In March 2021, the artist known as Beeple, set a record for a digital artwork in a sale at Christie’s. It was sold for $69 Million. The buyer did not receive any physical art, but a unique digital token. A so-called NFT. Sounds crazy, but while at first, NFTs were all hype, we will likely see NFT tokens with utility in the future. Meaning, the NFT space likely will continue to blow up in the future as they become integrated in our daily lives. But what actually is an NFT?
“NFTs exist so that the crypto grifters can have a new kind of magic bean to sell for actual money, and pretend they’re not selling magic beans. Nobody ever changed the world by doing what everyone else was doing.”Decentraland.org
Non-fungible tokens or NFTs are tokens on the blockchain that cannot be swapped or traded for an equal store of value like Bitcoin or Ethereum. This means, they are unique and not interchangeable. For example, a non-fungible transaction would be if one person were to swap cars with their neighbors. Sure, they might both be cars, but they aren’t totally the same. Therefore, it’s not an equal trade.
So, let’s not confuse ourselves. Non-fungible items have existed actually longer than currencies. However, blockchain has changed the world of non-fungible assets by providing what is called a coordination layer. Crypto Casey in her video, What Are NFTs in Crypto?, says:
“Blockchain technology provides a coordination layer that will impart six key properties onto digital assets all predicated on immutability. These are Standardization, interoperability, tradeability, liquidity, immutability, and programmability.”
Right now, there are three protocols for NFT standarization on the Ethereum network – ERC-721, ERC-999, and ERC-1155. Standardization makes NFT tokens tradable on all NFT market places, due to standardization of the data recorded on the blockchain.
The future of non-fungible tokens
NFTs are certainly not going to leave the cryptosphere any time soon. We’ve already seen great uses for non-fungible tokens in crypto. Many artists are able to easily sell and manage their artwork without the need for an agent or intermediary. And there are more real world use cases which have already been thought of that could soon be implemented. Soon, non-fungible tokens could be a big part of the everyday person’s life. NFTs could be used to create government IDs, house and car titles, and much more. Your own passport could soon be an NFT.
Crypto Casey said:
“Almost anything in the real world can be tokenized. Proof of ownership of real world collectibles can easily be stored or transferred and impossible to forge as NFTs. Undoubtedly NFTs will drive adoption of blockchain technology.”
The NFT buying frenzy of 2021 was only an introduction for the world to NFTs. We will see innovations in blockchain technology and a wider diversity of use for non-fungible tokens in the months and years to come.
Aaron is passionate about blockchain and has been an investor in cryptocurrencies for the past years. He enjoys engaging with other people in the cryptocurrency community online, particularly on Telegram, and learning from experts.