Figure 2.4 are the first and last frames of the “Disorder in the Court” NFT.

One can potentially overcome this effect by including a short introductory slide or transition at the beginning or end of the video.

FIGURE 2.4 First and last frames of The Three Stooges “Disorder in the Court” NFT

GIFs.

A .gif is a specific type of file format often used for making short, simple videos that automatically repeat (or loop). GIF stands for Graphic Interchange Format, which also supports still images. In fact, GIFs were originally developed for still images, but since multiple images can be stored in one GIF file, GIFs became ideal for short videos or animations. Some people refer to GIFs of video or animation as animated GIFs. But to us (and most people), even though GIFs can be still images, calling a GIF an animated GIF is redundant. There’s no reason to use the GIF file format unless it’s animated.

The advantage of GIFs over standard video files is that they automatically repeat by nature; there’s no need for a play button. On a site like OpenSea, a standard NFT video (such as in .mp4 format) will automatically play and repeat, but that’s only on the NFT’s page. If you go to the collections page, you’ll see a preview (or thumbnail) image of the NFT, with a play button, and you will need to click the play button in order to play the video on the collection page. With a GIF, since the GIF format automatically repeats, you will see the video repeating on the preview page as well as on the NFT’s page. There will be no play button on the GIF on the collections page. In fact, you will never see a play button on a GIF anywhere, because it automatically loops by nature.

There are some disadvantages to GIFs because they are an older technology. One disadvantage of GIFs is that they are limited to 256 colors. This may not be noticeable or a problem for most animations but would definitely be noticeable if you’re converting a high‐quality video to a GIF. If the video quality and resolution of the NFT are important, then a video file is preferred. Also note that GIFs have no audio.

GIF file sizes are also much larger than standard video files such as MP4. This is mainly because the compression algorithm for GIFs is less efficient. So, when creating GIFs, it may be necessary to reduce the dimensions of the images or video or reduce the frame rate (the number of frames, or images, per second). Reducing the length (in time) of the video would also help, which is why GIFs are usually short videos or animations, just a few or several seconds.

This leads us to the question of how to create GIFs. There’s specific software for creating GIFs and other video software from which you can export your creation in GIF format. There are also online GIF converters that will convert most standard video files into GIFs. One must be cautious, though, when using online converters of any type because when you’re uploading your creations to the Internet, you never really know where they might end up. If you do use one, make sure that it’s one with a good reputation.

A final word on GIFs: they’re great. They work really well as NFTs, but generally only for short animations, whether digital art or collectibles.

Audio.

Yes, you can make audio NFTs. Kings of Leon was the first popular band to release an album as an NFT, and it generated more than $2 million in sales. In addition to major artists, independent artists are finding audio NFTs, and other types of NFTs as well, as a great way not only to sell their music but also to energize and expand their fan base.

For NFTs, we suggest using a .wav audio file if available, rather than an .mp3 file. .wav files are uncompressed, while .mp3 filess are compressed, which results in higher sound quality for .wav files.

In some NFT marketplaces, such as OpenSea, you’ll need to include a preview image (or GIF) for the audio NFT. This could be album cover art or any other image or GIF.

3D Model.

A 3D model is a three‐dimensional representation of a specific real‐world or conceptual object or artistic design. 3D models are integral to several industries, including virtual and augmented reality, video games, movies, architecture, and medical and other scientific imaging, to name a few. 3D modeling is gaining popularity with digital artists as well.

3D models can be viewed with virtual or augmented reality headsets. They can also be rendered on two‐dimensional screens and rotated in all directions by “grabbing” the rendering with your computer mouse (or finger on a smartphone or tablet) and moving it, as well as having the ability to zoom in and zoom out. You can also print (make a physical model of) a 3D model with a 3D printer.

You can make an NFT of a 3D model at some marketplaces, such as OpenSea. The VeVe mobile app is a marketplace that specializes in selling 3D model NFTs.

Books and Prose.

NFT content can be just text, such as a poem, a short story, or even an entire book. I haven’t seen too many NFT books or other prose examples, but there definitely are some out there. So, if you’re looking for another avenue to monetize your writing, NFTs might be it.

In‐Game Items

There are currently 2.81 billion video gamers worldwide, and the number is expected to grow to more than 3 billion by 2023. This is quite a significant percentage of the world’s population.

