MBA1914 What Are NFTs?

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Hey oh. Welcome to the $100 MBA show business explained every single day with our daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of Webinar Ninja, an independent software company I started with my co founder back in 2014. And in today's lesson you will learn what are NFTs? You've heard about it on the news, you've seen it on social media. NFTs are all the rage. People buying them, people selling them. What are these things and are they good investment? Well that's what we get into. In today's episode we're going to explain what NFTs are in super simple terms. Then we're going to get into why do people invest in them? What are some things you need to watch out for? Because with anything new there's going to be scammers. And my personal advice when it comes to investing in any new trend, of course this goes without saying, but I'm going to say it anyway. This is not financial advice. I'm not a financial advisor by any means. This is just my way to help you understand what NFTs are and the pros and cons. Purely my opinion from experience. So let's get into it. Let's get down to business.

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So what does that mean? Well, a fungible token is like a dollar bill. If I have a dollar bill and you have a dollar bill, you can give me your dollar and I'll give you my dollar and I still have the same value. My $1 bill is not really unique. It has value, but it's not unique. A non fungible token is the opposite. It has value only because it is unique. Like a very rare and unique baseball card for example, or a one of a kind bottle of wine. The actual baseball card, in terms of its intrinsic value is not really worth much. It's just a piece of cardboard, right? But it can be worth hundreds of thousands of dollars because it's rare, because it's unique. Many people equate NFTs to works of art or paintings by artists. The actual canvas is not worth much. You can buy one from an art store. The paint is not expensive, but the painting is unique and one of a kind and therefore it's worth X amount of dollars. NFTs are like that, but digital. The reason why it's hard to get your head around this is because digital items can be replicated easily. You can literally take a screenshot of a digital piece of art and you will have that art. It'll look exactly the same. So how does anybody know that your NFT is actually unique if somebody can just screenshot it? Well, that's where the NFTs secret sauce comes in. NFTs are part of ethereum, which is another kind of cryptocurrency, like bitcoin. It's part of the blockchain technology where each NFT is recorded in the blockchain and that verifies its uniqueness. Just like how cryptocurrency really took off in the last few years is really something that could really take off and have success because of the underlining technology, which is the blockchain technology, a ledger of authenticity that can be forged so let's simplify this. NFTs are digital pieces of artwork, so to speak, because it could just be an image, really. It could be any set of pixels. And this piece of art is verified on the blockchain that this is the only one that is actually the nft. All the other screenshots are not verified on the blockchain. Now, just like anything that is in limited supply or is rare or is in demand, its value will go up. This is where the business of NFT comes in, or the trading of NFT comes in. People are selling NFTs and buying them for hundreds of thousand, even millions of dollars. Yes, millions of dollars. There's one NFT that is worth a hundred million euros. But this is not some sort of Internet fad. Christie's and Sotheby's are now selling NFTs, organizations that are known for selling fine art. One set of NFTs from CryptoPunks sold at Sotheby's for $11.75 million each. Why are people buying these? Well, they see them as investments, just like works of art and like a lot of rare art. The reason why people are investing in them is because they rarely go down in value. They just go up because the demand goes up. And every time that piece of art exchanges hands, somebody makes money. And anytime something new like this comes along, people want to get in the game early. Especially when now NFTs are being sold by so many people, and some of them are selling for some reasonable prices for a few hundred dollars. And people buy these with the hopes that, hey, if I hang onto it, people will want it and I could sell it for a profit for thousands or even millions later. Now, even though I mentioned that NFTs are like pieces of art, digital pieces of art, they really can be anything. Digital. It could be a song, it could be a video file, it could be a piece of code, it could be a tweet. Like the founder of Twitter, Jack Dorsey, sold one of his tweets as an NFT for $3 million. Now, I know many of you are thinking right now, why would somebody buy somebody's tweet for $3 million when the tweet is there for free, right on Twitter? And the answer is that they're not buying the tweet. They're buying the rarity of an item. They're buying something of value, and it doesn't really matter what it is. And they're not really going to get any kind of passive use from that. It's really just something of Value. And for many of us, it's hard for us to comprehend this because most of us, when we think of investments, we think of something that has tangible value, like real estate, like a business, like an antique car. But we are in a brave new world and things can have value without any intrinsic value. Now, a few warnings. Anytime something new comes along, there's going to be people that are going to take advantage of the hype of the excitement. And these people, you can call them scammers, you can call them snake oil salesmen, you can call them crooks, but the point is, is that people will try to scam people because of the excitement. They'll sell NFTs that are not really NFTs. They'll sell, they'll have the actual NFT, but then sell you a copy, they'll sell you an NFT that's not on the blockchain. The point here is, is that there are so many scammers out there right now, it's really, really bad. So just like anything you would spend money on or invest in, you need to do your research. You really need to understand who you're buying from, if it's secure, if it's credible references, all that kind of stuff. You need to make sure that you know what you're doing. And I highly recommend, no matter what you get into in life, whether it's in business or in your own personal finances, you need to understand what you're doing. You don't invest in anything you don't understand. So do some research, do some homework, understand what you're actually investing in next. We are in kind of the rocket ship phase of NFTs, meaning that they're just starting to take off. And just like anything new, it's going to really have a lot of hype and a lot of momentum, but it will slow down and it will even out. And even though it sounds like it's going to take over the world, it's going to take over the art world. Chances are it's just going to be something that's going to be normal, but it just won't be as big it is right now because of all the hype. It will just be something that we know and exists. But in my opinion, in my guesstimation, the values of these will drop at some point and normalize. Now, there are many people that are buying NFTs, not because they see it as an investment, but they want to support digital art, whether that's music, whether that's actual visual art. The point here is that they feel like painters and sculptors and classical artists have really been getting all the credit all the years. But hey, digital artists are real artists too, and they should be supported. And that's why some people buy NFTs to support the artists and because of the blockchain, because it's verified that this is the actual artist and it's only one of a kind, the artist actually gets credit for what they do. Now where NFTs are actually really taking off is actually in the youth market. In the younger demographic we're talking about 18, 19, 20, many of them are creating NFTs and selling them and kind of dipping their toes in the business world through NFTs. Some are making millions and some are just making some spending money and some are just seeing it as a way to work on a project and showcase it to the world. I think this is actually quite positive because this exposes young people to the concept of the marketplace of supply and demand and also putting their work out in the world. I think that's actually a really good thing. And I'm actually quite proud of these young people that are getting into this and taking a bit of a risk on spending some time on creating some interesting work.

