What are Non-Fungible Tokens?
For months it was talked about and the day will soon be here. Non-Fungible Tokens (NFTs) are finally going live on Monday. This is something that could be enormous.
NFTs are an aspect of the digital asset market that does not get a lot of attention. In fact, the potential is really untapped since there are so few projects experimenting with them. That said, they truly have the potential to change a great deal of how we handle assets.
To start, we might want to define NFTs. A non-fungible token is a digital asset that is unique. Contrast this with a fungible token like STEEM and we can see the difference. I send someone 1 STEEM, the person does not care which STEEM token it is. The reason for this is they are all the same. It is similar to a $5 bill. One is equal to another.
A NFT is different in that the token is unique. No two are alike. Thus, when one has a NFT in his or her wallet, it is the only one that exists which can greatly affect the value.
Most of the discussion about NFTs are pertaining to speculation and asset values. This is natural since it is the stage of that the industry is at right now. I will cover this aspect in a bit.
The utility of NFTs.
First, I want to delve into what can make this a game changer for Steem-Engine. NFTs are not so much about the tokens that are created. Instead, the real power is the applications that are tied to it using this technology.
If we look at blockchain at its base essence, it is a ledger. This means it is a recording of information. The transparent and immutable aspect of blockchain provides enormous value in this regard.
NFTs have the potential to transform record keeping. Instead of using a centralized data based or worse, paper, all unique information can be stored on the blockchain using NFTs. Ultimately, apps can be created where this data is all on the blockchain.
What kinds of records could be placed on here. One obvious one are land deeds. Many parts of the world see people having their land taken at gunpoint since there is no evidence of ownership. A blockchain NFT removes this. We could also put all other types of property registration such as cars, boats, and planes.
The art world is transformed and fakes removed by having a NFT tied to a particular work on a blockchain. We could see the same for rare jewels, gold bars, and rare coins.
Have you ever spent a large sum of money on an expensive name brand item such as a purse? How do you know it was original? Counterfeiting is an enormous business around the world. NFTs could enable each purse produced to have its own token, meaning provide of authenticity is proven.
As we can see, the utility of NFTs very powerful. Of course, it takes on an even larger value.
I write how blockchain is a piece in the foundation of the development of Web 3.0. That is the merging of our physical, digital, and, ultimately, our biological worlds. NFTs provide a main piece.
How do you blend the physical with the digital? The answer is sensors.
Imagine you have a piece of art. Where is it located? A NFT coded into the sensor on the item could reveal it. Suppose an institution wanted to know how much gold it was holding. A quick scan of the vault would verify exactly what is there. In fact, an ongoing inventory could be employed where all interested parties could see. This would be ideal if one of holding assets for clients.
The exciting part about this is that Steem, as of Monday, will have this capability. Ethereum started this process with the ERC-721 protocol followed by the ERC-1155. The later allows one to create both fungible and non-fungible tokens in the same smart contract.
How would something like this evolve?
Take the idea of a robo-taxi as laid out by Elon Musk. Here is a situation where a vehicle is owned by a single individual but runs autonomous providing rides throughout the day. Each vehicle could be identified using a NFT. If, however, the owner, wanted to sell tokens in the cars, then fungible tokens could be created to put out representing a piece of the robotaxi business.
This would apply to any business that wanted to tokenize. What a piece of a plumbing company? That is great except which one do you have? This is where a NFT coupled with the other tokens solves the problem.
As you can see, having the ability to offer NFTs can expand the scope of development. This could attract an entirely new class of entrepreneurs.
The key with NFTs is providing ownership. One of the most talked about areas for potential NFT adoption is in the gaming industry. For years, games had built-in features that were purchased to aid in the playing of the game. However, all this money was lost as soon as the game was turned off. While some of the bigger games had secondary markets open up, it is a rather costly process.
NFTs have the ability to make this friction-less. It also allows assets to truly be owned. Thus, an in-game purchase has a NFT tied to it enabling all to see clear ownership. Once again, the NFT also serves to validate the asset.
This could be a massive explosion for the gaming industry. It is shown what happens to the value of markets when friction is removes and asset transfer gets easier and less expensive. Non-liquid assets are harder to sell, thus tend to get depressed in value, between 5%-15%. Assets that are traded on liquid markets tend to appreciate in value while also seeing an expansion in the total market.
In other words, most people enter the market as the barriers are removed.
NFTs are going to provide the opportunity for people to speculate on unique digital assets. While fungible tokens can have great value, a NFT, depending upon the asset, could be worth a fortune. When it comes to gaming, this allows developers to build in rather rare, and unique characteristics. Ultimately, we could see a few assets from some extremely popular games getting into the millions.
At the end of the day, there is no limit to what can be created using NFTs. The addition to the Steem-Engine platform allows that team to cater to a vastly different class of developers.
As our world starts to become more “virtual”, NFTs are going to play a bigger part in the ownership process. They will allow for the worry free buying of digital assets, knowing the ownership chain is clear.
I hope this shows how NFTs are part of a much larger process.
Lnk to the announcement: https://steempeak.com/steem-engine/@aggroed/nfts-going-live