A short insight into Non-Fungible Tokens and their upward trajectory

NFTs are being hailed as the modern equivalent of art collectibles, albeit in a digital format, and there has been much hype in the media in light of this. Critics deem it to be a fad that is limited in terms of its immensity and gravitas but NFTs for digital artwork have sold for millions of dollars, contributing to their popularity and stratospheric rise, and sales reached $2.5 billion in the first half of 2021. [1]

What is a Non-Fungible Token?

An non-fungible token, or NFT for short, is a piece of digital media represented by a record on the blockchain or immutable ledger of a cryptocurrency. A non-fungible token (NFT) is a one-of-a-kind identifier that can be used to assign and prove ownership of digital goods cryptographically.

This can keep track of more than just virtual coins. It was invented a few years ago and can link to not only art but also text, videos, music or bits of code.

In economics, a fungible asset is something with easily interchangeable units, such as money. With currency, you can exchange a £10 note for two £5 notes and the value will be the same. This is impossible if something is non-fungible; it has distinct properties that prevent it from being interchanged with something else.

It could be a house or a one-of-a-kind painting, such as The Scream. You can photograph the painting or purchase a print, but there will only ever be one original. Digital tokens can be viewed as certificates of ownership for either virtual or physical assets.

What Is The Purpose Of An NFT?

NFTs have been around since 2014 and are gaining popularity as an increasingly popular way to buy and sell digital artwork. Since November 2017, a staggering £123 million has been spent on NFTs.
An NFT is a digital asset that simulates a physical object. NFTs are typically purchased and sold online, often with cryptocurrency, and are generally encoded with the same underlying software as many cryptocurrencies.

NFTs are also typically one-of-a-kind, with unique identifying codes. “Essentially, NFTs create digital scarcity,” says Arry Yu, managing director of Yellow Umbrella Ventures and chair of the Washington Technology Industry Association Cascadia Blockchain Council. [2]

Why Are They Increasing in Popularity?

NFT proponents claim that they solve a difficult problem with digital art: how to own an original. The concept of an original is difficult to define for creators who freely upload their work or sell it as identical copies.

When digital files can be freely shared on the internet, exclusivity is impossible to enforce. Collectors, on the other hand, want the prestige that comes with owning an exclusive claim to an artwork. This is where NFTs come into play.

The most common application of NFTs today is in the realm of digital content. This is due to the fact that the industry is in need of change. Platforms are consuming content creators’ profits and earning potential.

NFTs power a new creator economy in which creators do not give up ownership of their content to the platforms that publicise it. Ownership is built into the content.

An artist who publishes work on a social network generates revenue for the platform, which sells advertisements to the artist’s followers. They receive exposure in exchange, but exposure does not always benefit the creator financially.

Facebook changing its name to Meta is a stellar example of a company using its metaverse – or digital reality, to support non-fungible tokens (NFT) where the digital collectibles format has thrived.

Collectible NFT assets, for example, could be transformed into 3D avatars that owners can bring into a variety of web spaces, whether for work, play, exercise, or social interactions, further diversifying their usage of social platforms and thereby creating an increased flow of interactions.

If you’d like to know more then don’t hesitate to get in touch with the experts at Fracas Digital (www.fracasdigital.co.uk), where we will gladly assist you in your process to becoming familiar with NFTs and how they can benefit your business.

References
[1] What to know about non-fungible tokens (NFTs) — unique digital assets built on blockchain technology, Louis DeNicola Sep 2021, https://www.businessinsider.com/nft-meaning?r=US&IR=T

[2] What You Need To Know About Non-Fungible Tokens (NFTs), Robyn Conti, May 2021, https://www.forbes.com/uk/advisor/investing/nft-non-fungible-token/