A Quick Look Into NFTs

The basics to ensure you’re informed next time you hear about the outlandish concept.

The short answer is an NFT or non-fungible token, is a digital collectible item.

This is an unfamiliar term for a pretty simple concept. Non-fungible means that an object has unique traits that make it irreplaceable or interchangeable. There are innate qualities that make one different from others. No two pieces of land are the same, no two diamonds are the same.

Okay, so that’s the main characteristic of this item. However, the hype around them, as opposed to other non-fungible items, is the fact it’s based on cryptocurrency. Yes, that’s right. A niche concept nested inside yet another niche concept.

For anyone who may not be the most familiar with cryptocurrency, labeling it as simply currency is like labeling Google as only a search engine. This is the founding concept but there is so much more to it (look up web 3.0). Ethereum, one of the most promising cryptocurrencies, is as much a building block as a currency. NFTs are built upon it. They use Ethereum’s blockchain as proof of ownership. From the moment an NFT is minted on Ethereum, every transaction is kept in a public ledger which creates a history of every owner and the value it gains or loses.

Now, with that context, a more specific definition of an NFT is a blockchain-based collectible item with a built-in public ledger of its creator, owners, and value.

The important thing to note is that, like paintings or any other collectibles, simply because something is non-fungible does not mean it is innately valuable. Like any investment, it carries a risk that there will not be demand after the initial purchase. Think of an NFT like a painting. It could be like a child’s finger painting or a Van Gogh work. Valueless or valuable but irreplaceable regardless.

Keeping in mind that they are still a new and growing concept, they are mainly being used as collectible images or GIFs right now, though there are a few outliers. Recently, 3D models are beginning to gain some traction as more interesting collectibles while carrying a higher price tag.

This alone has been a monumental shift towards the creator economy we’re steadily heading towards. Photographers, artists, and other digital content creators are now being paid like traditional fine artists. Now, instead of selling prints, these creators are paid large amounts by collectors for fully digital pieces. Sure, they may come with a print or tangible item to compliment it but the price is for the file itself. The collector owns the piece the same way they would own a painting.

The current issue that makes it a harder concept to understand for the casual onlooker, is of course that the current pixel-based images can easily be either saved or recreated. Unlike a painting with each unique mix of brushstrokes and colors, it doesn’t seem to have the same one-of-one quality. Regardless, this isn’t stopping any collectors and they’re changing the lives of digital creators.

With a recent trend of the Bored Ape Yacht Club NFTs being used as profile pictures and prices skyrocketing, there’s a new aspect of NFTs emerging. This is a digital status item. A social media user with their Bored Ape profile picture can now flex their ownership and, while any person can save the image and use it as their’s, an ENS can link the collector’s Ethereum address and social profiles as an ultimate proof of ownership.

An obvious progression would be straying from easily replicable pixel-based images and short GIFs to vector-based images or longer video content. Irreplicable content would add even more value to an NFT as something that can’t be saved or reproduced as easily and is therefore worth significantly more to a collector.

Even pairing a non-fungible physical item with a non-fungible token as digital proof of ownership would present interesting opportunities. Imagine iconic shots of a cult classic like Pulp Fiction being auctioned off with the original physical film shot.

Exclusive experiences and content could be another logical progression. A one-of-one VR experience that is auctioned off with only a preview isn’t hard to see as a massively successful NFT. This is likely pending the technology to prevent a collector from duplicating or sharing it and devaluing a future owner’s asset.

NFTs are not and should not be limited to only collectible art pieces. Limiting them to only collectible items would be as much of a mistake as limiting crypto to only currency. They are proof of ownership for one-off items. There are already unforeseen uses arising such as NFT-based event tickets and this is still in its infancy. This could evolve into blockchain proof of ownership for a vehicle or house in place of a traditional title. This shift would create a hyper-secure ledger of transactions on that item. A living log of ownership and maybe more.

Check out Foundation and OpenSea to explore the current state of NFTs for yourself.

Source: https://medium.com/@1999.eth/a-quick-look-into-nfts-ea11139f4473?source=rss——cryptocurrency-5