What are NFTs? And why should you care?

Whats an NFT?

NFT stands for a Non-Fungible Token. To break it down, non-fungible means unique, or one-of-one. So an NFT is a unique one-of-one token on the blockchain. Since it’s built on the blockchain, it can always be authenticated and can not be duplicated or destroyed.

An example I like to give is how Leonardo Da Vinci painted the Mona Lisa. To our knowledge he did paint the Mona Lisa, but I didn’t see him paint it and neither did you, so it could be argued he never painted it. If Leonardo released the Mona Lisa as an NFT, it would be authenticated forever on the block-chain as his piece forever and always, so it could never be argued that he didn’t create it

But can’t I just screenshot it and it’s mine?

You can screenshot it and say it’s yours but then I would ask you to try to sell it on the open market, without the Leonardo authenticated block-chain attached. The point is, just like how people hang up posters of the Mona Lisa in their house, it’s not the real authentic Mona Lisa. However, with the blockchain there is a secure technology underlying ownership, which serves as the artist’s digital signature.

What is the future of NFTs and what is their utility?

The reason I am so interested in NFTs at the moment is due to the potential of this technology disrupting many large industries.

Authentication

To start, one of the most interesting use cases to me is the authentication of art and high luxury goods. What I mean by this is for example, when you buy luxury goods like a Rolex, it would come with an NFT. The NFT would be an authentic block on the block-chain, created and verified by the company that sold the luxury goods. When the owner of the Rolex wants to sell, they would simply transfer the NFT to the new owner along with the Rolex to serve as a certificate of authenticity.

Intellectual Property

Another potential use case NFTs can fill is intellectual property. Right now intellectual property is stored on the US patent office database. This could easily be replaced with block-chain, which is just another form of digital ledger. Now with the NFT, the owner of the intellectual property can enforce their rights due to having an authentic one of one block-chain address tied to their intellectual property. It gives creators or companies an easy way to give permission to license IP to people through the block chain.

House Deeds and Car Titles

Currently, the car title I own is a piece of paper. Even though this piece of paper is kept safe away from harm, there is always the chance to lose it, or for the paper to get destroyed. If this car title was an NFT on the block-chain, then I would always have an immutable block that I could show ownership to my car. If titles transitioned to NFTs, now when you had to show someone, like a police officer for example, you could pull up your QR code that links directly to your digital ownership.

Music/Art

Music artists have a new way to interact with fans. One example is an artist could sell a portion of the rights to a song as NFTs. Now whatever streaming revenue is brought in by the song is shared by the owners of the NFTs. Artists that have great content but are strapped for cash can now release NFTs to raise money with no need for a label. Another huge benefit of NFTs for artists is that they can now get paid royalties for their work every time it’s sold in the secondary market. You can put code into the NFT that basically allows an artist to get a percentage of royalties for every sale after their original sale!

Gaming/Metaverse

Video game creators can now sell in-game items directly to consumers with NFTs. A very common example is skins on fortnite. In the future I can see most video games selling digital items as NFTs. The reason this is better for the consumer is if they want to leave the game they can sell their digital goods as NFTs to more willing players. Even though I have the black knight skin in fortnite (one of the most sought after skins), I haven’t played fortnite in years, so this sought after digital asset just sits on my harddrive when another younger player would love to have it in their collection.

-Philip Mundt 2021