By: Rachel Gore
on-fungible tokens (NFTs) are defined as cryptographic tokens stored on a blockchain that can be sold and traded. To understand NFTs more, let’s break that definition down into its individual parts.
Cryptographic tokens represent a digital unit of value. Each token has its own unique identification code and metadata so that NFTs can be distinguished from one another.
Cryptocurrencies such as Bitcoin or Ether are also tokens but not non-fungible. Non-fungible means that the NFT is unique and cannot be traded with something else. In contrast, one Bitcoin can be traded for another single Bitcoin because they are both the same thing with the same value. In contrast, non-fungible tokens are unique, and each has its own value. This means that you cannot swap NFTs and expect them to be equivalent to one another.
Like cryptocurrencies, NFTs are stored on a blockchain. A Blockchain is a distributed and decentralized public ledger that exists across a network. Distributed ledgers are databases that exist across multiple participants or computers that record digital transactions or interactions. Decentralized ledgers do not have a central authority, such as a bank, to authenticate transactions.
Now let’s bring it all together. NFTs are cryptographic tokens or digital units of value, stored on a blockchain or a decentralized public database, which can be traded and sold. Every NFT is unique and has its own value. NFTs can represent digital artwork and other digital goods or real-world assets like real estate.
High-profile examples of digital goods NFTs
NFTs are best known for representing digital artwork and goods. This includes digital artwork, videos, audio clips and even social media posts. By buying an NFT, you are establishing ownership of that good. There have been some high-profile examples of goods-turned-NFTs in the news since public interest in NFTs exploded in 2021.
For example, the 2007 viral YouTube video “Charlie Bit My Finger”, which topped over 900 million views, was removed from YouTube in 2021 after it was sold as an NFT for $760,999. The first-ever Tweet of Jack Dorsey, co-founder and former CEO of Twitter, sold for over $2.9 million as an NFT. Nyan Cat, the animated flying cat with a Pop-Tart torso and rainbow coming out of it, was sold as an NFT for $850,000.
There is also the Bored Ape Yacht Club (BAYC), which are digital images from a collection of 10,000 unique drawings of bored apes. While the apes share core features, each has a unique trait and outfit. Dozens of celebrities are owners of Bored Ape NFTs, with Paris Hilton and Jimmy Fallon discussing their own purchasing of Bored Ape NFTs in an interview on The Tonight Show. Together, the two spent a combined $516,000 on their digital apes.
NFTs can represent real-life assets
NFTs can also be used as tokens that represent real-world items such as real estate. In February 2022, a house in Gulfport, Florida, was auctioned off as an NFT and sold for over $650,000. It was the first instance of the rights to a physical property being minted and sold as an NFT in the United States.
According to real estate transaction firm Propy CEO Natalia Karayaneva, which auctioned off the house, NFT technology eases the transactional period of buying a home, which has the potential to give homebuyers more money for a down payment by lowering fees. The auction was meant to showcase the real-use applications of NFTs.
The future of NFTs
NFTs have been met with a mixture of excitement and cynicism. Some believe that they are a passing fad of the elite, while others see a future where their use cases grow and become more mainstream. It’s worth noting that cryptocurrency, which is similarly dependent on the blockchain, was met with similar skepticism from those who doubted its value in today’s world. As more NFT case use cases emerge, it will be interesting to see how widespread NFT ownership becomes. It’s certainly a trend worth keeping an eye on.