What are Non Fungible Tokens and Why Would I buy one?
NFTs or “Non Fungible Tokens” seem to be all the rage these days! In this article, I hope to answer what are Non Fungible Tokens and why one would consider buying one. As a DevOps engineer, I am always looking for new applications of technology, especially the blockchain.
What are Non Fungible Tokens: The term “NFT” explained
NFT is an abbreviation for “Non-Fungible Token,” and it refers to a non-exchangeable value. As a result, an NFT differs from exchangeable assets such as cash. In economics and finance, fungibility, often known as exchangeability. It is the capacity to swap one object for another of equivalent worth. Four 5-dollar bills, for example, may be exchanged for one 20-dollar note with no change in value. Non-“fungible” values, or NFTs, are the inverse. Each NFT is a one-of-a-kind item and cannot be replaced with another item.
Famous paintings, for example, are a good illustration of such goods. A van Gogh cannot be replaced with a poster from the museum store. The poster is not worth the same as the original painting, and it is not the same as the original painting. The replication is not the same as the original work with all of its characteristic brush strokes, or paint choices.
Why should I buy an NFT if the artwork can be found for free on the Internet?
A artwork may be viewed, copied, and saved online by almost anybody. An NFT, on the other hand, provides the owner with something that cannot be duplicated. Specifically, the ownership of a work. NFTs can be compared to collectibles. Like paintings, stamps, and comic books, but in digital form. However, at first sight, it appears that you are purchasing something that is already freely available on the Internet. For example, photographs and films. A LeBron James slam dunk was recently sold as a trading card for $208,000. The footage, however, is publicly available on the Internet, but the buyer now owns that footage through the NFT.
The issue here is that a collectable in real life is tangible. A artwork, such as the Mona Lisa, may seem differently from a poster copy. In contrast, digital NFTs are optically indistinguishable from their duplicates. Only the use of underlying encryption ensures that it is the original. So an NFT is only useful because others place a fictitious value on it.
In the case of the LeBron dunk, this indicates that the trade card that includes the video is the official NBA footage. Having the official clip adds prestige to the card, increasing its worth. Only individuals who hold this card have true ownership of the clip. Everything else is a rip-off.
What safeguards are in place to ensure that an original is not simply copied?
The Ethereum blockchain includes NFTs. This is the fundamental structure underlying the cryptocurrency “Ether,” which is the world’s second most valuable cryptocurrency after Bitcoin. While other blockchains have now included NFTs, the Ethereum network remains the largest NFT platform.
As a result, NFTs are a form of cryptocurrency. They are, however, distinct from Bitcoin, Ether, and other cryptocurrencies. They have a digital signature, comparable to a famous painter’s signature. This implies that the original can always be identified as such, even if there are many similar copies of it.
The blockchain is analogous to an accounting of accounts, except it is entirely online and digital. It is a safe method of tracking the sale of digital items. NFTs, on the other hand, are kept as a string of numbers and letters, as opposed to an account book. This virtual certificate stores information on the owner or holder of an NFT, as well as the date of sale and to whom it was sold. With the purchase, one’s transaction of money spent on an NFT is added to the list of previous transactions. Storing this data on the blockchain ensures the NFT’s legitimacy and uniqueness.
Who needs NFTs in the first place?
NFTs overcomes a problem that many creators encounter on the internet. In a way, that is what non fungible tokens are: a certificate of authenticity. It enables them to ensure that their works are not simply duplicated and distributed on the internet. In a way, that is what non fungible tokens are: a certificate of authenticity. The value of a one-of-a-kind original rises as a result of its creation. There can only ever be one legitimate original of each NFT.
As a result, the objective is to create artificial scarcity. A excellent example is a streaming service such as Spotify. Musicians only receive a little amount of money for their tracks on Spotify. However, if a music is only available as an NFT as an original on the Internet once, its value skyrockets. There may be several copies of the music, but only one individual may possess the original. Furthermore, the author of an NFT might state in it, for example, that a specific amount is paid to him or her every time the token is resold.
Creators may now provide items for which there was previously no sales platform thanks to NFTs. GIFs or stickers, for example, to send via Messenger. In theory, NFTs can be anything that can be digitally stored. However, at the present, the emphasis is on digital art.
Speculation Drives NFTs
NFTs may also be used to generate money by clever collectors. You may buy an NFT and speculate that its value will rise, much like in the art market. For example, someone paid $3600 for a “Gucci Ghost” on the website “Nifty Gateway” and is now asking $16,300 for it. It was originally created at a cost of $200 USD.
What other kinds of NFTs are there?
Digital art, sports memorabilia, and video games use NFTs. The 2017 digital collection game “CryptoKitties” was one of the first to make use of the NFT concept. Collectible cats a purchased, traded, and bred by game players. Each new cat was an NFT, assuring authenticity and one-of-a-kindness.
The original copy of “Nyan Cat,” a viral meme from 2011, half cat, part pop-tart (an American sweet pastry), was sold in an online auction in February for 300 ether (about $600,000). Kings of Leon, a band from the United States, raised $2 million by releasing a digital-only album. In March, Twitter creator Jack Dosey’s first tweet sold for $2.5 million. Even the New York Times sells items as NFT for a pittance of $560,000.
Christie’s auction house recently sold its first all-digital artwork in the form of an NFT for $69 million in March – a 13-year-long collage of pictures dubbed “The First 5000 Days.”
The US NBA, for example, shows how NFTs function as trading cards with Top Shot. Users can use it to collect short videos of basketball highlights. Since October 2020, NBA Top Shot has generated more than 333 million US dollars.
Of course, the fact that an NFT is unique does not mean that each object exists only once. Collectible cards, for example, can exist multiple times, just like in real life. Thanks to the blockchain, however, it is possible to track when each individual card has changed hands.
This article barely scratches the surface on what non fungible tokens are, but I hope this will lead you down a rabbit hole of research like it did for me. If you are interested in keeping up to date on news about NFTs, feel free to follow my podcast, Tech Talk Nation on YouTube where we talk about plenty of NFT News!
Matthew J Fitzgerald is an experienced DevOps engineer, Company Founder, Author, and Programmer. He Founded Fitzgerald Tech Solutions and several other startups. He enjoys playing in his homelab, gardening, playing the drums, rooting for Chicago and Purdue sports, and hanging out with friends.