What is an NFT?

Nonfungible tokens (FTTs) have been around arguably since 2013 (see). Their prominence took centre stage in 2021 when the centuries-old auction house Sotheby’s sold a collection of 10,000 ape cartoons using NFTs for $24.4 million (see). There is no monkeying around when it comes to the impact of NFTs.

It is incredibly challenging to exercise ownership over digital assets in a digital world. Anyone can screenshot, copy, or download. NFTs, address this challenge of the ownership of assets. NFTs are crypto assets that grant and prove ownership over digital assets. In other words, an NFT says – “the individual in control of a specific crypto wallet address is the owner of a computer file stored at a specified location”. 

How do NFTs work?

Let’s say you took a photograph and posted it on a social platform, where it became viral. Millions of people would have seen your popular photograph. If you want to monetise your popular photograph, it is nearly impossible because it is almost certain that many copies of your photograph would have been made. This is where NFRs come to play.

Using an NFT, you can enter certain information about your digital photograph in the blockchain and sell it as an NFT. The information you write in the blockchain will not include the actual artwork. The information that goes in NFT is encrypted metadata about your digital photograph. Such as its name, description, and URL link to a server that hosts the original digital photograph. The NFT does not contain the actual digital photograph. It is proof of ownership – a document confirming that the digital photograph is yours. NFTs leverage the blockchain (a distributed public ledger that records transactions) and can be bought, sold, and secured through many different blockchains, such as Ethereum, Flow, and Tezos. NFT ownership and unique identity are verified using a blockchain ledger. An NFT is identified by locating its associated digital certificate, metadata, and its position on the blockchain. The blockchain associated with an NFT makes the NFT ownership and history secure, verifiable, and part of public records.

Can anything be an NFT?

A digital asset can most certainly be. But the answer is “kind off” regarding physical assets. NFTs are still evolving, though rapidly. NFTs have had a good degree of success in the world of digital art. The possibilities of NFTs are near-limitless – music, patents, tweets, and videos are all areas where NFTs are being applied.

NFT Trends

Digital Land – NFTs will be at the heart of the Metaverse. For example, Decentraland offers plots of virtual land that can be bought and ownership established using NFTs.

Gaming – NFTs are being used to represent in-game items, assets and collectables.

Social Media – Social media companies are beginning to allow their users to post NFTs as their profile pictures.

Counterfeit – Nike wants to create NFTs for proof of ownership of their physical shoes.

POAP – Proof of Attendance Protocol is a type of NFT that can prove physical and virtual attendance at real-world or virtual events.

Luxury Goods –Brands such as Gucci have entered the NFT market