ELI5: What, really, is an NFT? | Hacker News Reader

ELI5: What, really, is an NFT?

10 pointsnokita26 comments

I've read about these multiple times. I've had people explain the mechanics, but I read don't understand what an NFT is supposed to be.

Or do.

So please, can someone ELI5?

Thanks.

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At the risk of downvotes… and you did say ELI5…

An NFT is a scam. Designed to extract money from gullible and uninformed people’s pockets.

It was designed to be like a digital pass that entitles you as the owner of a digital asset. It could be something as simple as “oh that’s cool let me right click and save image as” or “only someone with this NFT can access this website that leads to a discord server where all the scammers I mean cool kids hang out”

While I mostly agree with you, you are describing the NFT art market not the technology itself. At its core, NFT is a technology to create digital scarcity and can be used for non-hype cases such as storing a contract or a wedding certificate. Right now that's not what it's used for, but perhaps in the future it can be a useful technology to store information in niche cases rather than being a modern day gold rush. As someone who has dabbled in NFTs, the current state of the NFT art market repulses me even more than cryptobros.

^ This.

100% (yes the literal 100%) of media regarding NFTs is purely about NFT art and it annoys the shit out of me. The fact that there is free form data (with some generally accepted fields used for consistency), and that this data can be owned and provably traced back to the originator is remarkably powerful Re: the poster's above example of a wedding certificate is a great example.

The most frustrating thing about this tech was the goldrush that happened and the inevitable crash. I view myself as something of a "pragmatic visionary" (yes self-proclaimed) and to see this tech completely abused was both confusing and crushing. I'm on the verge of releasing a platform that, underneath it all, uses NFTs because they have great use-cases, but none of the marketing material mentions it due to the fact that the media have wrecked the public's opinion of NFTs.

If I had to come up with an analogy, I would say that NFT art was akin to the Model-T coming out and the only use was people driving around a track and having a picture taken of them driving around a track. Yes you can do that but you've completely missed the point.

An NFT is an entry in a list of records that belongs to you. The entry might have data or a media file attached to it or reference a media file or data. You transfer, gift, or sell this entry to someone else if you want to.

It’s a big number that says that you own something but you don’t actually own much, a bit like the star naming scams.

Exactly. Or like those “Official Highland Titles” from Scotland.

I think most of the answers here have missed the basic point of an NFT, which is this:

In a digital system, there is no limit to copying data. You can copy and paste a file millions of times, share it with others, they can copy it, and so on. There is no scarcity.

An NFT is simply a way of introducing scarcity into this digital system. An NFT cannot be copied like other files, it is an entirely unique file. [1]

This has resulted in some people and artists using NFTs for digital art to add scarcity. Think about how the physical art world works: an individual art object is unique and cannot be copied. There is only one Mona Lisa. All the copies and photographs of it are not equivalent to the original. This is different than say, a manufactured object like a Coke can, an iPhone, or a Ferrari.

But digital art can be copied. By using a NFT, however, you can functionally have a scarce digital art object in the same way that a physical art object is scarce. So if you’re a digital artist, you can use a NFT to sell a piece of digital art as a scarce original.

Of course, the world of people using NFTs is full of scams and people trying to capitalize on trends. And it’s not really clear if a scarce digital object actually has value in the way a scarce physical object does. But at its core, it’s about scarcity.

1. I oversimplified this. Technically you can still copy the file, but it won’t be treated as the “original” or “valid” file by the validation network. Sort of like how you could make a copy of the Mona Lisa down to the atom, but it wouldn’t be considered the original by the art museums, experts, etc. that are the validation system in the art world.

Moxie Marlinspike did a good writeup in 2022, I can warmly recommend it: https://moxie.org/2022/01/07/web3-first-impressions.html

Ok, my stab at this.

A [fungible] token is the crypto equivalent of a share, it’s fundamentally a pointer to proportional ownership interest in some (often, but not always, also fungible) asset.

