With the introduction of blockchain technology, innovators are finding new and exciting ways to use it for interfacing with the world around us. One such innovation is non-fungible tokens (NFTs).
What are NFTs? Recall the blog about the invention of money? Something had to be fungible in order to be a good candidate to be considered money. Fungible as defined by dictionary.com means, “being of such nature or kind as to be freely exchangeable or replaceable, in whole or in part, for another of like nature or kind”. For example, 1 US Dollar is the same as another US Dollar. If one is spent and another is earned, they are the exact same and have the same value. It doesn’t matter if one is spent in cash and the other is earned digitally. Similarly, a $20 dollar bill can be exchanged for twenty $1 dollar bills and vice versa.
The same applies to oil, pure gold, bitcoins and other commodities.
Non-fungible means not interchangeable. Two cars which are built on the same production line with the same features and colours will have unique VIN numbers and are not the same. When one of these cars is purchased, the name of the owner and the VIN are connected, creating a record of ownership. If one is stolen and the other is spotted by the police, the latter does not count as the former.
Other examples include real estate, specialized machinery and original artwork.Now imagine a non-fungible asset is connected to a token on a blockchain. The token is unique and represents the ownership of the asset, digital or otherwise. The token can also be used to convey original ownership. For example, an artist can create an image or meme and put it on the blockchain where the token makes it easy to prove they created the image while still allowing others to access it. If an asset is non-digital a blockchain token can convey ownership, for example a car. The car changes ownership through an update to the blockchain.
We are talking about the future, right?
Actually, transactions as described above are already taking place.
An Ethereum based game known as CryptoKitties lets players breed, collect and sell virtual cats. As per the non-fungible nature of these assets, each is unique. One cat cannot be substituted for another, much like real world pets. In 2018, a CryptoKitty sold for $140 000 USD.
The same company which created CryptoKitties partnered with the NBA to create Top Shot, a blockchain based trading card system which has generated $230 million USD in sales as of early March 2021. The digital assets include game highlights from the history of the Association.
The blockchain based game Axie Infinity currently boasts the record for the largest in-game NFT transaction. Nine plots of land were sold for $1.5 million USD.
In early March 2021, musician Grimes sold a collection of digital art for almost $6 million USD. As with the other examples, a non-fungible token is used to verify ownership and the owners can sell their assets if they choose.
Also, in early March 2021, rock band Kings of Leon released an album on the usual streaming platforms. However, an NFT version is also available which includes a moving album cover and limited-edition vinyl.
To date, the largest NFT sale of all time is a digital art piece by artist Beeple which sold for $69 million dollars.
Right now when you buy a used car, you have to trust that the previous owner is being honest. They may claim that they bought it from the dealership, but there’s no way to really prove it. If the car were on a blockchain as an NFT, the entire history including maintenance would be available to the purchaser. Anywhere where trust is a necessity.
Does thenewboston blockchain support non-fungible tokens?
Yes! The speedy nature of thenewboston blockchain makes it perfect for using NFTs. An MMO game is already under development which will use thenewboston technology. Imagine completing a dungeon and being rewarded with a special item like a sword. The blockchain will update in real time to create the sword and apply ownership to the player who has accomplished the mission. As the blockchain is decentralized, players will truly own their items.
While NFTs are already blooming on many blockchains, we are still in the early phases of adoption. It is estimated that only 0.5% of the world’s population is using bitcoin, similar to the percentage of people using the internet in 1995. Even fewer are currently engaging with NFTs than with bitcoin. As blockchain technology grows and advances, the use of NFTs will expand and become commonplace.