In a multitude of popular games, such as Counter‐Strike: Global Offensive (CS:GO) and Dota 2, in‐game items, including weapons, armor, and skins (designs that go over your armor or other gear), are available for sale as in‐game items. So, if you want to gear up quickly, instead of earning items in games, which could take many hours of gameplay, you can purchase a variety of gear instead. Lots of gamers want more firepower and other advantages in a game and don’t want to wait. Game developers reap huge profits from these items, as they’re just bits of computer code. According to the popular game Gods Unchained’s website, in 2019, players spent $87 billion on in‐game items.

Players often accumulate multiple items throughout their gameplay experience with a particular game. At some point, that player will want to move on to a different game—the next fun experience. At first, players would be stuck with the in‐game items they purchased (sometimes for relatively significant amounts). Then, in‐game item marketplaces started popping up, where players could sell their no longer needed items to new players eager to gear up for the game and looking for reasonable prices. Also, some items could be rare and no longer available in the game. According to various reports, someone paid anywhere from $100,000 to $150,000 for a rare CS:GO skin.

The problem with “owning” these in‐game items is that they are subject to the whims of the game developer. If the game’s user base drops, the developer may stop supporting it, rendering your item useless. What if you paid a significant amount for a rare item, then the game developer creates thousands more of that item? What if you get banned from the game? Some games don’t allow the selling of in‐game items, and if found out, you will most likely get banned. Also, as with many industries, the in‐game item secondary markets can be rife with scammers.

Some game developers have now taken to creating NFTs of in‐game items. For example, F1 Delta Time is an Animoca Brands game where the in‐game items are NFTs (see Figure 2.5). Players must have car, driver, and tyre (Brit spelling for “tire”) NFTs to compete. NFTs for the game also include a driver’s gear such as helmets, suits, shoes, and gloves, as well as enhancements for your car, such as front and rear wings, transmission, suspension, and brakes.

FIGURE 2.5 F1 Delta Time “Intermediate Tyres” NFT selling on OpenSea

The NFTs contain each piece of equipment’s properties and boosts, such as that specific part’s effect on your car’s acceleration, grip, and top speed. And because they’re NFTs, the ownership and authenticity of the items are verified by the blockchain.

Digital Trading Cards

When you think of trading cards, you’re probably thinking about baseball cards or other cards that come in a pack, maybe with a stick of bubble gum. At least that’s what comes to mind. Another type of popular trading cards are collectible digital game trading cards for popular games such as Magic: The Gathering. How popular is Magic: The Gathering? According to Wikipedia, there are more than 35 million players, and more than 20 billion Magic cards were produced between 2008 and 2016. These are actual physical cards, used in gameplay, which can represent different types of energy or spells. Magic cards are traded on exchanges and sites like eBay.

You may have heard of Mt. Gox, one of the first Bitcoin exchanges, infamous for having been hacked. It started out originally as a website for trading Magic: The Gathering cards. Mt. Gox stands for “Magic: The Gathering Online eXchange.”

The next evolution in digital trading card games brought them online. One popular example is Hearthstone by Blizzard Entertainment. According to Wikipedia, by the end of 2018, Hearthstone amassed more than 100 million players. Technically, although Hearthstone is played with cards, similar to Magic: The Gathering, it’s not a trading card game because the cards are not tradable. Despite players’ requests, Blizzard didn’t add this functionality. This may be why, or at least one of the reasons, Hearthstone’s popularity has been tapering.

Thus, this is the reason for the rise of NFT trading cards, specifically digital collectible game cards in the vein of Magic: The Gathering and Hearthstone. One popular example is Gods Unchained, where cards you earn or buy are NFTs, minted on the Ethereum network. They can be used in gameplay, traded, and sold on NFT marketplaces. The fact that they’re NFTs means that the player actually owns their cards, and they can dispose of them as they want. The Gods Unchained website boasts, “If you can’t sell your items, you don’t own them.”

Digital Real Estate

Similar to in‐game items, digital real estate, also known as virtual real estate, can be sold as NFTs. Digital real estate is somewhat of an oxymoron because it’s not real. It exists only in a virtual environment. But for the purposes of the virtual environment, it is real estate in that it’s land or structures on land and can have real‐world value.

Virtual worlds, such as Decentraland, are online environments that simulate the real world in which multitudes of people explore the world and interact through their avatars, which are customized representations of the user. Like the settlers of old, people in the virtual world have a desire to purchase a nice plot in the virtual world and settle down. Or, as in the real world, speculators may buy up several plots with the hope of flipping them for a profit in the future.

