Nov. 19, 2021

What NFT is?

Although the beginnings of the NFTs date back to 2012, it was only quite recently, in 2021, that the topic gained immense popularity. Recently, people started getting into NFTs more and more often, mostly due to the breaking of outstanding auction records. Despite the growing, ubiquitous interest in the subject, NFTs still remain a demanding issue for many audiences.

Source: Business Insider

NFT stands for non-fungible token. An NFT is a unique digital certificate stored in a blockchain that provides certain ownership rights to an asset, usually digital, such as a digital work of art.


This technology has gained popularity with the emergence of the CryptoKitties game developed by the Canadian team of Dapper Labs. The mentioned game offers its users to breed cats that can later mate. Each cryptokitty that constitutes an NFT token has its own unique code that influences its unique appearance, which can be inherited through the next generations. Even though CryptoKitties is a regular game, based on the Ethereum cryptocurrency, it managed to earn over $ 1.3 million only few days after its premiere. The high sales of CryptoKitties have been considered a great success.

Home page of CryptoKitties game, source: cryptokitties.co

Each single crypto kitty constituting an NFT allows you to understand the essence of non-exchangeable tokens. Because they are unique and have different value, they are called non-exchangeable. This contrasts with "convertible" assets, such as dollars and bitcoins, that are identical and exchangeable.

 

Using the example of CryptoKitties, we can also note that NFT has provided a breakthrough in the thinking of ownership in a digital space where it is difficult to document such rights because of how quickly digital works of art can be replicated. After all, the barrier for digital art was the fact that it could not have a clearly assigned ownership, which was reflected in the possibility of copying and freely rotating digital files. How can you be sure who is the owner of a given digital object and what rights do they have to it, if it appears unmarked on many websites?


The solution to this problem was to link a digital work with a blockchain. Blockchain technology allows you to make digital works of art unique by linking them to a permanent and non-convertible digital register. The innovation of the NFT technology is that you can assign an owner to a specific file in the Internet domain, which affects the value of a digital object.


So, what is blockchain? It is a distributed database that is not based on a single server. Due to the special association of the network blocks, the transmitted information cannot be modified after it has been broadcasted. It's authentic and unchanging.


NFT functions in a manner analogous to a traditional work of art. Anyone can download and share a copy of a digital work of art that has a non-redeemable token associated with it. Just like any observer can take a picture of the Mona Lisa in the Louvre. Does someone become a legal owner of the Mona Lisa after taking a picture of it? Of course not. The NFT works in the same way to prove ownership of a digital work of art. Just as the existence of a copy of a physical work does not affect ownership of the original, the existence of digital copies of the artwork does not affect the ownership of the digital artwork.

Monas, source: Twitter

NFT, apart from being unique, has many additional advantages. Transparency and the transparent provenance of NFTs are important advantages.


Transparency means that every user operating in the blockchain can access and confirm the metadata of a given NFT: provenance, TokenID, address in the blockchain and other information related to this token. In addition, since the transactions taking place on the blockchain are publicly available, buyers can check the address at which the NFT was originally created.


Transparent provenance is directly related to this. As previously mentioned, any transfer of rights to the NFT or its purchase is recorded in the blockchain, along with the address of each digital wallet in which the token was stored. As a result, there is a public record documenting the ownership history of each NFT. This record cannot be changed or deleted. This means automatic and precise documentation of the token's origin, which can therefore be verified.


Most importantly, an NFT collector co-creates a new, innovative branch of the art market, which is developing in an extremely dynamic way.


All the previously mentioned benefits of having an NFT make this technology more and more popular. This influences its wide application, the NFTs are already being used in film, music and many other industries


In 2021, we could observe as everyone, from fast-moving consumer products (Charmin) to fast-food chains (Taco Bell), tech titans (Jack Dorsey) and musicians (Kings of Leon, Grimes), entered the NFT market.