What are NFTs?
NFT stands for Non-Fungible Token. Non-Fungible means that an item or asset has unique properties that cannot be changed or replaced. Essentially making it one-of-a-kind.
While NFTs have been around since 2014, they have only recently made it into popularity and mainstream media. With around $174 million being spent on NFTs since 2017. Forbes has stated that: ‘…many NFTs, at least in these early days, have been digital creations that already exist in some form elsewhere, like iconic video clips from NBA games or securitized versions of digital art that’s already floating around on Instagram.”
They are digital tokens that are normally bought using Cryptocurrencies. They use the same technology as crypto, such as the Ethereum blockchain, in order to secure the tokens. These digital tokens provide proof of ownership for digital or even physical assets.
But just like many digital things, they can be freely viewed online, so why are people spending millions on them? Because it’s the proof of ownership, of the original, that’s so valuable. Think of the Mona Lisa – anyone can have a photograph or replica, but there is only 1 original, and it is priceless.
How do NFTs work?
At their highest level, NFTs exist on the Ethereum Blockchain, but other blockchains can have their own versions of NFTs, and some already do.
NFTs can be “tokenised” to create digital certificates of ownership, and those are the things that are bought and sold.
Some examples of NFTs, provided by Ethereum.org:
- Digital Art:
- GIFs
- Collectables
- Music
- Videos
- Real-World Items:
- Deeds to a car
- Tickets to a real-world event
- Tokenized invoices
- Legal documents
- Signatures
- Lots and lots more options to get creative with!
NFTs can only have one owner at any given time. “When someone creates or mints an NFT, they execute code stored in smart contracts that conform to different standards, such as ERC-721.”
Artists can also sign their artwork by including their signature in an NFT’s metadata.
What are NFTs used for?
NFTs can be a way for digital artists and creators to monetise their content. They can be used for digital content, gaming items, domain names, physical items, investments and collateral.
Can’t I just “right-click, save”?
Theoretically, yes. There’s nothing stopping you from screen capturing, downloading, or saving a copy of an NFT artwork. The problem with that is, you still don’t own the token. And it’s the token that has the actual value.
The authenticity and the certification that you own the original piece is what NFTs are all about. Look back to the Mona Lisa analogy.
And in all fairness, the more a piece is copied, shared and wanted, the higher the value of the NFT is likely to grow.
Conclusion
NFTs are busy waking waves in popular culture and have seen massive amounts of investments over recent months. Owning digital assets could be the thing of the future, as we are slowly moving towards a more virtual world. And NFTs can even be a more secure means of confirming ownership of physical assets, as they’re secured with the same technology as cryptocurrencies.
And while it may be simple to copy a digital asset, all you’re achieving in doing so, is creating more value for the actual token.