What is an NFT?

What is an NFT?

An NFT is a non-fungible token, which literally translated is a non-replaceable token. It is a unique asset with a digital proof of ownership and therefore not easily replaceable. Anyone in the decentralized network can see who owns a particular NFT. To know why this is important, let's first look at the basics of blockchain technology.

Non-fungible token

The blockchain is a decentralized ledger where anyone can buy and sell tokens. But these tokens have no ownership certificate and are therefore freely exchangeable. It is best to look at this through an example:

You have a 5 euro bill and exchange it for another 5 euro bill. Both bills are identical to each other; you cannot tell them apart to determine which bill belongs to whom.

Therefore, this bill money is infinitely replaceable. But when you put a signature on your bill, this gets a proof of ownership. When you change this bill multiple times, you still know which bill is yours exactly. So this makes it unique and only one copy with your signature exists.

An NFT also has a certificate of ownership that allows everyone to know which NFT is yours. Thanks to the use of smart contracts, when an NFT is sold, the ownership certificate is automatically transferred to the new owner.

Types of NFTs

With the knowledge that an NFT is a non-replaceable token, every unique creation on the blockchain becomes an NFT. Since Mark Zuckerberg changed the name of Facebook's parent company to Meta, the metaverse got a big boost. As a result, more and more types of NFTs have been added:

• Collectibles
• Digital piece of land
• Digital clothing
• In-game assets
• Community

Collectibles

An NFT can serve as a collector's item. This is similar to the Pokemon Cards that are worth much more today than they were, say, 10 years ago. There are several NFT collections that are increasing exponentially in value and thus investors are also making a lot of money. An example is CryptoPunks, one of the oldest NFT projects, which is trading for record amounts.

Digital piece of land

In the metaverse, you can invest in a piece of land. This piece of land is unique and only you own it. So no one can buy the same piece of land. Because of this, this too is an NFT. But not only the piece of land, also all the furniture and artworks in this virtual house, are an NFT. These all have a certain value and can be traded, just like in real life. There are several NFT marketplaces for this.

So a piece of land or land is also non-replaceable, even in the digital world. Depending on location and opportunity, investors are willing to pay hefty sums for a digital piece of land. For example, in 2021, someone invested a whopping $450,000 to become Snoop Dogg's digital neighbor.

Digital clothing

Even clothing in the metaverse is an NFT. Fashionistas are always looking for unique garments and this is no different in the metaverse. None other than Dolce & Gabbana launched their first digital collection in 2021. You can now impress your virtual friends with a diamond tiara worth more than $1 million.

In-game assets

With millions of gamers daily, this is an impressive industry that is also changing thanks to NFTs. At several blockchain games, you can invest in NFTs that will make you a better player and thus make more money.

Think agricultural vehicles that allow you to plow and harvest faster and thus receive rewards faster. With the development of play-to-earn, where gamers earn money through the game, the demand for these NFTs also increases. With increasing demand, these also become more valuable. You can then trade these again and pass on the certificate of ownership.

Community

Thanks to the use of blockchain technology, online creators are launching their own NFT collection. In 2021, Russian-American entrepreneur GaryVee launched his unique NFT collection called VeeFriends. Here he distinguishes between different species, with each species having different functions.

For example, one NFT entitles you to a digital coaching session with GaryVee himself. In turn, the cheaper versions give you access to his Discord channel where you can talk to him once a week, for example.

The future of NFTs

The blockchain is a decentralized place in which everyone can move freely. By using NFTs, artists and creators are no longer dependent on large central platforms. They regain full ownership. For example, we see video material from Youtube being downloaded and copied just like that, without the rightful owner's permission. Nor does he receive royalties for this. By using NFTs, they can once again monetize their work themselves.

Content

NFTs make it possible to really place anything on the blockchain as "unique. For example, we can post this blog, which is intellectual property, as an NFT. This allows everyone to see that I own this text and no one can copy it.

Copywriters will also be better protected against plagiarism as a result. As an owner, you could then decide to make your content available under certain conditions, such as a certain monthly fee. Once again, you are fully in charge of your own intellectual property.

Conclusion

The future for NFTs are endless. Currently, this technology is mostly used to sell and trade digital images, but when we start capturing all intellectual property as NFTs on the blockchain, it changes the future forever. Both personally, and in business, everyone will be able to use their property rights again.