Let’s take a look at non-fungible tokens and how they’re being used in the modern digital world.
What is a non-fungible token?
A non-fungible token (NFT) is a unique, digitally scarce, virtual object that cannot be destroyed, counterfeited, or replicated. An NFT usually represents ownership of assets such as artwork or digital collectibles and each one has its own digital DNA which makes it immutable and ensures that they are provably scarce. Each NFT’s DNA also contains rules for how it can be used and transferred and what information about it is publicly visible.
How did we get here?
To fully understand non-fungible tokens (NFTs), it helps to understand where blockchain technology came from. The term blockchain was coined in 2008 by an anonymous figure or group named Satoshi Nakamoto, whose true identity is still debated today.
Nakamoto released a white paper detailing how blockchain technology could be used in digital currencies like Bitcoin. A blockchain is essentially a database that is distributed among many different computers (nodes) with no central authority controlling it. It’s hosted by nodes spread out all over the world, each one maintaining its own copy of all transactions ever made on that network and functions as a public "lookup table". These transactions are stored in blocks and are encrypted so they can only be accessed by users with unique passwords.
The key point is that there is no central authority over blockchain, making it an extremely resilient technology. Blockchain data can’t be altered once it’s added, and multiple copies of all blocks are available on nodes around the world. As long as at least one node still exists, there will always be an unbroken chain of blocks dating back through history. Think "millions and millions of nodes".
Over a relatively short period of time, blockchain technology has matured from being a niche concept to becoming a mainstream technology. This has been driven by a number of factors, including increased public awareness and interest in cryptocurrencies and digital assets, recent technical breakthroughs that have simplified development for non-technical users, and an explosion in funding from venture capitalists.
According to coinmarketcap.com, over $3 billion was invested into blockchain startups in 2017 and that number has increased to $8.7 by the end of June for 2021.
Now let's talk about NFTs
What are the most common use cases involving NFTs?
While NFTs can be used for just about anything, there are three categories of applications that you’ll likely see more than others: digital art, virtual goods, and game items. To explain how each of these categories works, let’s take a look at some of their most popular use cases.
CryptoKitties proved that NFTs are one of blockchain’s most marketable assets. With over $12 million USD in sales already, and has set an example for other game developers and digital artists to create their own NFT games.
With blockchain technology, art can be literally unruly. Artists can sell work and support the causes they care about in fantastic new ways.
Blockchain technology allows for an entirely new economy that revolves around NFTs. We can expect more games and art projects that utilize non-fungible tokens, just as we’ve seen with CryptoKitties. However, there are many other industries that stand to benefit from using NFTs
Because non-fungible tokens can be used for just about anything, from art and virtual goods to physical items, you’ll likely see a lot of them being used as collectibles. When NFTs are created as a limited set, they make for a great way to attract fans with a limited supply.
What are some potential future NFT use cases?
In the future, you can expect financial institutions and legal experts to become involved in the creation, or "Minting", of NFTs. These can be used to strengthen institutional reputation by providing immutable documents that are more resilient to fraud. For physical assets, similar to how a real estate attorney may issue a deed, those deeds will likely be tied to NFTs in the future.
The possible use cases for NFTs are innumerable. If you are interested in learning more about possible use cases, check out this great article!
NFTs are a new and exciting technology. I believe that NFTs will redefine digital ownership forever. At their core, they allow users to own unique items or digital assets without relying on a centralized authority. This has numerous practical applications, but one of my favorite use cases is art ownership.
NFTs and blockchain technology are providing a fundamental shift in the way people are thinking about wealth storage and verification.
Gucci bags used to come with serial numbers, what if they came with an NFT? Or maybe the bag will be virtual itself. After all... do people really buy Gucci bags for primarily utilitarian purposes? This article strongly suggests otherwise...
So what do you think? Are NFTs going to change the world? Or is this just hype that will eventually die down?
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Thank you for reading.