We can’t imagine there are many out there that can recall a faster zero-to-one hundred moment than what happened this past February with NFTs, and from the look of things, there’s no turning back. NFTs are here to stay, both on chain and in the mainstream.
Curious why everyone is buzzing with anticipation? Let’s break it down.
What are NFTs?
Non-fungible tokens are cryptographic assets logged on a blockchain with unique IDs that distinguish them from each other and subsequently make them irreplaceable. This differs from fungible goods like cryptocurrency tokens or fiat currency bills, which are interchangeable between one another and largely rely on the total sum of your tokens rather than the individual possession of one specific token.
The idea of digital assets isn’t completely new. Many Millennials grew up collecting Neopets, curating their MySpace Top 8, and bartering Yew trees on Runescape. Over time, these platforms were abandoned and subsequently users lost possession of the value they created on them. But at the end of the day, they never really owned those things in the first place.
Web 1.0, 2.0, 3.0
The Internet started off as a place for people to explore the things they love and freely exchange ideas with one another. In the beginning, the biggest problem one encountered was that a certain part of the internet didn’t exist yet.
Then corporations discovered the value in these online communities. They learned how to capitalize on our attention and convince people to buy their products and visions of what life should be about — and when they owned our attention, they owned the culture.
Eventually, things began to change. People got tired of being fed algorithms and needed a way to unplug from the network owned by corporations. They discovered the ability to enable online transactions without central authority and built new communities around tokenized economies.
On digital and transactional natives
These evolutions of the web changed how people thought about and related to it. People became defined by the Internet era in which they grew up.
The digital natives were raised in the digital age, in close contact with computers, the Internet, and video game consoles — and later mobile phones, social media, and tablets. The term is often used to refer to Millennials, Generation Z, and Generation Alpha.
Transactional natives are those who have grown up in the digital age where monetary transactions have always been accessible and user friendly at some capacity. This may be exchanging in-game assets (in-game gold, likes, armor upgrades, pets) or external ones (fiat, cryptocurrency, physical goods exterior to the platform).
Transactional natives and NFTs
With the transactional nature of the Internet came a need for a more transparent system. Enter blockchain: a type of database in which a record of transactions are maintained by multiple computers that are linked in a peer-to-peer network, leading to secure and auditable transactions.
With blockchain technology, people began exchanging data between one another in a decentralized way, cutting out middlemen and dismissing the need for centralized authority. Eventually, those data values began to represent all sorts of things like actual token stores or proof of a specific action having taken place.
Alongside cryptocurrencies, NFTs are a nuanced use case for blockchain technology. These special types of cryptographic tokens represent something unique. That unique item can be tangible or intangible, but the representation of it is indivisible.
When you think of buying an NFT, you purchase the token — not the asset itself. The token is what holds the asset that you’re buying, whether it be a piece of digital art, a music file, or deed to a physical asset. This unique ID is used to represent what you bought which can include a description, URL, title of the work, and more.
By purchasing an NFT on the blockchain, you are given unbreakable ownership of the asset it represents, whether it be a piece of digital art, song, or virtual trading card. This ownership is verifiable via audit of the related blockchain, and holds value in many different ways.
NFTs are provably scarce. When an NFT is minted, a required attribute is the number of copies made — this is encoded within the NFT and auditable via blockchain. Simply taking a screenshot of a work doesn’t mean you own the 1/1 or 1/80 token that gives ownership to a work.
NFTs are indivisible. Unlike other sorts of tokens, they can not be broken down into smaller parts. Most modified goods are this way.
NFTs are programmable. You can do anything with computers and NFTs are no different — you can assign any attributes or interactions to your heart’s desire.
NFTs are yours. Because NFTs are tracked on the blockchain, they are immutable and cannot be taken away from you just because somebody takes your hosting site down.
People are using NFTs in many ways, using the above qualities to innovate and expand their creations. This new asset class gives creators freedom and offers opportunity for major disruption to the traditional structure. On the collector side, NFTs offer verifiable ownership and a way to directly support creators they love.
The possibilities of the technology are endless — and this is only the beginning.
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