According to Reuters, “Decentraland has seen more than $50 million in total sales, including land, avatars, usernames and wearables like virtual outfits. A patch of land measuring 41,216 virtual square metres sold for $572,000 on April 11, which the platform said was a record.”

NFTs are a perfect way to sell and transfer virtual land, as the ownership and authenticity of the land is verified on a blockchain. The Sandbox is an example of a virtual world in which all assets and land are NFT‐based. They have a built‐in marketplace, but one of the advantages of NFTs is that they can be sold on any NFT marketplace, such as OpenSea. In fact, the Sandbox even has its own collection on OpenSea of virtual land.

Similar to how real estate deeds have a description of the property based on a survey, NFTs of digital land also specify the location of the land within the virtual world. Transfers of real estate deeds are usually recorded in the local county clerk’s office. Transfers of digital land NFTs are recorded on a blockchain.

Is this digital real estate for real? Yes, it is, because virtual worlds are wildly popular. The game Fortnite has more than 350 million registered users alone. Although you can’t purchase land yet in Fortnite, the Sandbox virtual world has sold more than 76,000 “LAND” NFTs, having an aggregate value of $20 million. As adoption of virtual reality grows, demand for virtual land will increase too, especially if at some point there’s a metaverse, a vast collective shared virtual space akin to the Oasis in Ready Player One. No need to wait for that, though, when it comes to real‐world dollars being spent. In March 2021, a virtual house NFT sold for more than $500,000.

Domain Names

The OpenSea NFT marketplace has an entire section for domain names. Blockchain domains make for great NFTs. But let’s make an important distinction here: we’re talking about blockchain domains, not the regular domain names you think of when browsing the Internet.

Every day we use domain names with extensions such as .com , .net , .org , .tv , and several other common extensions to access various websites across the Internet. These common domain extensions, also known as top‐level domains, are ultimately managed and overseen by a centralized authority: the Internet Corporation for Assigned Names and Numbers (ICANN), which is a private nonprofit organization that sets the policy for the global Domain Name System (DNS) and keeps track of who owns which domain names.

Instead of being part of ICANN, ownership of blockchain domains is determined by the blockchain, just like ownership of cryptocurrencies and NFTs are determined by the blockchain. Similarly, blockchain domains are also held in a cryptocurrency wallet. We’ll get more into cryptocurrency wallets in Chapter 6, “Creating and Minting NFTs.” In essence, a blockchain domain is a blockchain asset, which makes it an NFT.

Blockchain domain names have extensions such as .crypto and .eth and are not commonly used for accessing websites. Instead, they are used mainly for simplifying cryptocurrency payments. As we’ll get more into in Chapter 6, cryptocurrency addresses are long streams of random numbers and letters. This address may also be referred to as your public address or public key, as opposed to your private key with which you secure your cryptocurrency wallet. We’ll get more into that in Chapter 6.

A Bitcoin address usually has 34 characters, for example, 18ZW9AQGdsYcCUYrrp1NDrtjAnTnTX4zRG. An Ethereum address has 42 characters, for example 0x969Bbaa8473180D39E1dB76b75bC89136d90BD84. With a .crypto domain, you can associate the domain name with your crypto addresses. For example, suppose you had the domain name example.crypto. In that case, you could set it up so you could receive Bitcoin, Ethereum, or any other cryptocurrency at that domain name instead of the lengthy address. When someone asks for your address, you would just send them your domain name, and the cryptocurrency being sent will go to your associated cryptocurrency address. One drawback is that if someone sending cryptocurrency misspells your domain name, you won’t receive it, and it may even end up in someone else’s wallet.

Although not currently common, blockchain domains could also be the addresses of websites like regular TLD domains. The resolving of the domains would not go through the ICANN‐controlled DNS, but through alternate routes. Such blockchain domain websites would not be subject to potential censorship by centralized authorities. Most browsers only support DNS domain names, but there are browser extensions that make it possible for the browser to resolve blockchain domains. In the (near?) future, a browser extension would not be necessary.

An advantage of a blockchain domain is that, as an NFT, you pay for it once, and it’s yours. Registrars for regular TLD domains charge an annual renewal fee. If you don’t pay the renewal fee for whatever reason, you’ll lose your domain name. With a blockchain domain, there are no renewal fees—it’s yours outright.

