What is NFT and its potential for mainstream adoption?
What are NFTs and their potential for mainstream adoption?
If you’ve heard about cryptocurrencies, then the chances are that you have also heard about NFTs. What is so special about NFTs that they have managed to capture the world's attention, you may want to ask? NFTs have transformed digital arts and collectibles into digital assets that can be easily traded through blockchain-powered technology.
The Concept of NFTs
NFTs or Non-Fungible Tokens, if you prefer, are essentially digital assets and collectibles that are transformed or tokenized using blockchain technology. Digital assets and collectibles include pictures, videos, music, and documents, just to mention a few. So everything from patents, title documents, memes, digital artworks, and tickets to a boxing event can be tokenized or transformed into an NFT.
Fungibility is one of the critical features of fiat currency. It constitutes the ability of a currency to exchange with another for the same value. A $20 bill in my pocket has the same value as a $20 bill in your pocket. They can exchange comfortably because of the fungibility of the dollar bill.
Unlike fiat currencies and cryptocurrencies, NFTs are non-fungible. No two NFTs have the same value; each is unique and can be verified and traced back to the owner.
How do NFTs work?
The first step to understanding how NFTs work without burning the midnight oil is to understand the difference between a token and a cryptocurrency. Although used interchangeably, a cryptocurrency and a token are different.
While a cryptocurrency has its independent blockchain, a token is built on an existing blockchain using a smart contract. As you might have deduced from its name, NFTs are tokens, and most of them are built on the Ethereum blockchain technology.
Typically, a seller enjoys the freedom to determine the value of their NFT. This value is primarily determined by institutional support, historical uniqueness, and buzz.
Let us assume that the British Museum, for example, decides to tokenize their Egyptian art collection into NFTs; it is sure to have a greater value than an NFT from the average Joe down the street.
The Beeple NFT titled "The First 5000 Days" that sold for a whopping $69 million will always have an enduring value due to its historical uniqueness. In case you are not aware, The First 5000 Days is the first NFT to be sold through a reputable art house.
NFTs potential for mainstream adoption
From video games, tech, real estate, and art, NFTs' potential for mainstream adoption cannot be overemphasized. Below are some of its prospects for mainstream adoption in various sectors.
Science and Technology
Inventors rely on a patent right to seek redress in court if unauthorized third parties copy their invention. This mechanism is essentially the right to enjoy a monopoly over their creation for a specific period. Needless to say, it can be costly to enforce a patent right in court.
Using blockchain technology, inventors can tokenize their patents to prevent unauthorized access.
The adoption of NFTs in video games will allow gamers to enjoy exclusive ownership of digital collectibles purchased in a game. In addition, they can trade these digital collectibles with other gamers in-game and through a third-party NFT marketplace.
What could be better than being able to trade your video game collectible for some cash? You don’t need to own a gaming YouTube channel to make money from video games. So maybe it is time to prove to your mom that you are not gaming your life away by trading video game collectibles.
NFT is an equalizer for artists. They need not rely anymore on galleries to sell their works and can earn a royalty on every NFT sold. We will witness a surge in artwork sales through NFT in the coming years. Maybe it's time to go back to art school.
There are tell-tale signs that the blockchain technology through the NFT is about to disrupt the global sports industry.
The industry has witnessed massive investment to actualize fans' dreams of acquiring collectible moments in sports history.
Sportstars and teams can improve fans' engagement by issuing tokenized memorabilia and verifiable sport-themed collectibles, including autographs, certificates, and awards.
Fans can curate, exchange, and trade these collectibles for money.
NFT will revolutionize the music industry by aiding its democratization. Musicians can crowdfund their music projects by issuing NFTs to fans who can exchange them as they increase in value, thereby weakening the stronghold of record labels.
These NFTs can be in the form of tokenized memorabilia, tokenized tracks, concert tickets, and autographs, just to mention a few.
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