In today’s post, I am going to explore another piece of blockchain technology, the Non Fungible Token (NFT). These are an interesting usage of a blockchain, that changes the way ownership over digital assets can be handled. At the core, a Non Fungible Token (NFT) is pretty basic, providing you have at least a passing knowledge of blockchain technology, so if you haven’t been following my articles, you may want to brush up on some of them from that category first.
For the usual disclosure, I am not a financial advisor, I don’t even work in finance at all. My day job is as a telecommunications software engineer. Treat everything you read here as some educational resources and not financial advise.
Let’s start by breaking down the term Non Fungible Token and define it out. The word fungible, means easily replaced. This is basically things that are produced en masse. This would be things like GPUs, jeans, or anything else where when you go to get one, it doesn’t matter which one you grab. Other than some manufacturing variances, one is going to be the same as the next, and if one fails, it’s easy to get another.
When we look at something that is non-fungible, these would be the one of a kind things that exist. Something like a work of art, where there is only one of them. You can make copies of it, but these are not the same as the original, to quote the Highlander, “There can be only one”.
Then we have the word token, which is basically just something that can be exchanged, generally on a blockchain like Ethereum (ETH). Something like an ERC-20 Token, but in this case it’s not a token being used as it’s own currency.
Putting it all together, a Non Fungible Token (NFT) is simply something stored on the blockchain that proves that a specific person, owns a specific thing. Well, specifically a wallet owns the thing, the person may choose to be anonymous, as is the case with most blockchain things.
Essentially anything that exists on the internet, can be sold as a NFT. There have been quite a few of them sold off, from the first tweet ever sent, to clips from NBA games, music and digital works of art. Some of these have been sold for millions of dollars.
Another big usage of NFTs has been in blockchain games like Upland or Spliterland, where ownership of in-game assets are tracked and stored on the blockchain. This makes the in-games items something that holds value, and can be traded for other NFTs or cryptocurrencies.
Like works of art, the thing that gives them value is the scarcity of them (there can be only one after all). This lack of supply will mean people are willing to assign value to them. This value can also increase and decrease over time, so it can be a potential avenue for investment.
It also adds the transparency of everything being stored and tracked on a blockchain, so for something like digital assets in a game, it is easy to establish ownership, and everything is of course public and auditable. All the usual benefits of something being stored on a blockchain are in place.
I think Non Fungible Tokens have a place amongst the blockchain technologies, but at the same time, I think the price of them at quite inflated. I would never personally pay millions of dollars to “own” the first tweet ever sent. Conversely, for it’s usage in things like blockchain games, I think they have a very good place, I also wouldn’t spend millions of dollars on a single painting, so I am probably not the best judge for the value of those types of NFTs I suppose.
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Originally Posted On My Website: https://ninjawingnut.xyz/2021/06/21/non-fungible-tokens/