NFTs — An Internet Native IP
You may be wondering: what actually is an NFT and what is the underlying potential? Here are a few thoughts.
In case you have not yet noticed: NFTs are the latest trend and are currently making every crypto heart beat faster. NFT art is now traded in the millions. Would you like an example? Twitter’s Co-Founder and CEO Jack Dorsey is currently offering his first tweet for sale. The 2 million threshold has already been surpassed! Crazy, eh!
But what are Non-Fungible Tokens (NFTs), what applications can benefit from them, and what are the long-term implications? The purpose of this blog is to try to answer and educate on these questions. I do not claim to provide conclusive answers to these questions. No, on the opposite, I am simply sharing my personal view with the outside world. What this blog is NOT: project shilling or bashing.
Ok cool, everything good so far? So, let us start with the basics: what exactly are NFTs?
An NFT is a special type of cryptographic token which represents something unique; non-fungible tokens are thus not mutually interchangeable.
But wait, what is the basic rationale behind this? Well, there are many proposed uses of Ethereum¹ smart contracts that depend on tracking distinguishable assets:
- Physical property — houses, unique artwork;
- Virtual collectables — unique pictures of kittens, collectable cards;
- Negative value assets — loans, burdens, and other responsibilities;
In general, all houses are distinct and no two kittens are alike. NFTs are distinguishable and you must track the ownership of each one separately.
But what are actually tokens? Simply put, tokens are nothing more than a computer code (“smart contract”) that runs on a decentralised database (“the Ethereum blockchain”) and digitally certifies that you are the owner of an asset.
Hmm, everyone is always talking about these magic smart contracts, but how does this actually look in the context of NFTs? Well, let us take a closer look at this one (more precisely put, on the NFT interface):²