Non-fungible Tokens aka NFTs have been quietly reshaping the landscape of digital ownership and value.
These digital assets, stored securely on blockchain networks, have surged in popularity, captivating artists, collectors, and investors (and scammers too) alike with their promise of unique ownership and unprecedented possibilities.
At the heart of the NFT revolution lies the concept of non-fungibility—a quality that sets these tokens apart from their fungible counterparts like cryptocurrencies.
Unlike fungible assets that are interchangeable and uniform, NFTs represent one-of-a-kind items, each with its own distinct value and identity.
Non-fungibility, the cornerstone of NFTs, distinguishes them from interchangeable assets, reshaping digital value and ownership.
And I’ll try my best to convince you that NFTs come with advantages and they aren’t scams (at least a few aren’t).
Obviously.
NFTs provide a secure and verifiable way to prove ownership and authenticity of digital assets.
Authenticity has historically been difficult to establish.
In 2015, the most expensive Ferrari 250 LM was sold for a whopping $17.6 million at an auction. This was the same classic car that took first place at the 24 Hours of Le Mans in 1965.
And it’s easy to prove the ownership, because the replica is hard to make, and faking it is almost impossible.
But what about your social media account ID? What about the gun that you earned by killing someone in a video game? What about the recent art that your favourite doodle art creator has created?
If Monalisa was minted as an NFT by Leonardo da Vinci in 1503 on some blockchain (assuming they existed then), we would still be able to track it and know who (which wallet address) owns it.
And NFTs can be used to represent real-world assets such as real estate, expensive art, and luxury cars.
Heard of immutability?
At its core, immutability refers to the unalterable nature of blockchain transactions.
Once recorded on a blockchain network, such as Ethereum, NFT ownership and transaction history become immutable, meaning they cannot be modified or tampered with.
This immutable ledger ensures transparency and trust in the provenance of NFTs, safeguarding against fraud and forgery.
For creators, this immutable nature of blockchain provides a secure and verifiable record of ownership and authenticity for their digital assets.
In the digital world, scarcity has long been a challenge.
Replication and distribution are effortless, leading to a dilution of value and undermining the concept of exclusivity.
Memes can be copied. Music can be duplicated. (If you know about YT Copyright Infringements, you get it).
And because everything can be replicated easily, there is no value attached to it.
However, NFTs revolutionize this paradigm by introducing scarcity to the digital realm.
Each NFT is inherently scarce, representing a unique digital item that cannot be replicated or divided.
Whether it’s a digital artwork, a collectible card, or a virtual land parcel, the scarcity of NFTs imbues them with a sense of rarity and exclusivity that traditional digital assets lack.
But they can still be right-click saved, right? or Duplicated? Downloaded for FREE? Then how do NFTs embed scarcity into an art or a piece of music?
Well, by attaching a unique ID, making it trackable on the blockchain and making it impossible for anyone to alter the data, you attach the scarcity.
Yes, you can download the image of Monalisa and put 1000s of Monalisa on the blockchain, but you can also see the mint date, and minted by which wallet address, of the original one and where it exists today (if Davinci had minted).
The more scarce the NFT, and the more people are willing to own it, the higher the price.
This scarcity not only enhances the perceived value of NFTs but also fosters a sense of ownership and prestige among collectors.
Owning a rare NFT becomes akin to owning a rare physical artefact, with its scarcity driving demand and commanding higher prices in the market.
Related Read: Why NFTs Make Sense In A Status-Driven Society
NFT royalties have emerged as a pivotal aspect within the NFT space, offering creators a sustainable revenue stream beyond the initial sale.
These royalties, essentially fees paid to the original creator each time an NFT is resold, serve as a perpetual income source from a single digital asset.
Creators who mint their artworks as NFTs and set a royalty percentage can earn a portion of the resale value whenever their NFTs change hands in the secondary market.
This ensures ongoing compensation for the artist’s creative efforts, fostering a fairer distribution of value in the digital art ecosystem.
However, the effectiveness of NFT royalties hinges on marketplace enforcement.
While some platforms automatically deduct and transfer royalties to creators, others make royalties optional, posing challenges for creators seeking consistent income from their work.
The NFT industry is trying to solve this by launching Royalty pro marketplaces that support artists.
Token gating represents a transformative concept within the NFT space, offering a mechanism for creating exclusive communities and rewarding token holders with unique experiences and privileges.
In essence, token gating establishes a walled garden where access is restricted to individuals who possess specific NFTs, thereby fostering a sense of exclusivity and value around these digital assets.
For instance, just as a movie ticket grants access to a film screening, ownership of an NFT can unlock access to exclusive events, products, or services within the digital realm.
This exclusivity extends beyond mere access, offering tangible benefits and rewards to NFT holders.
Whether it’s discounts, memberships, or personalized experiences, token gating enables creators and brands to incentivize loyalty and engagement among their audience, thereby fostering deeper connections and community participation.
Despite its nascent status, token gating holds immense potential for revolutionizing various industries and use cases.
As the NFT ecosystem continues to evolve, we can expect token gating to play a pivotal role in shaping the future of digital ownership and community engagement, unlocking new opportunities for creators, brands, and consumers alike.
Interoperability refers to the seamless exchange and interaction of NFTs across different platforms and ecosystems.
Unlike traditional digital assets confined to specific platforms or proprietary systems, NFTs can be bought, sold, and traded across various marketplaces and blockchain networks, thanks to their standardized protocols and open-source infrastructure.
The NFT ticket that you purchased for a Taylor Swift concert can now give you an opportunity to redeem a 50% discount on the Domino’s Pizza website.
By enabling seamless exchange across platforms, interoperability enhances market liquidity and accessibility, facilitating dynamic trading environments and broader user participation.
Users gain access to a diverse array of NFTs, fostering choice and flexibility, while reducing barriers to entry and improving overall user experience. Moreover, interoperability fosters cross-platform collaboration and innovation, driving the exploration of new use cases and applications for NFTs.