As someone who is fairly slow to adopt new technology, all this discussion around NFTs usually leaves my head spinning. My mind immediately starts to race with the usual questions: What the heck are NFTs? Am I missing out on something big? Is it a scam? Why is everyone selling them all of a sudden?
To understand what exactly was going on, I had to embark on an investigative journey to get to the bottom of it all. Here are my findings.
Introduction to Crypto
The first thing I had to acknowledge was that the momentum behind the cryptocurrency craze is rooted in a very real and tangible breakthrough known as blockchain technology. Considering all the scammers, charlatans, and “crypto bros” muddying the waters, admitting to myself that it wasn’t all just smoke and mirrors was a tough pill to swallow. I am now reasonably convinced that blockchain technology truly is a new paradigm that will almost certainly play a massive role in the future of our society.
Blockchains can be thought of as a forward-moving database which can not be retroactively changed. Unlike traditional databases which are managed by a central authority, blockchains are decentralized and have no owner. It is a fully transparent and verifiable public ledger that is owned by no one yet can be used by everyone.
So – What Are NFTs?
NFTs, also known as non-fungible tokens, are nothing more than unique strings of data that sit on the blockchain. You can think of them as special marbles. Each token, or marble, is 1 of 1 and can not be duplicated or replaced. The token can be searched on the blockchain and the full history of the token can be seen. People can see when it was created, who owned it previously, who owns it now, and so on.
Author’s Note: To put the difference in perspective, something like an Ethereum token or Bitcoin token is fungible because it is replaceable. Because non-fungible tokens can not be replaced or interchanged, they are inherently unique and can be used to represent unique things.
NFTs can be used to represent anything. They quite literally have thousands of potential applications. However, it does seem to be the case that most people use them to trade digital artwork. Artwork also happens to be unique and non-replaceable which means non-fungible tokens are a great way to digitize their ownership.
Other Uses for NFTs
People naturally associate the concept of NFTs with artwork but there is actually no reason they can’t be used for other things. For example, brands like MetaZoo use NFTs as part of a product reservation system. As all trading card game enthusiasts know, demand for tradeable card games have been so insane that average consumers are finding it almost impossible to get their hands on any product. MetaZoo’s answer to this problem was the distribution of unique tokens (NFTs) which gives each owner a reservation slot during new releases.
It has long been theorized that NFTs could also be used to represent ownership of property. Similar to a paper deed, NFTs assigned by a local government could be used to represent a plot of land, house, condominium, or other dwelling. The difference being that these deeds would be accessible on the blockchain rather than a dusty government building.
Should I Buy NFTs?
It is true that NFTs are a novel way to assign ownership of artwork. It is also true that NFTs are a fun, exciting, and sometimes profitable way to trade said artwork. However, part of me feels that much of the space is in somewhat of a speculative craze with no clear trajectory.
No one really knows how NFTs are going to be used in the future or what challenges the technology may encounter. No one really knows how the problems posed by intellectual property and copyright enforcement will be dealt with. There are many details that society has yet to hammer out and it’s unclear what kind of turbulence the industry will encounter as we do so.
Ultimately, my advice is to never allow the fear of missing out (FOMO) to dictate your entrance into the market. Be patient, do your research, and form your own opinion. It’s possible NFTs will be layered into every aspect of our digital identity. It’s possible that they will play a huge role in some futuristic virtual reality world that we haven’t yet created. It’s also possible that NFTs will go completely belly-up and slowly fade away from the consciousness of society. Time will tell.