What’s an NFT?
“Non-Fungible Tokens (NFTs) are just JPEGs that anyone can right-click and save.” Is what I’m often told whenever NFTs are brought up in conversation. However, the JPEG/Art is not the NFT. NFTs are the tech behind the proof of ownership of an asset, which is a type of smart contract mainly on the Ethereum blockchain. A smart contract is a program that will execute automatically when predetermined conditions are met (If This Then That).
Imagine having a plane ticket NFT with the condition that if the flight is canceled, then the airline automatically refunds your fare back to you. In reality, that situation would probably require you to wait on the phone with customer service for hours on end only to receive an airline credit that may expire on an inopportune time or a reduced cash refund if at all. A smart contract would cut out the middleman/call center, save you time from waiting on hold, and execute your refund without bias.
Another feature of NFTs is their ability to be a productive asset by providing passive income and generating yield through rental, lending, etc. or revenue sharing through royalties attached to the smart contract. I envision artists selling music NFTs that split royalties with their fans, HBO Max/Netflix movies and shows funded by NFTs and sold to HBO Max/Netflix with the original creators sharing revenue back to their NFT-holders, and the ability for the owners to lend or rent the cash flow on these NFTs.
Proving sole ownership of A simple JPEG or any digital file is something people all over the world could just copy and save for their own unlimited use. But we are at an age where technology can prove an individual’s ownership of that basic pixelated JPEG, and that ownership can not be duplicated, forged, or counterfeit. That’s just one use case. As developers’ creative juices get flowing, the possibilities are theoretically limitless. And to me, that’s very disruptive.
Why it matters: NFTs can represent credentials, memberships, financial positions, baskets of assets, tickets, music, in-game items, real estate, social networks, identities, etc.
Key takeaways:
We are still in the early stages of unlocking NFT use cases.
NFTs are not JPEGs. JPEGs/NFT art is just one use case and the first stepping stone.