Non-Fungible Tokens are hot to trot! But what on earth are they?
If you are a follower of the evolution of Blockchain, no doubt you will have been keeping an eye on the new kid on the block, the Non-Fungible Token (NFT).
To date the major milestones in Blockchain technology have included the original digital ledger – namely Bitcoin (BTC); consortium-backed Ethereum (ETH) supporting Smart Contracts and Decentralised Finance (DeFi); the Linux Foundation’s open-source Hyperledger project …and now NFTs look to underpin the next phase in Blockchain evolution, enabling “digital asset tokenisation.”
Well first, we need to talk about fungibility – which gladly does not involve discussion of health-related issues.
According to Investopedia, “fungibility is the ability of a good or asset to be interchanged with other individual goods or assets of the same type. Fungible assets simplify the exchange and trade processes, as fungibility implies equal value between the assets.”
Cash, for instance, is fungible - you can swap a £50 note for five £10 notes and not lose a bean. Same goes for Bitcoin. 1BTC = 1BTC no matter where it came from.
So NFTs have risen up to deal with owning unique computer-based assets – the tech news feeds have been brimming with pieces about interesting transactions involving digital music and art changing hands for millions of dollars.
So…people buying and selling tweets and virtual trading cards may seem utterly nonsensical to you, given it’s an something of ephemeral phenomenon …but art is art right? And NFTs seek to address the rather impermanent transience of digital collateral.
An NFT can be seen as the digital equivalent to a bill of sale, certificate of authenticity, log book, purchase history - all rolled into one – and bundled with the digital asset itself - be it a jpg, mp3 or what-have-you.
NFT crypto projects achieve their value from the fact that they increase scarcity by limiting the release of tokens. As well as WAX, you’ll find other notable projects including CryptoPunks, Sorare, Dapper Labs, and CryptoKitties where you can collect and trade anything from fantasy football players to virtual cats.
The Saturday Night Live folks explain NFTs rather succinctly in rap form.
Twitter CEO Jack Dorsey managed to sell his very first tweet for just shy of $3m. Yes, nearly three million dollars. The proceeds of which went to charity, you’ll be glad to know. Star Trek’s William Shatner sold 10,000 memorabilia packs on the World Asset eXchange (WAX) using NFT encryption to create unique collectible assets. Perhaps this will help fund his next corset research project.
Geeks and/or Redditors at least will be well aware of internet memes such as Disaster Girl, Bad Luck Brian, Success Kid and so on - some of whom have been lucky enough to be able to monetise their ubiquitous images well into 6 figures.
Ask any greying video gamer and they’ll tell you that the concept of owning artificially-scarce virtual goods has been around for decades – some MUDs (early online games) allowed you to purchase in-game items and since then, platforms such as Steam and games such as Candy Crush on Facebook have found them exceptionally lucrative. Love them or loathe them, if microtransactions are anything to go by, you can expect this fad to last, as they’re a great way of extracting money from addiction-afflicted dopamine-chasers with relative ease.
Outside the videogame industry, well-known brands have been pushing boundaries with their marketing efforts in augmented and virtual reality (AR and VR) for quite a while – and now big players such as Gucci and Nike have been making serious strides into the virtual sneakers market.
You’d be forgiven for thinking so and you can bet certain agencies are watching the rise of the NFT with exceedingly aquiline eyes, but practical applications of non-fungible tokenisation can include digital IDs, credit history, healthcare records – all of which could benefit massively from a secure and auditable paper-trail.
Is your business looking to leverage the Blockchain for genuinely positive results? Are you hoping to make bank by selling the NFT-encrypted audio waveform of your best ever fart? We would love to hear from you!
...then you might like to check out our Blockchain, Ethereum and Solidity developmment training course