What is NFT?
For the last couple of years, Non-Fungible Tokens (NFTs) have been an important part of the cryptocurrency environment. Initially they were made famous to mainstream media due to the enormous amount of money being spent on NFTs as digital arts, such as the apes from the Bored Ape Yacht Club, which the most expensive one was sold for around 3.4 million dollars. But this utility is just one of NFT’s possible applications, and its true value may not even have been explored yet.
Firstly, it is important for one to understand its definition. NFT is a kind of cryptographic token that is unique and can represent an asset by its metadata. This means that NFTs can be tokenized versions of digital or real-word assets. NFTs, as the name implies, are not fungible, which means that their individual units are not interchangeable and different from each other. Therefore, NFTs function as verifiable proofs of authenticity and ownership of an asset, using the blockchain network as data storage and leveraging all its advantages.
NFTs are listed and traded in open marketplaces that connect creators, buyers, and sellers. This creates a market of its own that is governed by the user’s valuation of each asset. In addition to that, NFTs are created by programmable Smart Contracts, and have the possibility of automatically paying royalties to NFT creators when the asset is traded. Royalties’ payment used to be enforced by the marketplace if such feature was not present in the NFT code, but recently Magic Eden NFT marketplace removed the Royalties payment enforcement, meaning that an NFT buyer could choose whether the NFT creator would receive royalties or not. Being a marketplace update, nothing could be done if royalties were already coded on the NFT smart contract.
With the possibility of functioning as verifiable proof and ownership, NFTs can be used in many different industries, such as video games, licensing, certification, subscriptions, crowdfunding, fine art, real estate, tickets, coupons, and anything else that can be owned. A project called Ethereum Name Service (ENS) uses NFTs as a way of owning domain names on the Ethereum Blockchain. Another project being developed by the Medusa Protocol is OceanCats, a community-driven cartoon animated series, with characters available as NFTs, and profits distribution between those that stake their NFT. This shows how NFTs’ applications are diverse and of relevant nature for the digitalized society we are turning into.