Buying and selling of regular TLD domain names has been going on for decades and has been a big business for speculators. Early Internet adopters who grabbed common word domains such as hotels.com have cashed in big time. Back in 2001, hotels.com sold for $11 million. More recently, in 2019 voice.com sold for $30 million.

Blockchain domains are currently in the early adoption phase and have yet to go mainstream like regular TLD domain names. Nevertheless, the NFT blockchain domain market has already started to heat up with $100,000 paid for the blockchain domain NFT win.crytpo. There are still some great opportunities to grab common word blockchain domains, which would likely increase in value as the adoption of blockchain domains grows. Of course, there are no guarantees of how long that may take, or if mass adoption will occur at all. That’s why they’re called speculators.

Event Tickets

We’ve all been to events where you had a physical ticket that you presented upon entry. Tickets have been increasingly going digital, though physical tickets are still widely used. Even digital tickets can be just a bar code on your device that you print out and present as a physical ticket. Several digital ticketing services, such as Eventbrite, make it easy for event organizers to sell tickets. However, problems still persist, especially for large events like concerts and sporting events.

Sometimes you can’t make it to the event, and you may want to sell your tickets. There are also ticket scalpers who will buy up blocks of tickets with the intent to create scarcity and resell these tickets at a profit. Matt can recall walking around Yankee Stadium before a sold‐out game with the Red Sox searching for a couple of tickets. As an experienced fan, he could spot a fake ticket that some shady character might be trying to pawn off as real. Luckily, he never got burned. But once when entering a Knicks playoff game at Madison Square Garden, the guys in front of him were “Re‐jected,” as Clyde Frazier used to say. They had purchased bogus tickets. According to a CNBC.com article in 2018, about 12 percent of people reported that they had bought a concert ticket online that turned out to be fake.

Aside from scams, the secondary ticket market has grown to $15 billion. This secondary market has been facilitated by sites like StubHub, a marketplace for sellers and buyers of tickets. StubHub verifies the tickets being sold, but the service charges significant fees. Plus, you may need to mail in tickets or receive your tickets by mail, or overnight courier if the event is imminent. More importantly, none of the profit from tickets sold in the secondary market goes to the event organizers, concert promoters, or performing artists.

Enter NFT tickets, which solves these problems.

First, with NFT tickets, you don’t need a centralized organization to verify the validity of the tickets because, as discussed earlier, an NFT’s authenticity is verified by the blockchain. Second, the NFT could programmatically provide that a certain percent of the profit generated from resales be automatically sent to the organization that created the tickets. Mark Cuban, owner of the Dallas Mavericks NBA team, a maverick himself when it comes to technology, is thinking about turning Mavericks tickets into NFTs. In a March 2019 CNBC.com article, he said, “We want to be able to find ways so that not only can our consumers, our fans, buy tickets and resell them, but we continue to make a royalty on them.”

Tweets

You may have heard in the news in March 2021 that Jack Dorsey sold his first tweet as an NFT for $2.9 million. Who would have thought that you could make an NFT of a tweet? It goes to show that the possibilities with NFT content could be bigger than anticipated.

Aspects of NFTs

Every NFT is really a piece of programming code, which on the Ethereum blockchain is known as a smart contract. There are standards that dictate what should and can be included in an NFT’s code. Non‐fungible tokens have certain characteristics that set them apart from regular fungible tokens. As mentioned, fungible tokens on the Ethereum network are also known as ERC20 tokens. NFTs on the Ethereum network are ERC721 or ERC1155 tokens. These are different sets of standards that allow NFTs to have various functionalities and traits, as well as to allow marketplaces and wallets to work with any NFTs on the Ethereum network. Note that the Ethereum blockchain is currently by far the most popular blockchain for NFTs. There are several other NFT blockchains as well, including WAX, which stands for the World Asset eXchange. One of the major companies using WAX for NFTs is Topps, which has licenses for the collectible rights (both physical and digital) for a number of sports leagues, including Major League Baseball. Other NFT blockchains include FLOW, which features the NBA Top Shots NFTs, and the Binance Smart Chain. We’ll go into detail about the various NFT marketplaces in Chapter 5, “NFT Marketplaces,” and which blockchain each marketplace utilizes.