A non-fungible token is the crypto equivalent of a deed, it’s fundamentally a pointer to exclusive ownership interest in some (hopefully non-fungible) asset.

Because in both cases all you’re buying (with “real” money) is a pointer, I leave it to you to determine if either is worth investing in.

The important part is understanding the notion of fungibility: 100% ownership of a block of cheese isn’t the same as 100% ownership of a dog because it’s trivial to take a knife and make 10 smaller blocks of cheese, but just try do the same to make 10 smaller dogs.

Well, it’s kind of like money. It’s completely imaginary, yet we never have enough. Except in this case instead of being an artificial stand in for labor effort, it’s a stand in for something infinitely reproducible with virtually no effort at all. And yet the supply is still limited. Almost like the labor or use value aspect isn’t really the point at all. But rather the power posturing/exclusivity value.

What you’re really buying is the ability to be happy about the fact that nobody else can have it. Just like money. (For those who already have too much of it).

So in one regard it’s a cynical way to avoid taxes, on another level it’s a savagely hilarious representation of how our society basically works.

Digital certificate of "ownership" of something. Could be link to image.

Now this is theoretically transferable, but it might not actually mean any sort of real ownership.

Basically a piece of paper telling that holder of piece of papers "owns" something. Then you can give/sell this piece of paper to someone else and it is "guaranteed" by digital signatures on blockchain...

It's like a digital version of Tulipmania.

It's a number in a database that's assigned an "owner". Some NFTs can be controlled by a central authority, kind of like your bank account, and some of them are totally decentralized and can only be modified/traded if you, the owner, wills it so.

Someone can associate some data with that unique number, if they want.

In the context of art, it is basically a digital certificate of authenticity. More details:

https://mirror.xyz/mattdesl.eth/eUrK8MrRfKFJYVKTwi5F4mCIBJEB...

It is like a RealDoll in that if somebody mentions owning one you cannot unlearn that information about them

Do people generally tell you about their RealDoll, like with using Arch Linux, or do you need to ask?

Like NFTs their owners tend to be proud and vocal enthusiasts but the big difference is that RealDoll owners aren’t disposed to explain how they have unlocked massive wealth with their purchase

A unique token, which can be used for triggering any number of actions upon bearing it, either over the net or physically.

Next-gen RFID/NFCdata tags, as far as the raw tech and generic capability is concerned.

Not a serious explanation but a must-see:

https://youtu.be/cJzNiFLyw8k

It is a verifible, public receipt that someone bought something.

It cannot be faked and anyone can verify that it happened.

The gamification part of NFTs is to not be the last one holding the bag.

Could you give an example of how this works in the real world? Can I create a hash of a PNG of the Mona Lisa and sell that to the highest bidder, and who owns the Mona Lisa in that case? Can I change a single pixel in the PNG, create another hash and sell it again, over and over? Can I sell it once more as a JPEG or in a different resolution? Can I sell it on multiple blockchains? What happens to my ownership of Mona Lisa if I die and nobody knows my private key?

Better to use this tech as digital certificates of authenticity, or records of provenance of digital ownership, rather than a means of tracking physical inventory.

To use a comparison: if you buy a game skin from an app, a record of ‘digital ownership’ is modified in some central database. If you imagine a technological solution to this same problem that doesn’t rely on centralized payment processors and ownership databases, you might end up with something akin to NFTs.

The same concerns seem to apply -- I can change the value of a single pixel in the skin, and sell it again as a new NFT.

In that case, it would be a new NFT, with its own contract address (and hash), and users seeking to collect the original token would not find any interest in a copy. You can test this theory yourself, by minting new CryptoPunks (or whatever) with slightly altered pixels—or even the exact same pixels—and see if anybody values them as highly as the original.

take a file which you can duplicate for free

hash it with the blockchain, which costs you $

now it's attached to your wallet

now you can trade them by transfering to someone else's wallet for a fee of your choosing

it's a way to create artificial scarcity

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