The famous magazine TIME usually names the person of the year in December, and only twice in its history instead of person of the year named different thing. That was in 1988 where “The Endangered Earth” was named planet of the year and 1982 where “The computer” was named the Machine of the Year.
In 2021 we are naming “Tech of the year” to a digital entity: the NFT.
What is an NFT? Can I buy it in Amazon?
No. I mean, not yet that I know, NFTs are a thing of blockchain networks.
NFT stands for “Non-Fungible Token”. The “fungible” adjective sometimes can be counterintuitive; we’ll take the first Merriam-Webster definition:
Being something (such as money or a commodity) of such a nature that one part or quantity may be replaced by another equal part or quantity in paying a debt or settling an account.
Non-fungible means that no part of it can be replaced. It cannot be split into smaller amounts; it is not like a bank note that says 10$ and you can use to pay the newspaper and get one 9$ in bills. Whatever you do with the NFT must be using the whole thing.
And then the “token” part, that directly relates NFTs to blockchain technology.
So, a NFT is a Blockchain thing that should be used without tearing it into parts. Obviously, we are talking of something from the digital world. Also, one of the main interest is the uniqueness of each NFT, multiple copies of the same NFT could exists but each one is unique and can be tracked individually.
🤔 Maybe you can describe it a bit more
Imagine the NFT as a physical thing, not money, what can you do with it? You can use it, like a spoon. You can collect it, as baseball cards. Also can play with it, as a toy. Whatever you imagine. That is thanks to the Blockchain part, NFTs follow the rules of smart contracts and therefore its behaviour can be programmed.
NFTs, Tokens, Cryptocurrencies… what is exactly each one? 🤯
Intelligent question. Here we should take some breath to talk about the different kinds of crypto-assets.
You can find a detailed description here, but we’ll try to summarize.
The very beginning of crypto assets are cryptocurrencies, like Bitcoin or Ether. Those are digital representations of value (i.e., money) without the backing of a central bank or similar entity. They have the value that the market (people) think they are worth.
If you are looking for an asset that has its value backed by a central bank fiat money then you are talking of Central Bank Digital Currency or CBDC, like e-Krona.
More elaborated is the Financial Market Infrastructure or FMI, it resembles CBDC but it is based not in fiat money but on a participation claim on a deposit.
When the value is not backed by a Central Bank but another bank you are talking of Tokenized Commercial Bank Money.
Then comes the Stablecoins, these are tokens that resemble fiat coins as they pursue having a 1 to 1 valuation against fiat money. Tokens whose objective is, for example, having the same value as an USD. See some examples here.
And more tokens to come, we have Security Tokens, Settlement Tokens and Utility Tokens, none of these are related to fiat money as the four above. Security Tokens and Settlement Tokens are related to securities and financial instruments where Utility Tokens are those used to use a system, provision of goods and services provided on that platform. One example of Utility Tokens could be the Football fan tokens that give the fans the option to vote some decisions on their beloved team.
Finally, it comes the “Other Crypto-Assets” that are the representation on a DLT of ownership of assets or rights over those assets that are none of the previous (securities or financial instruments). This is where the NFTs fit.
NFT use cases? What are they for?
The list could be nearly infinite, people have a lot of imagination and surely will find new forms of using NFTs.
Informally there are two kind of NFTs: the digital content and the digital certificates.
🖼 Digital content could be Digital Art, In-game assets and Content Ownership. It could be a drawing or song, any kind of digital creation, a weapon or a costume in a game, or the ownership of a land in Metaverse. Along with the item itself the greatness of the NFTs is that the content itself could hold the rules of using it, the royalties payment beneficiary, or the ownership history (sunglasses previously owned by Elvis are more valuable than those on sale in a gas station).
Digital certificates are things like entry Tickets for an event or Certificates to facilitate the authenticity and verification of records.
As you see NFTs revolve around a few ideas: collect, use/play and certificate.
So, I can buy a NFT but, what if I want to create one? 😱
Well, creating an NFTs is tied to a blockchain network, therefore you must choose which one (or ones) you will use. You need a platform with “Turing complete programming language” (nearly all of them) also following a good standard would be helpful for interoperability. NFTs follow the standard ERC-721.
ERC-721 is a set of compulsory and optional interfaces, the “blueprints” to create a proper NFT. Along with those it is recommended to add “create” and “destroy” functions, security, and governance. All of this require a solid blockchain programming background.
But there’s an Easy Way
As in all the business the easy way is that someone else does the hard work for you. In the case of NFTs it means it will be a bit more expensive and it will probably have less functionality but nowadays there are plenty of online options to easily create your own NFT. Simply search in google “Easy NFT maker” and choose one.
They are alive 🙌
NFTs are not just a theoretical thing of a framework to create new things. There are a lot of them in the web. The two most known NFTs are Cypherpunks and Cryptokitties.
Cypherpunks is pure NFT art but Cryptokitties is a game, very popular three years ago up to the point of consuming 1/3 of the overall traffic in Ethereum network. You can browse Opensea and delight yourself with the existing NFTs, you can even use it to create your own NFT.
And then the Metaverse comes 🤖
Metaverse itself would require its own article but it is interesting to say that its success will be tightly coupled to blockchain networks. In the past we had metaverse alike worlds like Second Life, now VR comes into the scene along with the need of a proper persistence of the world with market capabilities. NFTs come to solve the digital copy problem for uniqueness or rarity. A good example of incoming metaverse is Decentraland based on Ethereum network, start playing simply using your Eth address and browse its marketplace to see NFT in action.
NFTs have a lot to say and a prosper future, maybe we were not ambitious enough and NFT should be the Tech of the Century!
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Juan Tavira
Universia
Specialist, architect and interdisciplinary geek passionate about all kinds of innovations. This is easy to say for oneself, but when my computing colleagues, my geek friends and even my wife say so, then it must be true somehow ;-). I also like to build violins as a hobby. I see code
