An example would be exchanging 1 Malaysian ringgit for 100 sen or for another ringgit.They are both equivalent and so it doesn’t matter which one you’ve got, you’ll be holding the same amount. Taking from that, a Non-Fungible commodity (in this case, a Tokenized commodity) is therefore a commodity with an identity (value) that cannot be replaced or equated to any other, even a replica.
Further into the article, we will explain in brief details how the NFT tokens work, and what to expect in the long run.
An NFT could come in different forms as long as it is tokenized and digitally transferable, this makes it pretty easy to clone. Normally, that should spoil the whole fun of having the original copy, but NFTs aren’t cloneable all the way. When they are made, each NFT carries a unique and permanent tag, like a school ID card or a passport, and this tag cannot be replicated therefore it is used to know the original token.
So, two people can have tokens that look and function exactly alike, but carrying very different value tags, and you’re right the original should be worth a lot more.
This branch of blockchain technology has a good potential with item collectors, be it artworks, cards or original songs. Rightly so, Moish Peltz, a property attorney with vast digital intellectual knowledge stated that NFTs are the “collectibles of the internet”.
Basically anything Valuable, or Valueless, can be given a tag of originality by converting them to NFT and adding that information to the structure of the asset. If someone thinks it is worth it, they can bid up to millions of dollars to have that original piece either because they believe in the future value or that they value the originality; these two categories are basically still collectors all the same.
They get involved in the auction for that asset, not because they may not find it anywhere else but because of its value as the first authentic asset. It is pretty much like getting a Basketball card autographed by the star on it, there are still other exact basketball cards out there but without the signature. The signature makes them worth a lot more, but unlike baseball cards you can’t just put the tag on any token. It has to be unique to it.
NFTs can also be used outside of digital arts to represent the unique Identity of people, Certificate of Land Ownership, etc.
To many people even in the crypto space, the whole idea sounds ridiculous and more like a bubble, but there is so much money one can make trading these NFTs at the right price. Even Jack Dorsey, the founder of twitter converted the very first tweet on the app (his tweet) to NFT and sold it for $2.9 million in a charity fundraising for African families. It simply said “just setting up my twttr.”
How do NFTs function?
Like fiat, the ordinary cryptocurrency is fungible and in the core of every unit, they are not unique to themselves because one dollar is always equal to another dollar no matter the date it was printed, and can be swapped without any change in value. As we already stated, this is different from an NFT.
NFTs were first developed on Ethereum’s ERC-721 standard, different from the ERC-20 for Ethereum based tokens and smart contract which is insufficient to handle the uniqueness of each token. This platform records every information in the token's smart contract, and additional information unique to each token, like the rich metadata and specific ownership details with which the buyer can tell when exactly the NFT was made.
The TRC-721 from Tron is very much like Ethereum’s ERC-721. There is also the ERC-1155 that goes a tad further to record different types of NFTs in one smart contract. Even though a lot of people are calling it a bubble, more DeFi projects are exploring the untapped features of NFT in accelerating their ecosystem.
The new phase of crypto that NFTs have spearheaded can be adopted in different industries. The uniqueness of each token makes it irreplaceable. This makes sense because NFTs are extensible in nature, and when two NFTs are combined they produce a different token, unique to itself as well.
Generally, the views of NFT and its usefulness will always be different in the minds of Buyer and Seller.
NFT to the Seller
An NFT could be a means of selling their work, and not like the traditional online stores where the goods are eventually shipped physically but a digital one. This can open doors to innovative ideas and digital products that had a much slimmer chance of success. With an advanced feature in the NFTs core, the owner can opt to receive a part payment every time the NFT is sold or transferred. This way, if the work gets more valuable than the owner gets a piece for their ingenuity.
NFT to the Buyer
Buying a Non-Fungible Token is just another way of supporting their favourite artists financially. This time, it's digitally unique, and way cooler than buying social media stickers. Another reason could be so as to get exclusive rights to that particular digital piece, unique to its content or not. Some buyers also buy to hold as an asset they can sell at a later date for much more than they bought it. This is a bubble that most critics believe won’t last long.
Their belief probably hinges on the fact that the scene is crowded by what they see as “irrelevant digital art” and speculative assets. There may be negligible justification for this since Art is an Expression of Self, and we live in a world where anything is art.
Not long ago, a short video was uploaded and sold as NFT for over $350,000. The video was only for 50 seconds. Another video was auctioned at $6.6 million by Beeple, and another at $69 million by the same creator, making it the highest selling digital art in history and the 3rd highest amount paid for any piece of art.
These videos can be replicated, uploaded and downloaded as many times as possible,and so the critics believe this trend won’t last. But there is also some value associated with uniqueness that you can hardly attribute to a copy, even with fungible commodities. The nature of the tokens also call for proper scrutiny on what you are buying, and who’s selling.
