Non-Fungible Token / NFT
NFTs – Non-fungible tokens – are digital assets that can come in the form of art, music, video game products, videos, and much more. You can buy and sell them online using cryptocurrency or other means. They are created and coded using similar means as cryptocurrencies in the form of blockchain technologies.
NFTs have become hugely popular as art collectors have begun investing a lot of money in that space. The market is now in the 10s of billions and will eventually eclipse the ‘real’ art world’s trading value.
In-depth meaning of NFT
NFTs are designed to be one-off, unique digital items, which is why it can be valued as artwork or other unique items. It is all about creating scarcity or limitedness within the digital space which is generally associated with infinite replicates or copies of items. NFTs create demand because they are unique.
Although much of the initial talk about NFTs centered around the art world, NFTs are now being commercialized for ecommerce, particularly in relation to the oncoming augmented reality and metaverse shopping channels that are being developed at the moment – just think of Meta’s plans for its metaverse.
The possibilities for commercial application of NFTs in meta environments are endless. They could be used to authenticate and prove ownership of meta real estate, art, meta-luxury goods, or gaming items, all of which can be traded on NFT marketplaces.
The general adoption of NFTs will accelerate because the speed at which consumers adopt new technologies is getting shorter.
NFTs are generally built on blockchain networks like Bitcoin or Ethereum, but compared to cryptocurrencies, which are fungible, NFTs are non-fungible. This means that each one has a unique digital signature which makes it impossible for them to be exchanged for other NFTS. They must be traded individually. Similar to, say, a land register for physical real estate, NFTs are recorded on a digital ledger within the blockchain which records all transactions for that NFT.
To create an NFT, one must first “mint” or create it on the blockchain. A lot of NFTs are currently being minted on the Ethereum blockchain. At the moment, the most popular forms of NFTs include art, GIFs, video clips, collectible avatars, and game skins, designer sneakers, watches and jewelry, and music.
Because blockchain technologies make NFTs unique, they can be commercialized in just as many ways as physical goods. It also frees creators or sellers from the physical space where they have traditionally had to sell their products or artworks.
How can I buy NFTs?
To buy NFTs, you need to acquire a digital wallet where you can store them. These wallets were already created to hold cryptocurrency. To make the purchase, many people trading NFTs demand payment in a cryptocurrency like Ether. The main platforms for buying crypto with a credit card include Coinbase, Kraken, eToro, PayPal and Robinhood. Once purchased, you can move the currency to your NFT wallet.
There are numerous exchanges where you can shop for and buy NFTS. Rarible is one of the biggest and self-titled “democratic” open marketplaces which allows artists and creators to issue and sell NFTs.
Stealing a lot of headlines in 2021, OpenSea.io is a peer-to-peer platform that sells high-end artworks. Just register an account and you can already start browsing their collections.
These platforms and others host thousands of NFT creators and collectors, but you have to be careful before making a purchase. As with all online transactions, there are criminals who steal identities and create fake sales. You should always check and contact the sellers to confirm identity before purchasing, as many platforms don’t insist on proof of ownership of NFTs on their platforms.
Outside of the artworks, many brands are now creating their own NFTs collections. These items are also helpful in NFT wall tests, but they come with physical goods you buy. For example, you can buy a Rolex watch and receive the NFT version to your wallet. There is increasing interest, particularly in the luxury goods sector, for more minted goods for owners to display digitally.
As NFTs are becoming more and more commercial, they will eventually be an essential part of businesses’ ecommerce strategies. Modern product-to-consumer (P2C) solutions will need to incorporate NFTs in their line-up of supported product types, i.e. by integrating the minting process into the product feed management and product content syndication processes.
What will NFTs be used for in the future?
Personal identity management is a future use case for NFTs. Because of their unique and traceable authenticity, there will eventually be documentation such as university degrees, academic certs, medical records, birth certificates, and death certificates. This could mean that users could carry all the necessary documentation they need for any bureaucratic actions in their NFT wallets. This could reduce forgeries and identity theft. It would also remove a lot of unnecessary paperwork and costs for consumers.
NFTs will have future applications for buying and selling digital real estate in the virtual and physical worlds. Virtual real estate applications are gaining ground in metaverse environments like Decentraland. Participants create and purchase areas in a virtual world using NFTs to guarantee the authenticity of the property exchanging hands.
Virtual real estate NFTs are exchangeable on NFT marketplaces which function in the same way as real-world real estate trading. They are even more transparent and efficient. There are already ledgers that register ownership of virtual or digital real estate.
Much the same as the documentation examples above, NFTs could be used in the future to authenticate real-world property exchanges or sales. Titles and deeds could be minted to ensure rapid and authentic transactions without the unnecessary expense of applying for and stamping the physical forms.
With almost all television and film now being consumed digitally, NFTs could be used to authenticate original digital film products. This could prevent plagiarism and illegal trading of media assets. Files could be added to the blockchain as NFTs to prevent them from being copied or shared without permission.
NFT supply chain and logistics
With sustainability and transparency becoming so important in supply chains, NFTs will eventually help trace the movement of goods and assure uniqueness. This will apply to supply chains for luxury fashion brands and for businesses in the auto industry (where even parts could be authenticated). The huge benefits for ensuring recycling and sustainability are also going to be an exciting growth area for NFTs.