A Beginner’s Guide to NFTs — It’s Simple!
A profound alignment of ‘digital’ ownership
In the blockchain industry where there’s already an overload of technical jargon, you might think that the term ‘NFT’ is another hell-sent acronym intent on exacerbating your confusion.
But the reality is that it couldn’t be simpler! NFT stands for Non-Fungible Tokens. ‘Fungible’ refers to funky inedible mushrooms that will blow your mind.
In all seriousness, ‘Fungibility’ refers to the ability of an asset to be easily interchanged with other assets of the same type. For example, SGD and Bitcoin are fungible because 1 SGD can be exchanged for 1 SGD, and 1 Bitcoin can be exchanged for 1 Bitcoin.
NFTs (Non-Fungible Tokens) are essentially tokens that represent your ownership of an asset. They’re ‘Non-Fungible’ because they’re unique, and hence cannot be interchanged with the same asset. For example, an original painting cannot be interchanged with the same original painting because it’s unique; it’s one of a kind. It can only be exchanged for a completely different asset like money.
Therefore, NFTs are unique digital tokens that allows additional information to be stored on them. This means that instead of physical assets like a painting, NFT buyers are purchasing tokens that has its value derived from the attached information— E.g. a JPEG file of said painting.
Remember our DeFi article? Here’s the link:
We mentioned that financial services can now be accessed by anyone from anywhere in the world. The same can be said for NFTs. Most NFTs are built on the Ethereum network as ERC-721 tokens but other blockchains such as Solana, EOS, NEO, and Tron have also released their own NFT token standards.
Because anyone can interact with these blockchains, NFTs essentially creates an accessible and global market place connecting artists, content creators, and gamers. The pandemic has resulted in a profound alignment in our understanding of ‘digitalisation’, creating a demand for digital content as the world adapts to online activities.
Blockchain technology is transparent in nature, and NFTs might be a precursor to a robust and open digital economy defined by immutable (cannot be modified) and paperless records of ownership.
Now you might be thinking: “Why can’t I just right-click that like what he did and make it mine too?” Sneaky! But neither you nor I will be able to prove that we own the original piece digitally signed by the artist. It’s like taking a photo of an original painting at an art gallery and then falsely claiming ownership.
There are three unique properties of NFTS:
- NFTs are indivisible — Because they represent unique data and hence cannot be sub-divided amongst multiple owners.
- NFTs are indestructible — One word: Blockchain. Data stored on the blockchain cannot be removed so long as the blockchain exists.
- Provenance — The same word: Blockchain. Because anyone can access public blockchains, anyone can verify the authenticity of assets.
Examples of prominent NFT projects:
- Axie Infinity — A game powered by blockchain technology and cryptocurrencies. It’s built on the Ethereum network. ‘Axies’ are NFTs — unique digital pets that users can breed and pit against each other to earn the game’s native tokens — Axie Infinity Shard Token (AXS) and Smooth Love Potion Token (SLP). Both AXS and SLP can be easily purchased on Tokenize Xchange!
- Decentraland — Another project based on Ethereum. Decentraland is a virtual landscape where unique pieces of ‘land’ can be bought and sold as NFTs. It also allows users to interact with each other in a ‘metaverse’. MANA is the platform’s native tokens and it’s used to buy virtual goods and services. MANA is also available for purchase on Tokenize Xchange!
- CryptoPunks — A collection of pixelated avatars. Each character is unique, and proof of ownership is stored on the Ethereum Blockchain. CryptoPunk #3100 sold for $7.58 million
- Beeple a.k.a Mike Winklmann — The artist combined 5000 of his works into a single art piece and sold it at Christie’s auction house for $69.3million. It’s the most expensive NFT to date.
A list of some NFT market places:
It’s natural to think that NFTs might just be another crazy cryptocurrency bubble fueled by geeks. But the same technology can also be used to establish authenticity; to create paperless records; to enhance security. While NFTs might be a flash in the pan, digitalisation is already occurring at a breakneck pace, and the tokenization of assets might soon become a reality.
Keep Tokenizing! Peace.
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