In early 2021, hardly anybody had heard of ‘non-fungible tokens’. By the end of the year, pictures of unimpressed monkeys were selling for hundreds of thousands of dollars.
What happened – and what the heck is an NFT, exactly?
What is an NFT?
At their core, NFTs, or Non-Fungible Tokens, are digital assets verifiable on a blockchain.
They are a way to prove ownership in a digital format, whether that’s of an image, music, text, or even physical property rights.
What does “non-fungible” mean?
The simplest way to explain fungibility is using money.
It doesn’t make a difference if you pay for dinner using a brand new $100 bill or one that’s roughed up and dirty. They both have a value of $100.
$1 bills are worth $1, $5 bills are worth $5, and so on.
A ‘non-fungible’ token cannot be replaced or exchanged 1 to 1. Examples of non-fungible items include things like trading cards, diamonds, or real estate. These items could hold sentimental value or vary slightly in their production quality.
In the cryptocurrency world, tokens like Bitcoin are usually considered ‘fungible’, while things like digital artworks on the Ethereum blockchain are usually considered ‘non-fungible’.
What can NFTs do?
The NFT ecosystem is still in its infancy, and new use cases are being discovered each day.
Today, some real-world use cases for NFTs include:
Digital artwork and collectibles:
Artists discovered NFTs for the technology’s ability to quickly and easily distribute their work across the globe.
Since NFTs are programmable code, NFT artists can also opt to collect royalties on each future sale of their work.
Another use case is digital collectibles. Gamers have long coveted in-game goods like weapon skins, usernames, and hard-to-obtain items – sometimes even coughing up hefty price tags to get them.
With NFTs, these digital goods can be bought and sold freely on independent secondary markets.
Video games and the metaverse:
NFTs are used heavily inside blockchain-based video games like Decentraland, Zed Run, and others.
Decentraland is one of the first open metaverse games where players can create their own avatar and explore the virtual world.
In Decentraland, NFTs are items like wearables and parcels of land, which can all be transacted on secondary marketplaces like OpenSea.
Zed Run is a popular NFT-based horse racing game where players buy virtual horses and race them against each other.
Recently, the beer giant Budweiser announced they had become a sponsor of Zed Run, and have started promoting the game heavily.
Tickets to physical events:
Last year, Gary Vaynerchuk opted to distribute tickets to his in-person event, VeeCon, as non-fungible tokens.
Not only do ticket holders get access to the event, but they also receive ongoing perks for holding the NFT in their wallets.
In early 2022, the property rights to a Florida home were sold as an NFT on the blockchain for over $650,000.
The transaction was facilitated by blockchain real estate startup Propy and has the potential to become standard practice in the real estate industry.