Why I Just Bought My First NFT, and What I Learned
An NFT of the New York Mets retired player’s “most famous sports contract of all time”
I just bought my first non-fungible token, commonly known as an NFT. If you know me, you may be surprised. I recently wrote a book with Andrew Lo, In Pursuit of the Perfect Portfolio, where we interviewed ten luminaries, include six Nobel laureates, as we traced the development of modern portfolio theory. A recurring theme in our book is the importance of a buy-and-hold strategy that rely heavily on traditional stock and bond index funds. There’s no mention in the book of NFTs, or cryptocurrencies for that matter. So why did I buy an NFT? Let’s start George Mallory’s quip, when asked why we wanted to climb Mount Everest: “Because it’s there.” I was intrigued with NFTs, wanted to learn more, and wanted to see what the process of buying one was all about. When I was young, I enjoyed collecting sports cards. This particular NFT was sports-related, piqued my interest because of a previous blog I had written about Bobby Bonilla, and it sounded fun. If you want to really learn about something then just do it.
NFTs: The Basics
According to Investopedia, NFTs are “cryptographic assets on a blockchain with unique identification codes and metadata that distinguish them from each other.” Let’s parse what this means. Cryptocurrencies, like bitcoin, are digital or virtual currencies that are secured (that’s the crypto part) based on a technology like blockchain (which is like a shared ledger), that makes them almost impossible to counterfeit. Likewise, NFTs are also secured (crypto) assets, but with a graphic component, for example, tied to a piece of art, or a virtual sports trading card. Cryptocurrencies, like regular currencies, are fungible, which means they are all the same value and can be exchanged for one another (a dollar is a dollar is a dollar). NFTs are non-fungible or unique and can be traded. Metadata is data that provides information about other data. Since an NFT represents something, like an image, metadata is used to make the NFT represent the image, such as the name and description of the item. For example, I now own a virtual baseball card, “The Contract #11” and at most there will by 1,193 NFTs related to The Contract — sort of like limited edition prints. (We’ll…