NFTs: A New Frontier for Ownership
We’re Only Getting Started
The Skinny
If you follow the blockchain space, you’ve probably heard of non-fungible tokens (NFTs). But like many aspects of this burgeoning field, there’s no harm in exploring the ins and outs of new technologies as they enter the market and expand out from initial use cases. Generally, the difference between fungible and non-fungible assets is that fungible assets can be swapped for others of the same type, while non-fungible assets are considered unique. A fungible asset is like a penny, swap it for another penny and you retain something that holds the same value as what you traded. A non-fungible asset is something unique, such as a ticket to a sporting event. While maybe similar in appearance to another ticket, a ticket to a baseball game is not the same as a ticket to a football game or even another ticket to that same baseball game. Or, as another example, consider how you can’t just swap plane tickets with someone. Those tickets are tied to the person whose name is on the ticket.
Without getting too far into the weeds here, most NFTs currently running on the Ethereum network and utilize the ERC-721 protocol. These are not the same as tokens running on the ERC-20 protocol, which are mostly fungible tokens (cryptocurrencies) resembling the everyday currency we keep in our wallets or those pennies mentioned in the previous paragraph. ERC-721 is the protocol that makes a token non-fungible and unique. Using another ticket analogy: think of these protocols like tickets to a concert. An ERC-20 is basically a general admission ticket, while an ERC-721 is tied to a specific section and seat within the arena. Typically, general admission tickets can be swapped between people without issue. Tickets tied to a specific seat are a little more complicated. They represent a specific location at the venue and should not be able to pass for any other ticket.
It’s not necessarily the non-fungible tokens themselves but the technology behind them that makes them exciting. We’ve already seen a variety of uses for them, and these are still the early days of the protocol. As we continue to iterate and come up with new uses, we are sure to see exciting implementations affecting various spheres of our daily lives. But just as Bitcoin and Ethereum won’t likely do away with fiat currencies, it’s useful to view non-fungible tokens and the ERC-721 protocol as working alongside current physical/digital unique assets and collectibles. They compliment instead of merely replace. Viewing NFTs this way will maintain a reasonable expectation of their uses while allowing for a more accurate understanding of their place alongside physical and digital assets.
Their Uses
We already have a variety of current and potential uses for non-fungible tokens. These include in-game collectibles in video games, document authentication (birth certificates, warranties, etc.), and property transfers or acquisitions (homes and artwork). In-game collectibles (e.g. CryptoKitties) are currently the most popular use case for NFTs. They can allow players to confirm ownership not only in one game but potentially across games and platforms. This has interesting applications for large gaming developers like Blizzard, Ubisoft, and Nintendo, among others, who run many concurrent services. Even within specific games, players would be able to trade items with each other and know with absolute certainty they were sending and receiving the right items or assets.
But the utility of NFTs goes beyond collectibles. They could reshape the way we handle secure document storage, property rights, even the sale of artwork, vouching for authenticity. They’ll help with the execution of wills and the chain of ownership for properties. New owners can see an immutable account of not just the most recent owner, but previous owners as well, along with other pertinent information regarding the property. Most legal documents or contracts would benefit from the use of blockchain technology and non-fungible tokens. These tokens, when done right, cannot be duplicated or forged and essentially combine the power of an attorney with the job of a notary. Both parties can have absolute confidence in the ownership of assets.
Equipment exchanges could also benefit from NFTs, providing both the lender and the requester assurance that the right piece of equipment is being utilized for the right purpose. This would be especially helpful for musicians or people working in video production, people who typically prefer specific types and brands of equipment. Exchanges utilizing non-fungible tokens would ensure the customer received exactly what they wanted while the sender could avoid unnecessary roadblocks by ensuring they sent the right equipment every time. And once again, should something go wrong, there’s a record of who previously received the equipment.
Non-fungible tokens are more than just a fancy way to categorize digital items or digital assets. NFTs could also revolutionize the way we handle and share our information both in person and online. Imagine personally profiting off your browsing history and deciding what aspects of it you share with interested parties. NFTs are backed by the blockchain and have a variety of uses from video games to legal paperwork to data ownership. Utilizing this technology, we can not only cut down on the potential for fraud (if not eliminate it entirely in some areas), but we can also explore new ways to celebrate fandom, whether that’s through a rare item you’re transferring between video games or a unique digital pennant or bobble-head from your favorite team or player.
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