NFTs
Non-fungible tokens function as the goods of a decentralized economy.
While the term can sound confusing, one of the easiest ways to visualize an NFT is as a digital “record of ownership”. In many ways it’s like the deed to a house, a car’s title or an artwork’s certificate of authenticity.
Instead of a physical piece of paper you can hold, however, this “certificate” is recorded on a blockchain, where it is linked to your digital address. This not only guarantees the legitimacy of the asset, but also proves that you own it.
Like real-world assets, NFTs can be bought, sold, traded and consumed via smart contract platforms.
An NFT is a Digital Certificate of Ownership for an Asset that is Secured by a Blockchain
NFTs can represent digital assets such as virtual land, music, digital art, games or software; tangible assets such as oil, real-estate or gold; or intangible assets such as ownership stakes, voting rights, content licensing or membership privileges. In fact, virtually any asset can be represented as an NFT as long as it is ownable and has value.
Each and every NFT is unique – in fact, the term “non-fungible” is just a fancy way of saying “unique” – and they run on the same underlying technology that powers traditional tokens such as Bitcoin and Ethereum. This gives them three important properties:
Proof of Authenticity: NFTs use cryptography to prove their authenticity. As such, they cannot be counterfeited and it is relatively simple to spot a fake NFT
Record of Ownership: They maintain a record of ownership on a blockchain, which cannot be altered, destroyed, removed or confiscated
Inalienable Rights: Owners can often do anything they want with their NFT – they can sell it, rent it, license it and / or create derivatives works
While the idea of digital goods is not new, NFTs are transformative because they completely change the underlying economic foundation of the internet.
Historically, most digital goods have been owned by centralized third parties such as Apple, Amazon, Facebook, Google and Microsoft and “rented“ to consumers.
For example, if you bought an in-game asset (such as the ultra-rare, $16,000, Dragon Slaying Sabre in the game Age of Wulin), you would need permission from the developer to sell it and you likely wouldn’t be able to transfer it to other games. In addition, the gaming studio could easily choose to arbitrarily restrict access to your items and / or decide to charge you enormous fees.
NFTs change the game because – for the first time in history – they allow consumers to truly own their digital goods. This eliminates the need for centralized third-parties and provides substantial benefits to all stakeholders.
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