What is an NFT for?
What is an NFT? What is an NFT for? In this article we try to answer these questions to try to understand the world of NFTs.
The crypto world has this thing, every now and then it appears a word that produces hype and arouses interest. And then some people are attracted to crypto like being abducted by this word.
Some time ago, when it was a little bit harder to buy Bitcoin or other rising cryptos, the magic word was Exchange. Then the blockchain concept flooded videos, books, and articles, telling stories about how the world was going to change with this applied technology, even more than Bitcoin. In 2017 was the turn of ICO (Initial Coin Offering), so the web filled with airdrops and projects “better than bitcoin”, faster, more secure, more private, and I could go on for a while with a long list of adjectives.
Other fancy buzzwords were side-chain, cross-chain, DEX (Decentralized EXchanges), dApps, and DeFi (Decentralized Finance), a whole ecosystem that evolved first in the Ethereum network to then extend to other networks like Binance Smart Chain, RSK, and Polygon among others. Nowadays this fancy word is NTF or Non-FungibleToken. Next one? Who knows, but probably, SSI (Self-Sovereign Identity).
Fungible, non-fungible. That is the question
So, non-fungible token. Before learning the non-fungible concept it could be wiser to know what fungible is. Fungibility is the ability of a good or asset to be interchanged with other individual goods or assets of the same type, this implies equal value between the assets. The best example of fungibility? Money. If somebody gives you a dollar bill, you can give back another dollar bill, it doesn’t have to be the same one, both have the same value because money is fungible.
Non-fungible are things, assets, or goods that are not interchangeable and are unique like cars, lands, diamonds, and so on.
Just in case you are not familiar with the token concept, a token is a representation of something usually with value attached. If you ever went to a Casino, then you know that you don’t bet with physical money, but with chips that can be considered tokens. But for this article, we will concentrate on digital tokens.
To sum up, an NFT is a digital asset that is unique, collectible, and can represent ownership of both digital items and real-world objects.
Sounds very nice, but you are probably wondering: What can I do with an NFT? What is an NFT for? Basically, you can relate an NFT to a digital or a physical asset.
NFTs in the Digital Content realm
The main use cases that come to mind are those related to digital content, where scarcity and uniqueness were not possible until the NFT concept. In fact, there is still not possible to ensure uniqueness nor scarcity although with NFTs you can grant them some sort of authenticity, digital content can be copied anyway.
Digital content and files, in general, can be copied and transferred the number of times you want. Of course, there is copyright legislation, but it doesn’t avoid this practice. Moreover, the discographic industry had to adapt to these times (record stores practically disappear) and participate in music apps to survive. Vinyl records are still manufactured but they have more sense as collectibles for music lovers.
In this context, artists and other digital content creators can take a step forward in their careers as some of their work can be tokenized as an NFT. From in-game items, art, GIFs, videos and sports highlights, collectibles, virtual avatars to music. All of these can be tokenized and then sold as NFT.
As NFTs can have only one owner or group of owners at a time. NFT’s unique data makes it easy to verify their ownership and transfer tokens between owners. The owner or creator can also store specific information inside them. For instance, artists can sign their artwork by including their signature in an NFT’s metadata. The creator can even take a percentage of the NFT sell operation every time this happens to break with the usual practice of today where the creator earns only for the first sell.
Next stop, physical world
More interesting could be the tokenization of physical items that aren’t yet as developed as their digital counterparts but it’s on its way.
A live concert where the organizers can sell general seats or field tickets as fungible tokens and VIP or numbered tickets as NFTs that you can use or even sell or transfer to someone else.
A tokenized building where you can buy fungible tokens to earn a share of leasing incomes or an NFT that may grant strict ownership of an apartment and facilities.
Another example could be a museum or foundation that allows people to buy tokenized artwork in order to raise money to buy another piece of art. People wouldn’t have control of the piece, but it could work as an investment.
All of these are just examples of what can be done with NFTs and tokenization. The blockchain industry is just beginning to show its potential.