NFT is an abbreviation for Non-Fungible Tokens. If something is fungible, it means it is identical and exchangeable against itself. For example, euros, dollars, gold, and Bitcoin are all fungible, because you can exchange them one-to-one anywhere without anything changing on paper. Non-fungible means that something is unique. For example, the Mona Lisa, a glittering Charizard card, and a drawing of a toddler are all non-fungible.
A Non-Fungible Token is a unique crypto token that is linked to a unique digital file or object. So it is a passport and proof of ownership. Due to the magic of blockchain technology, this unique ID cannot be used for fraud. This is because it is stored securely, permanently, and completely transparently on a blockchain.
Currently, NFTs are mainly used for digital files, such as videos (MP4), images (JPEG, PNG), audio files (MP3), and memes. By means of smart contracts, these file types can be given a unique identifier, the NFT. You can store these NFTs in a wallet and trade them with other people via marketplaces.
In addition to the underlying file, metadata is also added to an NFT, such as a description, the date of issue, and the issuing artist. In addition, everyone can see who has what via the blockchain and also view the complete digital path that an NFT has taken.
Also, NFTs are programmable, meaning that we can basically encode anything we want into an NFT. For example, consider lifetime artist royalties, special deals for NFT owners, automatic transactions, and much more, most of which have yet to be discovered.
Before NFTs, it was extremely difficult to trace the source of a digital file and thus protect intellectual property online. Now digital artists can capture their original work on the blockchain. Of course, these files can still be easily copied, but NFTs are a way to establish actual ownership, authenticity, and origin. And this has huge implications for the internet economy.
Why are NFTs so revolutionary?
Like Bitcoin, NFTs enable digital scarcity. But instead of a currency, blockchain is applied here to digital art. Millions of creations in all shapes and sizes are put on the internet every day. These creators of these works put in time and effort and create value for the consumers of this content. An incredible amount is being created, but it turned out to be just as difficult to earn directly from this.
Before NFTs, there was no optimal model that is best for both the producer and the consumer. There is almost always a party in between, for example, YouTube, Medium, Netflix, Spotify, or Facebook. They set the rules for the platform, and thus the users, in order to maximize profits. As a result, the focus is primarily on algorithms that maximize the company’s revenue, but not necessarily experience or fair payout for producers. Plus, digital files are super easy to copy. Once it’s put online, it can suddenly go viral without the publisher getting anything in return. Or think of the PirateBay, where music and movies can be shared very easily.
Through NFTs, producers can earn directly from their work. They can sell these directly to their fans, who receive an NFT in return. Just as we (hopefully) know what and where the original Mona Lisa is, we can do the same for digital files via NFTs. As a result, we are now at the beginning of what is also called the “creator economy” or “ownership economy”. With NFTs, it’s all about creators and their fans.
The “creator economy” emphasizes the relationship between products and their fans. Through NFTs, people can directly buy the works of their idols and show the rest of the world that they own a unique work via their wallets. But this is just the beginning, as there is much more that can be done with NFTs.
For example, creators can program special perks in the NFTs. These can be VIP passes to concerts, one-on-one meetings, or exclusive access to new works. This allows creators to create an economy around themselves and build an intimate relationship with their following. On the other hand, content consumers can directly support their favorite artists. That is quite different from the €0.005 cents per Spotify or Netflix stream.
What can we use NFTs for?
NFTs are a type of crypto tokens that are used as proof of authenticity and ownership of a non-fungible object.
One of the most widely used use cases of NFTs is digital art at the moment. Graphic designers and musicians from around the world have already uploaded and tested hundreds of thousands of creative bits and bytes and sell them. NFTs are a much better experience for these artists than how this economy worked before because they can sell their art directly to their fans without going through companies that want to take a profit percentage.
People like to collect things, especially when they are scarce. Somewhere deep inside us, we attach great value to unique objects, because they hold value and give us social status.
We also see this in the NFT space, where many different types of unique digital collectibles have already become popular. For example, CryptoKitties, Hashmasks, CryptoPunks, and many more unique collections have already been traded for millions.
NFTs can also be used to protect somewhat more pragmatic digital files. Think, for example, of festival tickets, confidential files, contracts, and website domain names. By means of blockchain, everyone can trust that the file is authentic and thus fraud is prevented. A good example is UEFA, which has already started a pilot for an NFT ticket system. Ultimately, we are moving towards a system where your digital ID, or maybe even your passport, becomes an NFT.
The gaming industry is now worth about $90 billion and there are thousands of people who have turned it into a full-time job. Millions of gaming assets such as weapons and skins are also traded daily via various platforms such as World of Warcraft and Fortnight.
NFTs can make this system more reliable and secure. In addition, they make it possible to move in-game assets between different games. Much better digital marketplaces can also be set up via blockchain.
In fact, there are already blockchain-based games that use a “Play-to-Earn” model, the more you play, the more in-game cryptocurrencies and NFTs you can get. The player can then sell this again. In countries such as the Philippines, people even earn several times more than the minimum wage.