EX 271 - NFTs
NFTs have been exploding in popularity lately, and if you want to understand why people are going crazy over this new type of asset, you're at the right place. This course will cover the following:
- Defining NFTs
- Exploring NFT Art & Collectibles
- Other Types of NFTs
So you're looking to find out what these NFT things are? Good. You should never judge whether you're into something or not without knowing what it is first. If you simply pay attention to media headlines, you'll have seen things like 'X person buys JPEG for $2 Million dollars', and assume its just another weird internet trend that will go away soon.
The reality is that the technology behind NFTs is a lot more interesting than clickbait articles would suggest, and it is definitely here to stay, but maybe not in the ways you imagine.
It is a type of token, more specifically a 'Non-Fungible Token', usually following the ERC-721 token standard. As defined by Merriam-Webster, fungibility is "being something (such as money or a commodity) of such a nature that one part or quantity may be replaced by another equal part or quantity in paying a debt or settling an account". In simpler terms, a fungible asset is one that is replaceable. If I pay you one dollar, for example, and you pay me a different dollar, we both still have one dollar each. Nothing has changed. The same can be said for other fungible assets such as cryptocurrencies - BTC, ETH, AVAX, SNOB, etc.
The non-fungible aspect of NFTs means that no NFT is the same as another. They are unique. Other examples of non-fungible assets could be physical, real-world assets such as land, or trading cards. The difference is that while physical properties would determine the value, authenticity and/or characteristics of these assets, these are determined through the digital properties of NFTs.
Since value is highly subjective, let's take a look at authenticity; how would you tell if a contract, or a painting is authentic? You'd be looking for unique aspects that differentiate them from fakes, or a hard-to-replicate stamp, or something of the likes on other types of assets. Every NFT has its unique cryptographic hash on a blockchain, and all events such as who created/minted it, when it was minted and who has owned it in the past can be traced through the public ledger. This makes tracking the authenticity of an NFT extremely easy.
So, with that being said, what are NFTs being used for? We'll take a look at all the possible use cases of NFTs in a later section, but first let's check out the type of NFTs that has exploded in popularity lately:
NFTs that embody some form of art have become increasingly popular once people discovered that they can easily sell their art through this new medium. Not only that, but the authenticity is easily verifiable, and they can have control over a token's transferability through smart contracts. For example, an artist could choose to have royalties imbued into every sale of their NFT - meaning every time it is sold to another person, they would make 5%, 10%, or whatever amount they have set of the value of the sale.
Some of the NFTs available on Snowball's NFT Marketplace
When it comes to collectibles, it is clear why NFTs are the perfect medium to produce and distribute those. A collectible could simply be a visual item, or sometimes a representation of a feat or event attendance, like a badge or trophy. The world of collectibles is exploding in popularity in areas such as fantasy football, card games, and gaming in general. This is because problems of access, authenticity and transferability are issues these industries have been tackling for ages, and blockchain and NFT technologies simply solve all of them.
Let's look at fantasy football, for example. To make it work, you'd need a secure network to buy and sell player cards. That's the blockchain. You'd need a way to check if player cards are authentic. If they are NFT's, just check their hash. Each card would needs to have player stats, parameters, etc. Since NFTs are simply a smart contract, those can be built-in or defined when they are minted. Done.
In the world of gaming, having assets that are verifiable and easily transferrable is a blessing. Characters or items being NFTs take all the work of designing the systems behind those off the hands of game developers, allowing them to focus on making their games the best they can be instead.
Surely this technology can be used for other things as well, right? Absolutely. The ease of authenticity is incredibly useful for other applications such as event tickets or even university diplomas. Even UniSwap V3 LP positions are NFTs now, and those with funds in those pools know how much easier it is to manage your positions now because of it.
While there will always be more use-cases for NFTs, let's list some others that come to mind here:
- Music / Song Distribution
- Property Contracts (Real Estate)
- Other Ownership-Related Contracts
- Decentralized Domain Names
- Logistics / Supply Chain Tracking
- Authentic Profile Pictures
- Digital Identity Management
The use-cases for NFTs are endless, and are definitely more than the 'selling JPEGs on the internet' that the mainstream media would let you know of. Some implementations of NFTs are definitely flashier than others, but the world-wide adoption of these tokens is on the way, and more and more physical assets are being digitalized and decentralized every day.