The NFT Craze: A Simple Breakdownby Farida Haji
What on Earth Is An NFT?
NFT stands for Non-Fungible Token. The terms ‘non’ and ‘token’ are simple to understand. It’s the ‘Fungible’ part that has people raising their brows.
Commodities, shares, and dollar bills are simple examples of fungible goods. Something that can be replaced, duplicated, or mutually exchanged. However, assets like land and precious stones cannot be called fungible as they have certain unique qualities that aid in evaluation.
So, what is non-fungible?
Non-fungible is the opposite; it cannot be taken from you, exchanged, or duplicated. Once an NFT is created, it remains as it is for eternity.
Mike Winkleman, an artist who goes by the name of Beeple, recently sold an NFT artwork for US$69 Million. Whoever bought it, now owns this digital painting.
NFTs are possible because of a technology called blockchain that promotes the idea of a distributed ledger. A distributed ledger is a consensus of replicable ledgers in the hands of numerous people spread out over multiple countries. Anybody who is part of the blockchain can keep a record of another person. This system is the opposite of a bank, which is centralized and keeps information and ledgers confidential in one location. Essentially, the difference is the availability of information: banks keep it private while blockchain is open for all involved to see.
This blockchain technology is the Non-Fungible part of NFT. Since everyone keeps track of what you own, no one can be cheated or scammed. Almost any digital content can be converted into an NFT. You may create a digital house, art, music, a 3D model of Burj Khalifa, sell or buy it and no one else can steal ownership from you. In fact a beloved GIF, Nyan Cat, we use at Muslim Pro is an NFT worth US $600,000.
Digital Gold or a Fool’s Errand?
Futurists believe that in the world of digital scams, there is finally a way to patent digital material. Instead of relying on mega-conglomerates like Facebook, Microsoft, and Google to create a ledger of websites or digital material, ordinary citizens can use blockchain technology to keep track of what individuals own.
However, realists are not quite sold to this idea. There is a grey area. No matter who owns the NFT, it is not a full-proof way of stopping someone from making a black-market copy of it.
For example, if you owned the US$69 million artwork that Beeple sold, it may not be in your authority to stop anybody else from taking a screen capture and printing it on a T-shirt. However, you can claim to own it without question or dispute. The access of who claims ownership is what blockchain allows.
Is it of Value?
Physical commodities will always have value. There is a demand, it can be sold, you can own it and it cannot be taken from you (unless through a scam). Think about a pair of jeans. It is made, there is a cost of production. It is sold for a profit and you can wear it to protect your legs and look decent in public. It exists somewhere. There is a value associated with it. No one is clicking on “copy-paste” and duplicating it.
Can anything digital, even if it were an NFT, ever have that kind of value?
Creating NFTs is a new way to digitize content and sell it without an intermediary. Giving power to the layman. NFTs are valuable because they verify the authenticity of a non-fungible asset. This makes these assets unique and one of a kind. So it’s a pair of digital jeans or digital Adidas shoes that only you own. This way the internet can grow with the creation of new marketplaces and new forms of investment.
Lord of the NFT
The pressing question is, is the entire world ready for NFTs? Probably not. Right now everyone is excited about it because of the money it is generating. Millions for a painting. Even a tweet, that fetched over $300 thousand. That is indeed a lot of money.
However, in a practical sense, it’s not extremely valuable. You can do nothing with a digital commodity except see or hear it. It serves no other purpose.
Note that trading and money evaluation differ. Digital and real-life currencies are different (a discussion for another day).
Regardless, it may not be a substantial reason to dissuade others from ‘investing’ in NFTs. As long as artists can sell their work in the thousands and people can trade the said artwork for millions, NFTs are going to stay.