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Well, there you have it. Those are NFTs. Non fungible tokens. Seems like a really wild and new idea. Well, that's because it is. And I'll be quite honest, when I first heard of NFTs, I passed judgment. You know, I judged it. I was like, this is insane. What are you talking about? How is this even a thing? And then I stopped myself. I said, hey, listen, listen, don't judge. Just be a learner, have an open mind. And I did some research, I watched some videos, I listened to a bunch of podcast episodes about it. I found out all the positive things that NFTs actually do. Just the technology behind it alone is really going to propel a lot of businesses forward. I actually think that the best thing I got out of learning about NFTs is stopping myself from judging what it is. Stop myself and say, hey, hold up, you know, let's learn, let's figure this out. Because there's always good in something. There's always something you can learn from it. And to be quite honest, I look back at those ideas that I had about it before and said that was kind of foolish. Even if you don't buy an NFT or sell an NFT or have anything to do with it, it's good to know where the world is going. It's good to know what people are spending their money on. It's good to know what's out there in the marketplace. It's good to know where technology is going. Maybe your business is going to start using blockchain technology in the future. Will you leverage it to improve speed and efficiency in your business? It's worth you learning about thanks so much for listening. If you love what you hear, hit subscribe so you don't miss an episode. An episode like tomorrow's episode, which is Q and A Wednesday, where a listener asks the question, I've lost thousands of dollars on paid ads and I can't get new customers. Can you help? Well, I do my level best in tomorrow's episode to talk about getting into paid ads, how to make sure you get a return on investment, and what are some of the things you need to ask yourself about your business, about your product, about the way you're marketing to ensure you are getting your money's worth. When you spend money on ads, hit subscribe so you don't miss that episode. Before I go, I want to leave you with this. There will always be new fads and trends products services that come out. Some are going to be out there like NFTs, and some of them will be very practical. But ideas, good ideas, often spread quickly. And if you've heard about it, it's probably because there is some good in that idea that you can take from, you can learn from, you can apply in your own life, business now, or in the future. Thanks so much for listening and I'll check you in tomorrow's episode. I'll see you then. Take care.

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