NFTs have taken the worlds of art and gaming by storm. Whether you think they’re a speculative fad or a great new possibility for artists, they continue to make the headlines when they sell for millions of dollars.
What really though are NFTs?
NFTs are tokens that we can use to represent ownership of unique items. They let us tokenize things like art, collectibles, even real estate. They can only have one official owner at a time and they’re secured by the blockchain – This means no one can modify the record of ownership or copy/paste a new NFT into existence.
NFT stands for non-fungible token. Non-fungible is an economic term that you could use to describe things like your furniture, a song file, or your computer. These things are not interchangeable for other items because they have unique properties.
Fungible items, on the other hand, can be exchanged because their value defines them rather than their unique properties. For example, ETH or dollars are fungible because 1 ETH / $1 USD is exchangeable for another 1 ETH / $1 USD.
NFTS are important because they help to solve some of the problems that exist on the internet today. As everything becomes more digital, there’s a need to replicate the properties of physical items like scarcity, uniqueness, and proof of ownership.
Here’s how an internet of NFTs compared to the internet most of us use today looks.
An NFT Internet
The internet today
NFTs are digitally unique, no two NFTs are the same.
A copy of a file, like an .mp3 or .jpg, is the same as the original
Every NFT must have an owner and this is of public record and easy for anyone to verify
Ownership records of digital items are stored on servers controlled by institutions – you must take their word for it.
NFTs are compatible with anything built using Ethereum. An NFT ticket for an event can be traded on every Ethereum marketplace, for an entirely different NFT. You could trade a piece of art for a ticket!
Companies with digital items must build their own infrastructure. For example, an app that issues digital tickets for events would have to build their own ticket exchange
Content creators can sell their work anywhere and can access a global market
Creators can retain ownership rights over their own work and claim resale royalties directly
Platforms, such as music streaming services, retain the majority of profits from sales
Items can be used in surprising ways. For example, you can use digital artwork as collateral for a decentralized loan
The biggest use of NFTs today is in the digital content realm. This sector faces a major problem whereby content creators see their profits and earning potential swallowed by platforms. An artist publishing work on a social network makes money for the platform who sell ads to the artists followers.
They get exposure in return, but exposure doesn’t pay the bills.
NFTs power a new creator economy where creators don’t hand ownership of their content over to the platforms they use to publicize it. Ownership is baked into the content itself.
When they sell their content, funds go directly to them. If the new owner then sells the NFT, the original creator can even automatically receive royalties. This is guaranteed every time that piece of content is resold because the creator’s address is part of the token’s metadata – metadata which can’t be modified.
Overall, NFTs are a new way for people to take advantage of the benefits of blockchain technology, especially the veracity it lends to any information.
There is still some time for NFTs to become mainstream, but in the meantime, if you want to buy some digital art, then NFTs are a fun way to go.