What is an NFT? (with GPT-3’s Help)
Over the last few months you probably have heard of NFTs being sold for millions of dollars. But what actually is an NFT ?
NFT stands for “non-fungible tokens”, which are tokens that take the form of unique digital assets.
An NFT enables us to create digital certificates that represent a unique asset which can be anything from a photo, a video, a GIF, or if properly implemented we can have NFTs for Real Estate too.
What is so unique about NFTs?
NFTs are decentralized, incorruptible, and don’t require any trusted third parties to operate. You can therefore guarantee that your coins are yours alone, no one can take them away from you. This is what makes NFTs so attractive. You can transfer them to other people without having to worry about their identity, for example when you’re selling or giving away your NFTs. You can also claim your NFTs by submitting proof of your ownership, for example by proving that you are the creator of an NFT or that you are the holder of an NFT that has been transferred to you.
NFTs give you the ownership of the work (Though the creators can retain ownership rights and can claim resale royalties directly on the token itself)
They are un-hackable, decentralized, and incorruptible, thus making them the perfect vehicle for the transfer of ownership.
NFTs provide a method to trace the true ownership of digital assets which enables artists and buyers to engage in the exchange of such assets, just as they would with physical ones.
Their embedded metadata and transaction history are open and verifiable by anyone in the world with the Internet which means anyone will be able to know what digital wallets own what tokens at any given point in time.
NFTs also manifest their origin. Each NFT contains within it a record of ownership of a digital asset and only one original can be traced back to the original creator.
It’s the very idea of scarcity and abundance (oxymoronic isn’t it ?) of the NFTs that makes NFT art so appealing to collectors.
Advantages of NFTs:
- NFTs are the perfect medium for the exchange of ownership. Because NFTs are incorruptible, you don’t have to worry about hackers stealing your NFTs.
- There is no requirement for third parties to operate NFTs. NFTs are not controlled by any central authority, since they are decentralized.
- The security of the blockchain makes digital assets more secure,
- The authenticity of the blockchain makes digital assets more reliable, and
- The interactivity of the blockchain makes digital assets more practical.
How to Collect NFTs
The easiest way to claim your NFTs is to use the Metamask browser extension. You can do this in any browser by visiting this website. Alternatively, to claim your NFTs you can use MEW. You can also claim your NFTs by running a node on the Ethereum network.
How do you store and use NFTs?
You can store them in a wallet, for example, a hardware wallet, a mobile wallet, a desktop wallet.
How secure are NFTs?
NFTs are decentralized and therefore, they are not controlled by any central authority. This makes them secure. Because NFTs are decentralized, there is no risk of the central authority stealing the NFTs from you.
Furthermore, because NFTs are decentralized, you don’t have to trust any third party to operate them. This means that you can transfer your NFTs to anyone without having to worry about their identity. Another important factor that makes NFTs secure is that the Ethereum blockchain is open source, meaning that there is no way of stealing data from Ethereum or any other blockchain.
Does the Blockchain actually store the digital asset?
The blockchain doesn’t store the actual image, it stores essentially a cryptographic derivative or a hash of the image so anyone analyzing the blockchain would see two tokens that seemingly have absolutely no relation to each other, assuming any small detail has been changed, but one represents ownership in a copy of the other.
However, it mostly depends on the implementation.
The ERC721 (the essential set of rules for NFTs) standard allows any type of metadata. This metadata could be the file itself. The token would then be directly tied to the actual data.
With a system like this, you can restrict functions, like, read data, to those with certain permissions. In the case of art, it would be those that own the NFT that gives them access to this asset.
Some other potential applications of NFTs:
(this is from a discussion I had with my friends)
One actual use of NFT’s might be to NFT the landing/take-off slots at busy airports because airlines trade those already but it would probably modernize that niche area of asset exchange and make it easier to keep track of who has what.
Blockchain for private property rights both on earth and in space
Blockchain the land registries there is no asset on earth where blockchain is a more appropriate ledger than land.
Why do you keep hearing about NFTs?
For the same reason you keep hearing about crypto a lot these days, they are becoming an economy by themselves. NFTs can enable a creator economy where creators can freely and securely sell their work with no fear of being banned or removed from the platform.
But most of the craze around this is mostly because people are seeing crypto and NFTs as an investment rather than as a technology that could change almost everything by removing 3rd parties (including banks) entirely from the equation of the new economy.
For example, you must have seen how NFTs are bought at small price and sold at very hefty sums and people buying dogecoin because Elon tweeted so.
What is the future of NFTs?
It is very hard to predict right now, but the trend suggests that they are here to stay. Even if they happen to fail in the future, the technology behind the NFTs will be shaping our society in ways that we can’t begin to comprehend from solving poverty to funding space programs!
by the author.