The magical world of Non-Fungible Tokens (NFTs)
Let’s delve right into this mysterious land of (not limited to) Monkey JPEGs.
What is a Non-Fungible Token (NFT)?
Very high level – Non-Fungible means it is unique and one-of-a-kind.
An NFT is an item coded into the blockchain with a unique identifier. This prevents anyone from having a copy of the original token as only one item can have that coded identifier.
Although a person could copy and paste the JPEG used to represent that line of code, they couldn’t become the true owner of that token. They’d just have a worthless JPEG.
Just like in the Mr Bean movie where he tries to replace the original art piece with a poster-copy of the image. It could never be the original.
What are the many utilities of NFTs?
From an outsider’s perspective, it’s baffling why anyone would spend $60+ on a JPEG, something anyone can just right click, copy and paste!
I used to believe the exact same thing before January 2022 when I bought my first 8-bit duck NFT, since then I have fallen down the rabbit hole of the NFT craze and have learnt that there’s a lot more to NFTs than just JPEGs.
Starting from the most skin-deep aspects of an NFT, let’s explore the use-cases:
Art in blockchain space
NFTs have revolutionised the buying and selling of art and has brought it to the 21st century. Now an artist can digitise their work, encode it on the blockchain and sell it directly to the consumer.
Artists previously struggling to be noticed in the saturated art scene, have a brand-new platform where they can amplify their work to the masses.
Not only is exposure currently easier via this avenue but the artist is fully in control. You can publish your own work easily on to the blockchain via independent marketplaces. Also, you can build royalties into the art pieces, to ensure that you are always receiving a % of re-sales into the indefinite future.
Modern-day membership cards
For the investor/consumer, these NFTs act as a membership card giving them rights to any of the benefits set by the project/company behind the NFTs.
As each NFT has a unique identifier, the project managers can create programs to read your wallet and determine whether you are a true owner. This allows for automation of access to a particular service, distribution of rewards, access to a community channel, etc. Actually the Shopify app NFTaccess does exactly that in the e-commerce space.
It also protects the owner’s investment as a group or individual with malintent cannot just come along and make copies and dilute your share of the rewards or the scarcity of your asset.
Passive Income as one of NFTs utilities
A lot of NFT projects use a proportion of the original mint price, royalties and/or their company’s revenue to be placed in a Community-Driven Organisation’s (CDOs) wallet.
These funds are owned by the holders and are usually used to gather rewards from staking pools, liquidity farms, investment in Initial Coin Offerings or even in other NFT projects.
These rewards are then distributed to NFT holders, often based on the amount of NFTs you hold compared to the total NFTs in existence (minus anything up for sale and not in a person’s wallet). This ensures that everyone gets a fair portion of the rewards based on the amount they invested, rewarding their belief in the project.
Similar in a way to the payment of dividends to stockholders.
Community part in NFTs
Many projects have communities on discord, twitter and telegram where people come together to talk about the project, the blockchain and general day-to-day life.
I personally have met people from all over the world through my many NFT communities and I wouldn’t have this access if it wasn’t for the NFTs themselves.
It’s a great way to network and to gain a greater understanding of NFTs, investing, etc through the experience of others.
Projects can also be community driven and autonomous thanks to NFTs. You can create an autonomous vote that gives every NFT holder a chance to vote on an important decision with the community funds or direction of the project itself.
Potential Future Applications of NFTs
Due to their non-fungibility, there are obvious applications with legal documents such as house deeds, employment contracts, marriage certificates, etc. In this area there is an importance that such documents cannot be changed from their original copy.
In the medical area, we could see our records being placed on the blockchain to help inform our medical care. Furthermore, maybe a personal NFT avatar could be created for our medical or advertising information which we then truly own and can choose to sell to interested third parties for a passive income. Something that’s already done without our explicit consent, but we don’t receive the rewards.
Furthermore, in gaming, we could buy an in-game item in one game and then transfer that asset into a completely different game. Maybe, even that item could be upgraded or store information about how well we played with it and that could make it more valuable.
The world of NFTs is vast and it’s still early days. The projects who have launched via NFTs are small companies now but could be even bigger in the future. There are also so many applications to NFTs that have yet to be explored and it’s going to be very interesting to see where it goes.
Contact us and together we'll explore NFTs applications for your use cases!