NFT’s
What are NFTs?
NFT’s have been among the hot news topics of the new decade along with crypto. The two go hand in hand since NFTs depend on blockchain technology, just like crypto. So what is an NFT?
NFT stands for “nonfungible token”. In plain English NFT’s are a way to prove exclusive ownership of a digital asset, and this is done using a ledger on a blockchain, most of the time the ethereum blockchain. These digital assets can be images, videos, text files, you name it. As long as it can be stored in a hard drive it can be made into an NFT.
Recently sold NFTs
When talking about the recently sold NFTs there’s no way not to talk about Beeple’s “Everydays: The first 5000 days” NFT. The most expensive NFT sold at 69.3 million US$!
One of the more recent NFT sales that made the news is the sale of the source code of the world wide web by Tim Berners-Lee, which sold for $ 5.4 million at a Sotheby’s auction.
There are many other multi-million dollar NFT sales such as the first tweet by Jack Dorsey the CEO of Twitter.
Why do people buy NFTs?
As proven by the examples mentioned earlier, people have paid crazy amounts of money to buy NFTs. But why?
The art world is no stranger to such phenomena, throughout the past we have seen plenty of people pay hundreds of thousands, or even millions of dollars at auctions to buy modern, and contemporary art pieces that make people go “Even I could have done that!”. The best example being the good old banana duct-taped to a wall that sold for $120,000.
Yet even overpriced art seems tangible when compared to NFTs, at least a piece of art is something physical, something someone can put on their walls and proudly say they’re the owner of that exclusive piece, and that there’s no other like it. But NFTs are just images you see on a computer, nothing more, right?
Ok, let’s not be so cynical about NFT’s, in reality, they’re a great way to prove ownership of a digital asset. When someone buys an NFT and claims ownership of that item on the blockchain it’s much more secure compared to other ways of proving ownership of digital assets.
Imagine buying a limited edition skin on Fortnite. Once you buy that item, your ownership of that item is stored as a piece of information on a server. Now imagine someone hacked into that server (just imagine, I know it’s near impossible), the hackers can find the location where information about your ownership of an item is stored and change it so that they’re the new owner. Now you don’t have that ownership anymore.
Losing a skin on Fortnite may not be the end of the world. Yet what if it was a multimillion-dollar work of digital art, then it would clearly be much more consequential.
But when it comes to NFTs having this information on the blockchain means the ownership is recorded on hundreds or even thousands of computers mining on that blockchain, and to alter that ownership, one would have to hack into all of those thousands of computers at the same time and alter the blockchain information for it to work. Safe to say the chances of that happening are zero.
This makes an NFT the most secure way to claim ownership of a digital asset. Ok, now we know that NFTs are secure and technologically superior to conventional methods. But it still doesn’t answer the question of why people buy NFTs of simple image files for millions of dollars.
The NFT bubble
Here’s why people pay millions of dollars for NFTs. It’s all about the hype! All the hype around crypto and the NFT space has created an environment where people buy in hopes of selling for a higher price later on and make a profit. Some might argue on this but let’s keep it real, most of those in crypto and the NFT space want to buy low and sell high.
This clearly creates a bubble. There will come a time where a majority of holders of NFTs will want to sell and claim profit, and there will be barely anyone left to buy. That’s when the bubble bursts and all hell will break loose on the whole NFT market. Right? No, not really.
The future of NFTs
There’s no doubt the current NFT bubble is going to burst sometime in the near future. But considering the long-term future of NFT’s things are going to be a lot brighter.
Remember all that stuff about how a blockchain is the most secure way to record the ownership of digital assets. So what are some other digital assets other than digital art?
- Business contracts
- Online Plane tickets
- Sports games and concert tickets
- Mortgage payment records
Imagine going to a sports game, that became historically significant at a later date, and your ticket was in the form of an NFT. Now you have that ticket as a piece of memorabilia from that game. Imagine all your mortgage payments were on record in the form of an NFT in a blockchain, now you have concrete evidence of all your payments and no one can tell otherwise.
There can be hundreds of other examples of how NFTs are going to revolutionize our lives, and we will see new startups emerge to take advantage of these opportunities. With technologies such as NFTs, and blockchain on the rise, who knows what opportunities the future may hold for us.