In addition to allowing non‐fungible tokens to be owned and transferable, the standards discussed earlier allow NFTs to contain the following aspects:

· Name

· Main content

· Preview content

· Description

· Traits

· Unlockable content

· Ongoing royalty

· Supply

For all practical purposes, a name, piece of main content, and supply (which is usually one) are required. The description, unlockable content, and ongoing royalty are optional. Traits can be a key aspect of the main content of an NFT or actually be the main content of an NFT. Preview content may be required in certain circumstances. The different types and variations are discussed next.

Name

This is pretty straightforward. Every NFT, like every piece of art, has a name. Sometimes you’ll see the edition number, like “(2/10)” or “17 of 25” at the end of the name. This would indicate that, in the former, the NFT is number 2 in an edition of 10, and in the latter, number 17 in an edition of 25.

Main Content

The main content of a non‐fungible token is the content about which the NFT was created. You can also think of it as the particular purpose for which the NFT was created. For example, for a digital artwork NFT, as shown in Figure 2.6, the main content would be an image, video, GIF, or 3D model. The main content of a domain name NFT is the domain name, which is usually represented by an image and may contain particular traits.

FIGURE 2.6 Image of a digital art NFT and a domain name NFT

Whereas the image in Figure 2.6 is the main content for the digital art NFT, the image is not the main content of the domain name NFT; it is just a visual representation of the main content.

For digital game trading cards, the main content of the NFT contains both an image (or GIF) and particular traits, such as the strength of the spell or other item that the image represents.

For digital land, the main content is the location of the land within that particular virtual world, and it is usually represented by an XY (X, Y) coordinate.

Where the visual is the main content of an NFT, such content can be in pretty much any file format. However, if you’re creating an NFT on one of the several marketplaces, the allowable file format and size varies from marketplace to marketplace. If you’re creating an NFT on OpenSea, for example, this content can be in any one of the following file formats: JPG (image), PNG (image), GIF, SVG (vector graphic), MP4 (video), WEBM (video), MP3 (audio), WAV (audio), OGG (audio), GLB (3D model), or GLTF (3D model). On OpenSea, the maximum allowable file size is 40 MB.

Preview Content

If the main content is not the image, such as is the case with an audio NFT, the main content can be represented by a piece of preview content, which would mostly be an image or a GIF. Such an image could be the album cover artwork or any other artwork, photo, or other image to represent the song. Note that programmatically, NFTs don’t require a preview image. The purpose of the preview image is to make the NFT more visible and distinctive in marketplaces and collections, as opposed to a generic graphic of two musical notes, or nothing at all.

There is a clear distinction between a preview image and a thumbnail image. Thumbnails are reduced‐size images or videos, which are generally used to represent NFTs when there are multiple NFTs presented on a particular page, such as in a marketplace or collection. Generally, clicking a thumbnail will take you to the NFT’s detail page or to the full‐size image or video that the thumbnail represents. If there’s a play button on a video thumbnail and you click it, the video will play, rather than taking you to the NFT’s detail page.

Description

This is also pretty straightforward. In addition to describing the NFT, descriptions can be used to indicate the edition number, describe what the unlockable content is, provide copyright or trademark notice, and mention other perks, if any, that the highest bidder will be awarded.

The following is the description of the Official Three Stooges “Crypto Moe” NFT:

“The Stooges have gone 8 bit, which, if you think about it, is four times better than two‐bit.

“This super rare Crypto Moe NFT collectible is a unique one‐of‐a‐kind number 1 in a series of 1. There ain’t any others, and no others will be minted.

“The highest bidder of this auction will also be awarded the opportunity to meet one of Moe’s family members.

“The Three Stooges® is a registered trademark of C3 Entertainment, Inc. The Three Stooges® characters, names, likenesses and all related indicia are trademarks and property of C3 Entertainment, Inc. © 2021 C3 Entertainment, Inc. All Rights Reserved.”

Perks.

The description is also where additional perks, if any, are usually mentioned. Perks are additional items or experiences that the winning bidder will also be awarded. For example, the Rob Gronkowski “(1‐of‐1) GRONK Career Highlight Card” NFT had this perk in the description: “In addition to winning the Career Highlight NFT card, the highest bidder of this auction will be awarded the opportunity to meet Rob Gronkowski and attend one of his football games & win VIP All‐Access Tickets to the next Gronk Beach. (2x tickets / mutually agreeable game in 2021 season).” We’re not sure what Gronk Beach is, but it sounds like fun. The description also added, “Must be holding this NFT on April 30, 2021, to redeem this offer.” So, if there are any special conditions to the perks, those should be mentioned as well.

