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What Are NFTs and Why Are Celebrities Getting Into Them?

From Paris Hilton to Heart Evangelista, more and more celebrities are engaging in this purely internet-based market.
What Are NFTs and Why Are Celebrities Getting Into Them?
IMAGE INSTAGRAM/iamhearte, INSTAGRAM/nadine, Unsplash.com, Wikimedia Commons
From Paris Hilton to Heart Evangelista, more and more celebrities are engaging in this purely internet-based market.

ICYMI, NFT is currently emerging as the hottest buzz topic in both art and finance. From OG influencer Paris Hilton selling a series of NFT images for more than $1 million, to our very own trendsetting, multi-hyphenate Heart Evangelista releasing an NFT remix of her painting, to lauded actress Nadine Lustre dropping limited edition audio NFTs of her latest single, more and more celebrities have been engaging in this purely internet-based market. 

what is an nft
PHOTO BY YOUTUBE/CNBC Television
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Starting as an experimental token for digital art in 2014, these “monetized graphics” have now expanded to videos, audios, in-game items, multimedia digital artworks, gifs, memes, and even tweets; the possibilities are endless! The prospects are also highly encouraging given the industry sales' supersonic growth this year: from $13.7 million in the first half of 2020 to $10.7 billion at the end of the third quarter of 2021. It seems like our favorite celebrities are on to something, and we definitely want to learn more.

Below is a quick guide on what exactly NFTs are and why celebrities are getting into them:

What is an NFT? 

NFT is an initialism for Non-Fungible Token. The Wall Street Journal refers to fungibility as “the ability of an asset to be exchanged or substituted with similar assets of the same value.” Both cash and cryptocurrencies are fungible, meaning they have interchangeable assigned values. For example, P50 is P50 even if it’s a single bill, 50 one-peso coins, or even as (approximately) a $1 bill, whoever's hand it's in.

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Inversely, non-fungible commodites are unique pieces that carry their own distinct value. Take for instance a piece of paper with words scribbled on it. Even if the writer used the same pen, the same paper, and had the same words, their work will not cost the same as the sheet Taylor Swift originally wrote All Too Well on. In this scenario, you wouldn't willingly trade these pieces (unless you valued the other writer more).

The prevailing NFTs of today rest on the same premise of fungibility. What sets these digital assets apart from other media on the web, even if they look literally the same, is that these are embedded with a unique, unhackable code that determines both authenticity and ownership of the token. 

In layman’s terms: “NFT’s are like physical collector’s items, only digital,” Forbes distills.

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How does it work? 

NFTs are created using the same form of computer coding that powers and protects cryptocurrencies like Bitcoin and Ethereumblockchain

As the Co-founder and Executive Chairman of the Blockchain Research Institute, Don Tapscott, explains in a talk, it is a de-centralized, trust-building technology wherein data is encrypted into “blocks” which are then linked to form a “chain” with all the other time stamped blocks that came before it.

This is done simultaneously using the highest levels of encryption by “miners,” spread across millions of computers all over the world that record and store all transactions within the particular blockchain network. This vast system of mining makes this method more secure as it adds multiple layers of protection versus just having one central server that is relatively easier to hack. 

This is what makes your NFT, or your digital collector item, impossible to fake and thus, highly covetable. 

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“The blockchain technology of NFT revolutionized the industry by making it possible to stamp digital goods with a cryptographic marker of authenticity and keep a permanent record of its ownership,” Nadine Lustre’s NFT platform, ENTER.AUDIO, states.

Why are celebrities into NFTs? 

“Essentially, NFTs create digital scarcity,” Arry Yu, chair of the Washington Technology Industry Association Cascadia Blockchain Council, tells Forbes. This is something almost unheard of in the past, since the internet allows us to save and share files with a simple mouse click. While the visuals (or the audio) will still be available for anyone to see online, NFTs afford you exclusive ownership of that piece. And as with any prized collection, this can evoke a sense of personal satisfaction and fulfillment within the collector.

what is an nft
PHOTO BY INSTAGRAM/iamhearte
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And why would you want to own something that you already have access to? Michael Gargiulo, CEO of VPN.com and a Forbes Councils Member, reasons best: “What people don't realize is that saving the file on your hard drive is like taking a picture of a famous painting. You can look at the painting any time, but you don't own the painting. A picture or replica has none of the value associated with the original. You can't sell it or count it as one of your investments, and nobody's going to want to look at the replica if they get the chance to see the original in a public gallery.”

It also creates new, possibly higher value, revenue streams for digital creators. Not only do they get profits by selling directly to the consumer, since NFTs in Ethereum can be programmed as self-executing contracts, “artists can now program in royalties to ensure a percentage of sales whenever it is sold again. This is an attractive feature as artists generally do not receive future proceeds after their art is first sold,” Forbes explains. 

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In fact, ENTER.AUDIO shares that musicians on their platform “can opt to have as much as 20% in royalties on all future resales of their music, making sure that their wallet holdings increase with the value of their works”. 

what is an nft
PHOTO BY INSTAGRAM/nadine

Should you jump on the NFT bandwagon? 

If you find a piece you resonate with and you have the budget for it, why not? Aside from the pride that comes with owning limited edition memorabilia, some people also consider NFTs as investments.

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Profit, although not guaranteed, may come from two factors: the commercial value increasing or the value of cryptocurrency increasing. For example, you bought an NFT for 1 Ether. Either the demand for your NFT goes up and people will offer you 2 Ethers, or the actual conversion value of Ether increases. Earning from the latter occurs when you buy an NFT for 1 Ether that’s valued at 1 USD and then resell it when 1 Ether is valued at a higher dollar, say, 3 USD. Hence, you’ve earned a profit of 2 USD. 

While looking highly promising, no investment is ever without risk. If you are purchasing NFT purely with the intent to resell, do keep in mind that Forbes advises a more aggressive risk appetite since NFT values are far more subjective than the stock market, and not based on any empiric formula. It is “based entirely on what someone else is willing to pay for it. Therefore, demand will drive the price rather than fundamental, technical or economic indicators, which typically influence stock prices and at least generally form the basis for investor demand,” Forbes cautions. 

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How to do it?

First thing’s first, create a crypto wallet as NFTs may only be bought with cryptocurrency, typically Etherium. Some examples include Coins.ph, Binance, Metamask, and Coinbase.

Then, head on over to NFT marketplaces such as OpenSea, ENTER.AUDIO, ENTER.ART, Rarible, and Superrare, and shop as you would!

 

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