NFTs

NFTs are growing in popularity, but you might be wondering what are NFTs? Why are people paying millions of dollars for a digital image?

To understand why NFTs are so popular, we have to break down exactly what they are.

What are NFTs?

NFT stands for Non-Fungible Token. To understand this, think of money. Your dollar bill is exactly the same as my dollar bill. Maybe yours is more crinkled than mine but they have the same value. When you go to a store and pay $5 for a $4 sandwich, you don’t care which dollar bill the cashier gives you in change because they are all worth the same. They are interchangeable. They are fungible.

Something that is non-fungible is something that is unique. There is no other like it that exists. That’s what an NFT is. They are non-fungible. The “token” part of NFT, simply means that it was created on a blockchain.

Most NFTs are created on the Ethereum blockchain. This involves the same process as mining cryptocurrencies with validated records, timestamps, and data stored on the blockchain that is publicly verifiable. That data exists forever.

The Real Benefit to NFTs

So while people make fun of art NFTs and say they can simply right-click and save the image to their computer without having to purchase it, those people will never be the true owner of that art piece.

Let’s say Banksy created an NFT and sells it. Many people would save the image to their phone or computer, but there would only be one that is the original and the authentic piece of art. Whoever buys it would have that record on the blockchain for everyone in the world to verify.

Only that person would be the true owner and therefore only their image file would be the valuable one. What’s more, creators of these NFTs can be paid royalties every time the artwork is sold to someone else. This is huge for creators who want to earn passive income from their work.

NFTs are not only for art, however. NFTs are likely the future for a variety of things that many people don’t realize.

Real-World NFT Use Cases

Ticketing

Tickets purchased for events, concerts, sports and anything else can be NFTs. This will kill ticket fraud. If you buy an NFT ticket from someone else you can be sure that it is a real, authentic ticket.

Housing

Imagine every property is issued a unique identifier. Purchases and sales will be publically recorded and verifiable by anyone offering real transparency in the housing market. In some countries, it is not the law that housing sale prices are made public, which in turn drives up the price of housing. If properties were NFTs, not only would everything be transparent, but it would cut down the paperwork, speed up the process of buying and selling, and cut out a lot of the expensive middlemen.

Supply chain

Items can be tracked as NFTs through their complete life cycle ensuring quality control. No fake products will enter the supply as each NFT is trackable. NFTs in any supply chain from fashion to medicine to auto parts can be authenticated. You can also verify the product’s origin, where it is and when, and for how long, which is crucial for perishable items.

The cryptocurrency VeChain is working with global businesses to revolutionize supply chain transparency.

Education

When you graduate from a university your diploma and transcripts will be issued to you as an NFT. It is accessible by you, forever, whenever you need it. You will no longer have to contact the institution, pay for them to find your transcripts, and pray that they still have your records on file.

NFTs can eliminate human error when it comes to deleting and losing important documents. They can also eliminate duplicates and counterfeits. If everybody used cryptocurrency as a form of payment, and identification documents were NFTs, there would be no more identity theft.

Bullish on NFTs?

As you can see, there are many use cases for NFTs and we’re still early in their adoption. It could take decades before we see real-world use cases for NFTs implemented, but it means that investors can get into projects early before they take off.

Remember, a lot of blockchain projects fail and it’s important to research them before you FOMO your life savings. Once the digital art NFT hype is over, then we’ll really see what NFTs can do. That’s when people will start to care about them.

Next, learn all about decentralized finance (DeFi) and why banks are scared of it.