Perks are great to include in an NFT and will obviously up the NFT’s value. How awesome would it be to meet Gronk? Well, someone thought it would be really awesome and bought the NFT for 229+ Ethereum, a value at the time of more than $433,000.

Physical Items.

An NFT’s description can also tie the NFT to a physical asset. For example, the Slabs collection on OpenSea has the following description:

· Digital NFT Trading Cards backed by physical, graded assets, aka “Slabs”!

“Collect and invest in tokenized physical sports and trading (TCG) cards. All tokens represent cards graded by reputable companies like PSA/BGS with distinct grades. (ie, a PSA 10 is distinct and separate from a BGS 9.5) Cards are stored securely in off‐site locations like PWCC Vault and others. Build your digital collection and skip the shipping & storage hassles.

“You may optionally redeem your NFT to receive a physical card. Full instructions are in the unlockable content. Redeemed tokens are destroyed, and the new owner is responsible for all shipping costs, fulfillment fees if applicable, and insurance. Visit our link for more details. NFTs with a serial # from the grading company will match the one in custody, but may not always be the exact card you receive. You will always receive the exact same grade by the same company.”

Note that this Slabs description is not in any of the Slabs NFTs descriptions but in the description of the collection.

Similarly, a digital artist could put in the description of an NFT that the NFT owner is entitled to the original pen‐on‐paper drawing upon which the NFT artwork is based.

NFTs are an interesting and convenient means of “owning” a physical asset by owning the NFT without ever having to take possession of the physical asset. This type of use of an NFT is likely to gain some momentum, but an obvious question remains: What happens if the creator of the NFT does not deliver the asset when you redeem the NFT? In reality, you just own the NFT and a promise. Again, this goes against the value of a blockchain asset by requiring the trust of a third party.

Attributes

NFTs have the ability to contain certain attributes and properties. This is of particular importance when dealing with NFTs for in‐game items and digital game trading cards for example. Attributes can be different properties or categories the NFT falls within as well as the powers or advantages (sometimes referred to as boosts) that the NFT provides and how much extra power or other advantage the NFT provides. For example, let’s take a look at the attributes of an NFT of a pair of F1 Delta Time racing ”Gloves,” as shown in Figure 2.7.

The first area, labeled Properties, shows which categories the NFT falls within and what percent of NFTs are contained in that category. First, you can see that these gloves are in the Gear category, and that they have a Gear Type of Gloves. They are from the 2020 Season and are in the Rare Tier. These categories are set up by the game developer and may vary from game to game. Compare these categories to those shown in Figure 2.8.

As you can see, different property categories will be utilized by different games.

For the racing gloves NFT, the rarity level is 4 of 9. Though neither of the authors has played F1 Delta Time, we assume that 4 out of 9 is somewhat medium‐rare. More important to the game would be the boosts. As you can see, the gloves provide a +395 boost for aggression, a +433 boost for concentration, and a +357 boost for stamina. The Sign of Avarice card has an Attack level of 3, a Health level of 3, and a Mana level of 4. Again, we haven’t played Gods Unchained either, but from what we understand, Mana is the level of energy required to play the card.

FIGURE 2.7 Attributes of a pair of F1 Delta Time racing “Gloves” NFT

The number of attributes or properties that an NFT can contain is theoretically limitless. It’s up to the game developer, the NFT creator, and any display limits that may be imposed by a particular marketplace.

Unlockable Content

Unlockable content is cool. It’s content that only the owner of the NFT can see or access. Unlockable content not only adds value because there’s additional content included in the NFT, but it also creates curiosity, which can add value as well. The NFT’s description may describe what the unlockable content is, or it can be left as a complete surprise.

FIGURE 2.8 Attributes of a Gods Unchained NFT of “Sign of Avarice ID #73809”

Unlockable content can be any kind of content. In addition to actual files (such as image or video), examples include contact information for redeeming physical items or other perks, login credentials for something (such as a website or online training program), a game activation key, a note from the NFT creator, or even your fortune as told by Curly from The Three Stooges, as in one of the Fortune Curly NFTs.

Note that on some marketplaces, such as OpenSea, the actual viewable unlockable content is only text. So, if you want to reveal some other type of content, such as image or video files, you will need to provide links to such files. Or you could provide an email address with instructions for them to email you and then email the files to them.

