While non-fungible tokens (NFTs) are simply a way to transfer information (data), they provide various benefits because they are created on blockchain networks
Characteristics of NFTs
NFTs have the following characteristics:
- Unique: The hallmark trait of non-fungible tokens is that they are unique and this can be verified on a blockchain.
- Permanent: NFTs have permanent information and data that are stored within the token. This information can include a message, image, music, signature, or any other piece of data.
- Programmable: An NFT is just a piece of code on a blockchain. This means it can be programmed to have various qualities. One of the most useful qualities of NFTs to date is that royalties can be programmed or built into the tokens. This means that an artist obtains royalties on all secondary sales of their artwork.
- Permissionless: NFTs can be used in multiple ways if they exist on a permissionless blockchain like Ethereum.
- Digital ownership: Whoever possesses an NFT in their wallet, owns and controls the NFT. Digital assets like domain names (Google.com) are not owned by Google, but by middlemen like GoDaddy or Verisign.
Typical uses for NFTs
- Art: Digital art, combined with the digital property rights of NFTs (verifiable ownership) and perpetual royalties for artists, makes NFTs a 10x improvement upon the current system. The global auction house Christie’s recently auctioned an NFT for USD69,3 million for art created by Beeple, the top NFT artist by sales volume.
- Digital trading cards: Sorare and NBA Top Shots are two of the most popular sports trading card collectibles. Sorare cards can be used in Sorare’s fantasy football (soccer) leagues while NBA Top Shots by Dapper Labs is developing a game that uses their NBA NFTs.
- Gaming items: Gaming assets are already digital in nature, so creating them as digital assets that individuals can own presents various benefits.
- Content: Music, blogs, tweets, memes, and other digital content can all be issued as NFTs.
- Tokenised luxury goods such as wine and Louis Vitton bags. Luxury goods are constantly under attack from forgers trying to replicate products. They can be tracked in the blockchain as NFTs.
- Financial products: Many types of financial products are not interchangeable. For example, your mortgage is unique to your house, length, interest rate, and more. Any simple financial contract can be issued as an NFT and stored on a blockchain.
- Event tickets: NFTs can also play a role in combating ticket fraud if every ticket was registered on the blockchain as an NFT.
- Tweets and social media posts: NFTs present an opportunity to turn media into tokenised content. For instance, selling social media posts such as Tweets is the latest use for NFTs.
NFTs are a file format that transfers data and value on blockchain networks like Ethereum. Since NFTs exist on blockchains, these tokens (or files) contain properties similar to bitcoin, primarily digital ownership (a token in a person’s wallet) and transparency (all activity is recorded on a blockchain).
The term ‘non-fungible’ refers to the concept of fungibility. A good is said to be fungible if it is identical and interchangeable. For example, one dollar is worth one dollar. An item is said to be non-fungible if it is unique and no two of these items are the same.