NFTs and You: What Do You Know About It?
Non-fungible tokens (NFTs) are a relatively innovation in blockchain technology. While they have been around for some time, it has only been recently that the public has begun to understand their true potential.
"A non-fungible token is an asset whose individual units are separately distinguishable and nontransferable, making them as unique as traditional securities."- Blockonomi.com
What exactly does this mean? A good example of these non-fungible digital assets would be swat cards in the game "Counterstrike." Each one of these cards is unique because each player spends hours upon hours honing their craft until barely anyone else can come close to beating them at their own game. The same principles are true for NFTs. As opposed to cryptocurrencies that are fungible, or all the same, NFT's are unique because each unit of the token is not interchangeable.
Not sure you understand? Let's compare this to something more familiar... Let's say you have a hundred tokens in Monopoly and want to trade them with someone else so they can have a full set. However, you realize that there are two railroads included in your stack of chattel so instead of being able to give them everything at once, you'd need to take out four tokens (the two railroads) for yourself. You now no longer have one hundred units but ninety-six because those other four belong to the bank -and the player who owes you the other tokens. The same principle applies to NFTs because their value is not true in what they can buy but in what they represent. You could have two of the same token, both with one hundred units each for example, but the second one would be inherently more valuable because it has a little bit more history behind it if that makes sense.
One of the unique aspects of blockchain technology is that there are no physical copies of digital assets and this means that things like art can now be represented by unique NFT's instead of being limited to mass production. This may sound strange at first but let's think about it for a second... A copy of an art piece or album cannot be exactly like another without some sort of variation. So instead of taking a mass production route we can now have something original since each unit is truly fungible and therefore unique! The same principle can be applied to traditional artwork that has been digitized.
So not only does the world of NFT's open up new possibilities for people who want to own artsy pieces, but it also creates an entirely new market where collectors and true fans will be able to buy at prices below what they would pay for copies/replicas because these tokens are rarer than their "duplicates." This could create a whole new market in the business of trading such things by creating a universal value system that applies across all digital items. These non-fungible tokens will play a large part in the future of our long-term economy.
Here are some ways that people are already benefiting from this technology.
One of the most obvious applications for blockchain technology is the tokenization of digital assets, which has led to an entirely new medium for collecting and trading unique digital collectibles. Whether it's CryptoKitties or Baseball Cards, NFTs have created a whole new market, where physical items can be digitized, bought, sold, and traded amongst people around the world using smart contracts on the blockchain. But what else can you do with these NFTs? There are plenty of other possibilities...
- Gaming Tokens
The digital asset market goes beyond just collectibles- it also includes gaming tokens. These are often implemented as part of a game's design, where players can use tokens as the main method of in-game transactions. In some cases, these tokenized items have intrinsic value within a game's ecosystem and can be traded with other players for different items or cryptocurrencies.
- Digital Identity
NFTs are already being used to power Decentralized Identities. With blockchain technology, it is possible for users to own their identity and authentication mechanisms by owning their private key instead of having an online service manage that information on their behalf. This allows users to prove who they are (and not be impersonated by others) without revealing any additional personal information beyond what is required of them by the specific application at hand. Overall this increases user security and is better for the end-user.
- Supply chain management
Supply chains are among the most complicated and opaque systems in existence today, but blockchain technology has made it possible to track goods as they move through a supply chain. For example, you can now tell where your milk came from or who manufactured your t-shirt; all without having to trust the information provided by any one party. Once implemented on a large scale, NFTs will make this kind of tracking much easier for both businesses and consumers alike.
- Voting & Elections
Voting is another application that makes use of NFTs within blockchain technology. Votes can be recorded on-chain with an NFT representing each participant's vote, and the results of an election can be independently tallied by each member of the network. Because votes are recorded on-chain, they cannot be tampered with once submitted and counted on by all members of the system.
- Digital Assets for Decentralized Exchanges (DEXs)
NFTs are seen by some as a pillar of how decentralized exchanges will operate in the future. One benefit is that NFTs allow users to trade ownership over digital assets without any third party involvement, greatly increasing security since hackers would not be able to get their hands on any personal information if they were able to gain temporary control over a user's private key. Another benefit is that NFTs offer fast settlement times which make trading assets on a DEX far easier and faster than systems that require order matching.
- Gaming & Collectibles Dapps
The potential applications for unique digital assets are endless. The more unique these assets are, the more interesting it becomes to see what people will do with them next...such as this decentralized game utilizing NFTs on the Ethereum blockchain called CryptoKitties. Many argue that NFTs will bring the same kind of success to gaming as it has with collectibles, and we believe this will be an integral part of the distributed web's future.
Other possibilities include non-fungible stablecoins, where each token has its value pegged to an external asset or basket of assets. This is of particular interest for exchanges looking to provide stability amid cryptocurrency volatility. For example, Tether's recent implementation of NFTs allows users to own individual tokens representing fractional ownership in US dollars held by the company.