Ongoing Royalty

Another groundbreaking aspect of NFTs is that the creator can set an ongoing royalty. This means that every time the NFT is sold in the future, a certain percentage will go back to the original creator. Now artists and other NFT creators can earn from future sales of their creations without having to do anything more. The royalty amount will automatically be sent to the creator’s wallet.

The creator chooses what percentage royalty they would like; 10 percent seems fair. If the royalty rate is too high, it’s a disincentive for future sales. Note that when an NFT is offered for sale or auction on certain marketplaces, such as OpenSea, potential buyers are not able to see what the ongoing royalty is.

Also note that on OpenSea, the royalty is actually set when you create your collection, and it will apply to all NFTs that you create in that particular collection. Also, the creator is able to indicate the address to which the royalties will be sent, which can be different than (or the same as) the wallet address used to create the NFTs. We’ll go into detail about creating collections in Chapter 6, “Creating and Minting NFTs.”

Further note that if you create NFTs on a certain marketplace and set an ongoing royalty for your NFTs, the royalty might not be paid if the NFT is sold on a different marketplace.

Supply

As we discussed, the supply of an NFT is usually (and almost always) 1, which makes it unique and non‐fungible. However, it is possible to have a supply greater than 1, each NFT being identical in all respects. Please note the distinction between supply and the number of editions of an NFT, for example, The Three Stooges “NFT Hucksters” NFT shown in Figure 2.9 is #5 in an edition of 30.

FIGURE 2.9 The Three Stooges “NFT Hucksters” NFT 5/30

The supply of this particular NFT is 1. This number 5 of 30 NFT is unique. There is only one “NFT Hucksters” 5 of 30 NFT. However, there are 30 editions of the “NFT Hucksters” NFT. Each NFT in the series is distinctly numbered. So, the supply of each NFT is 1, although there are 30 editions of the NFT.

What’s Really in an NFT?

Are all the aspects of an NFT together in one place on the blockchain? Not really. An NFT is actually a smart contract (programming code) based on the ERC721 standard (for Ethereum‐based NFTs). All of the previous aspects of the NFT are designated in the smart contract. Other than the supply and ongoing royalty, the aspects of an NFT are contained in the smart contract’s metadata. Metadata is data about other data. For example, the metadata for a digital game trading card NFT might look something like the following:

{

"name": "Elven Wizard",

"image": "storage.googleapis.com/game-image

/0x0d7b893b3wdd389cf022530ccd1743ac1db56e4e/0127847.png",

"description": "Common Alpha Edition wizard of elven descent.",

"attributes": [

{

“trait type”: “Strength”,

“value”: 16

},

{

“trait type”: “Dexterity”,

“value”: 20

},

{

“trait type”: “Wisdom”,

“value”: 19

},

{

“trait type”: “Constitution”,

“value”: 15

}

]

}

Note that the NFT’s image is not in the smart contract, but rather it is stored elsewhere and referenced in the metadata. The main reason for this is because the blockchain would get bogged down with large image and video files if such files were stored on the blockchain. That’s why it’s extremely expensive to deploy smart contracts that include image and video files. It’s even expensive to store the metadata on‐chain. So, most projects also store the metadata off‐chain, with a reference in the smart contract to the metadata’s location.

There are two main solutions for storing metadata and files off‐chain. The first is cloud storage solutions, such as Amazon AWS or Google Cloud, and the other is the InterPlanetary File System (IPFS). The IPFS is a decentralized peer‐to‐peer network of computers around the world (similar to a blockchain) where data and files are stored across multiple locations. Although these are the main solutions, the metadata and files can pretty much be stored anywhere on the Internet.

So, an NFT is technically a reference to data and files, and as we’ll discuss in the next chapter, how these data and files are stored matters.

Extrinsic Elements of NFTs

In addition to the intrinsic aspects of NFTs discussed in this chapter, NFTs also have extrinsic elements. Every NFT, like every work of work, has a story behind it, which is tied to the NFT, whether stated or not.

One reason why you’re reading this book is because you want to get involved with NFTs, likely start making your own, and eventually become successful at it. For many brands, influencers, companies, and other individuals wanting to get involved with NFTs, it can be tempting to look at the successful NFT sales and think that one can sell their own NFT simply on the strength of the value they’ve provided, the experiences they’ve created, or the history they’ve been a part of up to that point.

Sadly, this is not the case.

