NFT an acronym for on-fungible token as we all know it’s a big trend in the crypto industry now asides the crypto industry it keeps taking the art and collectibles industry by suprise.
NFTs are tokens that we can use to represent ownership of unique items. They let us tokenise things like art, collectibles, even real estate. They can only have one official owner at a time and they’re secured by the Ethereum blockchain – 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.
You can learn more in the video below.
NFTs and Ethereum solve some of the problems that exist in 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. Not to mention that digital items often only work in the context of their product.
For example you can’t re-sell an iTunes mp3 you’ve purchased, or you can’t exchange one company’s loyalty points for another platform’s credit even if there’s a market for it.
A little comparison between NFT’s and the assets on the internet.
|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.|
|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 in a decentralised loan.|
Uses of NFT.
Gaming has a huge demand for unique items that are tradable and purchasable. Their rarity directly affects their price, and gamers are already familiar with the idea of valuable, digital items. Micro-transactions and in-game purchases have created a multi-billion dollar gaming industry that could tap into NFTs and blockchain technology.
It’s also an exciting area in terms of what an NFT represents. Tokens for video games combine aspects of art, collectibility, and utility for players. However, when it comes to big-budget video games, NFT implementation is a long way off.
It’s easy to forget that not every NFT derives value from a song, picture, or collectible item. In decentralized finance (DeFi), NFTs also provide unique financial benefits. Most will have some artwork too, but their value comes from their utility.For example, JustLiquidity offers an NFT staking model. A user can stake a pair of tokens in a pool for a certain period and receive an NFT to access the next pool. The NFT acts like an entrance ticket and is destroyed once you participate in the new pool. This model creates a secondary market for these NFTs based on the access they provide.
Like an image file or video, you can also attach audio to an NFT to create a collectible piece of music. Think of it as a digital “first edition” of a record. Attaching a song to an NFT is similar to our art example, but there are other use cases.
In the meantime, smaller projects have ended up working mainly with independent artists. Rocki on Binance Smart Chain gives independents a platform to sell royalties and stream their music. Their first royalty NFT sale on the platform raised 40 ETH for 50% royalties using the ERC721 token standard.
Credits: Ethreum and Binance.