Non-Fungible Tokens (NFTs) are, simply put, one-of-a-kind digital data stored on the blockchain that establishes verified and public proof of ownership.You get all that? Don’t worry.Even more simply put, NFTs can represent a particular digital asset such as digital art, but can also represent real-world objects like physical art, music, in-game items, and videos.NFTs belong to blockchains, in the same way that fungible tokens like Bitcoin (BTC) or Ether (ETH) do.The difference is that fungible tokens are interchangeable, meaning they can be replaced by another identical item.One Bitcoin, a fungible token, can be swapped for an identical BTC token.Non-fungible-tokens cannot.
Just as no two human beings are the same genetically, no two NFTs are the same.
They can be similar but never the same.Each NFT is unique and can not be replaced by another.NFTs are an aspect of blockchain ecosystems that promote the uniqueness, ownership rights, and originality of digital assets.
Non-fungible assets are not only non-interchangeable, but they are also indivisible, unlike other fungible assets like US dollars, Bitcoin, and other cryptocurrencies.One token of BTC can be divided into 100 million “satoshis”, the smallest unit of BTC.$100 can be divided into smaller fractions (five $20 bills, twenty $5 bills, etc) without losing its value.An NFT asset can not be divided.However, recent developments from platforms such as Fractional have allowed NFT owners to mint tokenized fractional ownership of their NFTs.The intricacies of fractionalized NFTs are numerous and are above the scope of this article.
NFTs have a variety of functions.
These include but are not limited to (new use cases seem to pop up every day!):
1.Digital assets — art, music, in-game assets, collectibles.
2.Physical assets — real estate, luxury goods.
3.Intellectual Property — publishing royalties, copyright.
4.Digital Identity — online identities with the potential for reputation analysis.
5.Secure savings accounts with NFT Smart Vaults (GOGOcoin).
6.Supply chain tracking and analysis to enhance efficiency and sustainability.
Ownership Let’s assume you own a car.Everyone can see the car in the grocery store parking lot and some can even take it for a joyride and leave garbage in it whether they know you are the owner or not.
However, the car has only one owner, you, because it is registered in your name.You can donate it, sell it, or set it on fire legally (ok, maybe not) because you are the only person with the certificate of ownership.In the same vein, everyone in the NFT marketplace can access, view, and sometimes even interact with all the NFTs on the platform but each asset has only one owner, the person with the blockchain-based digital certificate for that specific NFT.This certificate which gives your collectibles a unique identity is generated through the smart contract technology hard-coded into the blockchain network.Despite the uniqueness of NFTs, the value of an NFT is subjective, just like a classic 1964 Ford Mustang 289 is more valuable than a 1990 Ford Escort.Non-fungible tokens, much like automobiles, are as valuable as the buyer/seller market says it is.
Despite the subjectivity inherent in value, there actually are real factors that affect the value of a Non-Fungible Token.
These include, but again are not limited to:
Real-life usage An NFT with real-world benefits can be very valuable.Some NFTs have games and other real-life interactions with them and benefit their collectors.Some NFTs give access to newly released music albums, and any trade of those NFTs gives a percentage to the creator, an infinite source of revenue.Even more, particular NFTs can give membership access to some A-list communities.However, you will likely pay a fortune for it.As a collector of any of Gary Vee’s NFTs, for example, you have access to his annual physical hang out.
This access has increased the popularity and value of Vee’s NFTs enormously.
Rarity or Uniqueness If everyone can have it, why should you pay more for it? Gold is the most valuable metal in the world and it’s not a coincidence that gold is also the rarest metal in the world.Scarcity drives value.
Anybody can have the picture of the Mona Lisa painting on his wall, but only the Louvre Museum has the original painting of the Mona Lisa painted by the legendary artist Leonardo da Vinci.It is estimated to be worth more than $ 867 million.The same goes for NFTs, as Beeple’s Everyday — The First 5000 Days piece has fetched $69 million, the most expensive NFT trade to date.
First Mover Advantage Much of Bitcoin’s value is derived simply from it being the first legitimate cryptocurrency, having what is known as “first mover advantage”.NFTs are no different.One of the first NFTs on the Ethereum blockchain (or any blockchain), CryptoPunks, has fetched up to $7.57 million.
NFT from a specific creator of a project also tend to have a lot of value.The first edition of anything is a treasure in the collectible asset class, often bringing in a fortune.
Ownership History The smart contract technology within blockchain networks enable people to track the ownership history of a non-fungible asset.If your favorite celebrity owns a particular NFTs, you might be willing to pay for such assets simply because Brad Pitt owns it.
In addition, Influencers promoting (or being involved in) an NFT project also has a direct impact on its monetary value.Jack Dorsey sold the picture of his first tweets for a whopping $2.9 million.Remember the Overly Attached Girlfriend meme? The woman in that meme sold her meme as an NFT for $411,000 in April 2021.
Sounds like I need to go viral…
Closing Thoughts Most NFTs are built on the Ethereum network and OpenSea is the major digital market for NFTs.
However, due to sometimes insane transaction prices on Ethereum, and because of the growth of Layer 2 and other Layer 1 blockchains, NFTs have started to become increasingly popular on blockchains such as Avalanche, Solana, Fantom, and, of course, Polygon, where yours truly, GOGOcoin, will be launching our take on NFTs soon.
NFTs are here to stay and their utility grows daily.
Soon we will see a surge in NFT use-cases, including for identification purposes, real estate, voting records, and supply chain management.In many cases, such as in San Marino with their NFT vaccine passports, it’s already happening.NFTs will soon rise above the moniker of “collectible gimmick” and prove their real-life benefits as the gap between real-world and blockchain gets smaller and smaller.
– GOGOcoin.
