NFT Who, NFT what? What’s this all about?
If you’re a regular ready of the CN&CO blog it will not come as a surprise to you that I have written about the potential that this technology offers. I am an advocate for the future of blockchain and for embedding it in more of thinking.
A couple of weeks back, around the start of February, the world started to take notice of what was happening in the Non-Fungible Token (NFT) space. Press the fast forward button and the world is now seeing digital art and other goods selling through NFTs for prices that many find it hard to believe…
We may indeed be in a NFT bubble currently and there is bound to be a correction in time to come, but before we get caught up debating the recent hype cycle, let’s take a step back and ask some basic questions about the space.
The name – NFT and what they are.
A Non-Fungible-Token is a unique unit/piece of data on a blockchain that is not inter changeable for other items as each NFT has uniquely specific properties. NFTs are largely associate with the Ethereum block chain, however some are built on top of other chains. Due to the decentralised nature of blockchain, the record of ownership of an NFT cannot be tampered with and an NFT can only have one owner at a time.
NFTs first burst on to the scene in 2017, when Crypto Kitties took off and saw people spend over $1 Million on virtual cats. This triggered a significant decrease on the speed of Ethereum’s transactions on the block chain due to congestion as a result of the number of users exploring the virtual world.
Over the last few months we have seen NFTs provide significant value to the creator economy where ownership and remuneration had been a challenge due to the lack of control a creator has over their work once it is push out into the world.
Use cases and what do they signify?
This is an interesting question to consider answering as we are really just at the beginning of unpacking what NFTs can offer. Having said that though, I think that their biggest use case is around creating digital ownership and unique identifies in this digital, distributed, and decentralised era we now live in.
Some of you may have read the last paragraph and just brushed over it or ever dismissed it, saying why do we need to be concerned about “digital ownership”. If I may, I would like to draw your attention to the way the world has changed over the last 14 years since the first iPhone was released in 2007.
While there will always be sceptics of new ideas, technology, and concepts… change remains the only constant in the world in which we live and the future of digital ownership and spaces will be linked to unique digital tokens in some shaped or form even if they are not the NFTs technology that we have in front of us today.
Why should you have a rough knowledge of what is happening in the NFT space?
-It’s changing transactions on the internet – there are some who see it being the web 3.0
-Ownership and different business models – digitalisation of ownership does create different complexities, but it also creates transparency and direct ownership that does not end directly when there is a sale of an asset. The first owner or creator will continue to benefit as the NFT exchanges hands.
-Direct Peer to Peer exchanges
-The digital first world we are navigating – while the main use of NFTs is in the gaming and art world at the moment (the creator economy), the thinking and technology may unlock exchanges in a world of virtual reality in time to come.
The size of the NFT market is still very small and held with a few individuals around the world. However if you look into the structures behind it and the fact that the majority of chains are build on ETH (Ethereum based) block chains there is some promise to expand this more broadly.
You may also want to check out this Twitter handle: https://twitter.com/metapurse
One of the best analogies I have heard of this space is to think of it like a jpg. file that we use to transfer images on without giving it much thought. One view is that the efficiency of NFTs means that it will create the space for web 3.0 and become a part of things that we do on a daily basis when transferring things between owners.
While I do believe in the potential that NFTs offer there are some things that still need to be worked through in order to make this space more sustainable from both an environmental and ownership stand point. If a blockchain were to collapse and disappear, so would you NFT. In order to fully unpack the point around the environmental impact were would need to explore the concepts of proof of ownership and proof of work, I don’t want to derail this blog as it a seriously deep rabbit whole and thus will come back to it soon. The main reason for raising these two points in closing is to show that while the NFT space is exciting, there are challenges which people are thinking deeply about and working hard to solve. Creating a new space with new architecture and systems isn’t easy, but the rewards are often worth it!
Here are a few other links – podcast and reads – that will give you a deeper intro into the world of NFTs.