Basically anything could be sold as a Non-Fungible token, so long as the owner is in possession of the digital product with original seal of ownership at the end of the day. This blog post could even be sold as an NFT. We will only convert it and put it up for auction. Who knows, we could actually do that if we get enough requests. Nevertheless, we won’t be the first to do it. Quartz already created the first ever NFT news article, and the New York Times did the same.
CryptoPunks sales: Top 5
There have also been some successful attempts to bridge the gap between NFTs and physical objects like shoes, furniture, etc and connecting them. One of such successful scenarios is with the 2019 patented Cryptokicks by Nike. Using the same method, Nike may also be able to retrace the purchase history, ownership and also ascertain the authenticity of every unique pair. When any pair is purchased,
it comes along with a digital asset that acts as its unique identification compass for that pair. If that is the case, then such kicks are limited edition, and since the asset tied to them is also scarce by default, it’s price will obey the Economic laws of demand and supply. According to the patent, the digital shoe and their inbuilt cryptographic token are what make up the Cryptokick asset.
Effectively, when the shoes transfer ownership, the owner can choose to sell the token as well, or hold on to them for value. This token is kept in a “digital locker” which is a type of wallet app unique to the Cryptokicks. To further make things interesting, Nike took advantage of the NFTs extensibility and made the tokens cross-breedable, just like the Cryptokitties. So if I had one edition and you had another one, we can combine our tokens to get another unique token that can be converted as real unique shoes.
This concept was first used with the Cryptokitties back in 2017 when the NFTs were still quite new. The concept was wrapped around having “Digital Cats'', as unique as a real life pet using their embedded ID on the blockchain. This unique ID also gives each Cryptokitty a value tag in ETH. These digital cats could also breed and reproduce, to make new offsprings with a very different catalogue of attributes and value tag from the parent cats.
This NFT based platform eventually went on to amass over $20 million in a few weeks, from users looking to buy, feed and raise their digital cats. While use cases like this could easily prompt anyone to call it a bubble, the NFT have been applied to much more business-like and formal scenarios including real estate (eg. Decentraland). The ERC-1155 will assist in compilation of all the different types of NFT into one transaction, for easier movability and to conserve storage.
Making the copy of an NFT is possible, but it’s like passing the 1999 model of a car for a 2021 model of the same series, and not in the form of an antique. Things don’t happen with the slight of a hand. It's not really like how one could photo-replicate a physical artwork and possibly sell it for the original to a total noob. For the noob who wants to buy an NFT, the details are very easy to identify by default and so the only way of selling worthless NFT at an exorbitant price is if you are able to convince someone of it’s future worth.
Anyone willing to buy into the vision is either a collector that sees your vision, or a collector who doesn’t necessarily see it, but wants to also pass it round as quick to get his money’s worth regardless.But unlike real art, digital arts printed on NFTs are susceptible to Bit rots, meaning that they can start degrading in image quality and sometimes the files can crash not to open anymore. People can lose account ownership identification as well. That would be such a shame if you were in possession of the costliest digital arts ever sold.
It is even possible that your NFT gets stolen, and although it would be easy to track down, the possessors' true ID or the commodity itself can’t be recovered.
Since NFT’s cover a broad range of activities, it won’t be long before more industries start to exploit it to their benefits.
Conclusion
Eventually, non-fungible tokens have a very wide use case outside of what it is currently being used for. In the world of finance today, there are different fungible assets on the market as commodities, linked to real life items. This idea of unique digital representation is not exclusive to NFTs, and has been around for a while.
But as we have seen so far, an amalgamation of this idea with the decentralized advantages of Blockchain technology is something wonderful that has great potential. One of the obvious ones is in the removal of centralized intermediaries in the transaction. They can only get involved with the permission of buyer and seller. See how NFT can be involved in wine production and accelerate business processes
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They are also great for physical identification, like passports where everybody is tagged to a unique token that bears all their legal information.
Different types of NFT are available on auctions across different platforms like Opensea, SuperRare, Foundation, etc. They can be bought with ETH, and/or TRX depending on what platform they were hosted. Someone could also physically sell their NFT for physical cash or any other exchange they deem fit.
NFTs on the market today have a very wide price range, and are very volatile as it is in its crypto nature. A few years back, in June 2017, two artists released a set of tokenized pixels built as NFTs and called them Cryptopunks. They were 10,000 in number and each of them unique to their Identity. Initially released for free, the costliest of these pixels eventually sold for $7.6 million.
As we have earlier stated, this has everything to do with perceived value. However, the creation and transaction of these arts are not eco-friendly and so there are also worries about what innovation can reduce the environmental impact drastically.
