What is NFT?
NFT (non fungible token)
What is the hype around NFTs, what is it, how does it work and is the hype eligible?
Let’s start with the question what it is: NFT is essentially a proof of ownership, that’s it, that is al it is really, it can proof ownership on both digital assets as well as real world assets. Why is this so important? The reason for why this technology has a huge potential for disruption is that it enables the user as well as the creator to store your own property rights and to prove independent ownership of your created or bought asset.
The biggest use of NFTs today is in the digital content realm. There are several reasons for this, one reason is that the current platform environment is not creator centric. Creators who publish their creations generally does it on a centralized platforms i.e a social network. these platforms need to attract visitors in order to monetize through ads. Content creators that are using centralized platforms see their profits and earning potential swallowed. The artist or creator get exposure in return, but that does not cut it or pays the bills and is very hard to depend on when it comes to have a secure income.
However, NFTs power a completely new creator economy where creators don't hand ownership of their content over to the platforms they use to publish it on. When you create a NFT the ownership is included into the content itself.
Another reason for why the digital realm is the one area that are booming first, is because it is low hanging fruit and directly connected to the technology. To create a Jpeg picture as an NFT is not that hard, to integrate NFT technology in real world asset on the other hand is harder, and it is especially harder to gain adoption in.
How does it work? NFT are Non fungible tokens, this means that you cannot create a copy of that specific token, each token is unique. This is not the case for Ether (Ethereum) which is fungible, that means that each Ether is the same and you can create more of that token. NFTs are minted (created) through smart contracts that assigns ownership, each NFT are connected and linked to one specific Ethereum address. The NFT is essentially connected to the transaction into the smart contract that are creating the NFT. That transaction ID is the one thing that proofs the authentication of your NFT. You can easily prove that you have the original the same way that you can show proof that you have Ether in your wallet. So, the proof of originality is the private key of the creator, and if you buy that certain NFT your proof of ownership is the public key connected to the first transaction that are linked to the minting of that NFT.
So, is the hype eligible? I would say yes and here is why: First we must acknowledge that the NFT space today may be a huge bubble and short term it could collapse, but if we look at it from a long-term perspective, the possibilities are enormous.
Here are some examples:
In the digital realm
- Digital art
Real world Items
- Real world art
- Legal documents
- Ownership to a house and other expensive assets.
As you can see, there are a lot of different areas that this technology could affect in a positive way and these are only a few examples. The technology eliminates the middleman, gives you the possibility to truly own digital assets, as well as create a smoother interaction with real world assets.