Chances are you have seen the abbreviation “NFT” somewhere on the internet over the past year. While the first NFT was created way back in 2014, the market for them surged in 2020 and climbed to a market cap of around $338 million. While NFTs are still an early-stage technology, it’s clear that they will have implications on the future of the internet and digital ownership. As such, we’d like to provide some background on NFTs and their potential future.
What Are NFTs?
NFT is an abbreviation for non-fungible token. “Non-fungible” simply means that an item or unit is unique and cannot be replaced with something else. An example of a non-fungible tangible object would be a piece of art. While you could purchase a replica of a masterpiece like The Mona Lisa, it couldn’t be substituted for the real thing. US dollars, on the other hand, are fungible, meaning it doesn’t matter which specific dollar bill or combination of bills you have. Whether you are using a single 5-dollar bill or five 1-dollar bills, the payment is valid.
With that in mind, NFTs are a type of cryptocurrency that serves as a way to create scarcity amongst digital items. Currently, NFTs are most commonly used as a method to sell digital art. Information is recorded as a blockchain and attached to the digital art pieces to effectively serve as a unique digital signature. In other words, NFTs are an attempt to solve a problem that has existed ever since the internet was created: the lack of any type of limitation on digital distribution of digital files.
NFTs in Action
As an example of just how profitable NFTs can be, we can look at Nyan Cat. Nyan Cat is an internet meme involving a brief loop of an 8-bit cat that ballooned in popularity in 2011. Ten years later, the GIF was sold as an NFT for 300Ether (roughly $600,000 at the time). While this example may help you understand the idea of NFTs, you likely are not looking to make sizeable investments in internet memes anytime soon. Instead, here are a few examples of how NFTs could be applied as the technology develops and becomes more widespread:
- Ticketing for events
- A representation of property ownership
- Digital art sales
- Domain name ownership
- Identification and certification
- Digital fashion and wearables
- Healthcare records
- Healthcare records
- Music ownership
- And the list goes on!!!
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