You may have heard the term NFT recently. Perhaps in your Facebook feed or scrolling through Instagram or even in a news article. So, what is an NFT? And what’s all the hype about?
A non-fungible token, or an NFT, is a non-replaceable (fungible) unit of data. The ‘data’ may include art (paintings/pictures/photography), music, video game collectibles, memes, GIFs, or even a tweet (see here NFT tweet hype). For those who purchase these units of data, they become essentially digital assets.
So why all the NFT hype?
NFT’s have been around since 2012, well not NFTs, but the building blocks that would go on to pave the way, colored coins. Colored coins opened up the option for decentralizing asset ownership, just as Bitcoin paved the way for decentralizing currency. Both use the same blockchain technology to do so. Just as one might own a house, a car, or an expensive piece of art as an asset, this was a way of owning digital assets.
So, what is a blockchain? This will be subject to a future article, (once written we will link here) but for now, the easiest explanation is a digitally distributed, decentralized public ledger to keep a record of cryptocurrency transactions (and more, to be discussed later). In 2014 a new platform called Counterparty was created that enabled the sale of the first NFT as we know it today, called Quantum, by Kevin McCoy. Quantum was an octagon-shaped animation that was recently auctioned for $1.4 million dollars (see here). In 2017 the move was made to Ethereum, another decentralized blockchain technology used for “digital money, global payments, and applications” (https://ethereum.org/en/), which brought about somewhat of a revolution. Marketplaces were created for the sale of NFTs, standards for transactions and tokens were written up, and people began to get on board and get trading. Rare Pepe the frog memes, Cryptokitties, and Crypto Punks were some of the early big names, and are still popular today, however, as with all artforms things have evolved since the early days, as has the technology.
Once an NFT is purchased the buyer can then do with it as they please. They may choose to hold on to it, resell or trade it. And in most cases, any future sales of the data will result in a percentage of the payment returning to the original owner or artist, like a royalty. So next comes the question of authenticity, how do you know you have purchased an original piece of art and not just some knock-off? That is really where blockchain technology comes into play. As with any piece of art it can be replicated, copied, or forged, however NFTs claim to be almost immune to forgery. Blockchain transactions have to be verified by a network of computers and can be traced back to the original, to verify the authenticity of the data. However, a healthy dose of skepticism never hurt anyone, so in the article on blockchain technology, this will be explored further.
Why should you care about NFTs?
If you believe everything you read then blockchain technology, and the Web3 that it enables, has the potential to catalyse the next digital revolution. And whilst still in their infancy, it does seem NFTs are here to stay. NFTs represent an opportunity to diversify assets, to dip your toe into the emerging crypto world, to spend some of that cryptocurrency burning a hole in your pockets, to branch out into a new medium of art, or, if you choose to purchase an NFT through Fauna, the opportunity to give back and donate to some worthy causes.