To achieve sustained long‐term success, NFTs must have the following extrinsic elements:

· A compelling story of “why” you (the creator) are getting into the NFT market

· A reputation that you can translate to your NFTs

· Future assurance of lasting (or increasing) value of the NFTs

You may just want to dive in, make some NFTs, have fun, and see what happens. That’s great, and you may hit the mark a few times. However, if you’re serious about making it a long‐term, life‐changing endeavor, which is surely possible, strive for these extrinsic elements.

More than 14 years ago, Mike Winkelmann (aka Beeple) started a journey to create a piece of digital artwork from scratch every day. Today, this collection of Everydays stands at 5,100+ artworks strong.

As a computer scientist, Beeple had no background in art. He simply wanted to learn to draw and felt that publishing a work every day would build a following that helped keep him accountable to this feat.

Was his vision to eventually sell the first 5,000 artworks 13.5 years later in the form of an NFT for $69 million? Probably not. But it happened. Unpacking why this massive sale occurred, we can ascertain a few essential elements.

The Why

Simply, why do you want to make NFTs? There’s no right or wrong answer. What’s driving you? What’s motivating you? Was there a particular inciting incident? How can you express your “why” in your NFTs and to your audience? Use your “why” to build a following.

Beeple’s story of “why” was convincing. His entire brand was organically aligned to be an NFT artist. Up until his first NFT sale, Beeple took his art out of the digital medium and sold physical prints for at most $100. As a digitally native artist, it made perfect sense that his archive of digital art should be collected in the digital medium. Furthermore, the entire premise of Everydays was to showcase the growth of daily creative consistency. Therefore, owning one of his creations translated to owning a piece of Beeple’s journey. What story will you tell that will make your NFT intriguing to collectors?

Reputation

Beeple’s reputation was authentic. He spent 14 years giving to (and rarely taking from) his community. Beeple inspired others to better themselves, whether that meant learning Cinema 4D and OctaneRender (the software he used to create his mesmerizing art) or simply following in his steps and doing a task every day to improve. Reputation goes a long way. What’s your reputation, and how does it align with your story of “why”?

Future Assurance

Buying a Beeple NFT came with a sense of future assurance. We know that Beeple will continue to create Everydays into the future, which reassures potential collectors that Beeple is in it for the long haul. He wouldn’t be here today, gone tomorrow. How will you show the NFT market that you want to grow with the community?

When we juxtapose Beeple’s immense success in NFTs against the failure of the Basquiat NFT, we learn even more about the essential extrinsic elements that we listed earlier.

Toward the end of April 2021, DayStrom listed an NFT version of Jean‐Michel Basquiat’s Free Comb with Pagoda piece. Along with owning the NFT, whoever won the auction would then be given the right to destroy the original physical Basquiat—wiping it entirely from the physical medium and leaving only the digital version. The theory behind this was that destroying the original would make the NFT more valuable.

After a couple of days (with no bids) the NFT was removed from sale due to a copyright dispute.

How is it that a computer scientist who created digital art in his free time could sell more than $75M worth of NFTs, but an art icon couldn’t get a single bid?

While it’s an intriguing story about the piece, they overlooked the fact that collectors might not have any interest in destroying a work of art by one of the most influential artists in American history. Furthermore, were they planning on listing all of Basquiat’s work as NFTs? Would they all be given the chance of destroying the original? This strategy did not indicate future assurance.

Not every successful NFT drop incorporates the extrinsic elements listed earlier. And it’s also by no means a comprehensive guide to selling your NFT, which we’ll cover in Chapter 7, “Selling NFTs.”

In January 2005, a man named Dave Roth would unintentionally make Internet history by taking a photograph of his 4‐year‐old daughter, Zoë, standing in front of a burning house mischievously looking back at the camera. The photo spread like wildfire and took on a life of its own as the “Disaster Girl” meme, one of the most recognizable memes in history. Sixteen years later, the original photograph was sold as an NFT for 180 ETH (or more than $700,000 at the time of this writing).

While we don’t know why @3FMusic bought the NFT, we can assume that it was for its reputation and historical significance, rather than any future assurance or compelling story.

The value placed on NFTs might still seem like an enigma to you. Nothing more than random valuations pulled out of a hat. In the next chapter, we’ll explore in greater detail why NFTs have value.

At the bare minimum, you should now understand why people collect, what are NFTs, the different types of NFTs, aspects of NFTs, and a few extrinsic elements that make for a compelling NFT.

Now, onto the value of NFTs.