WTF Is An NFT? 3 Examples That Show The Future Of Digital Ownership
If you’ve wondered what an NFT or non-fungible token is and why they’ve been making a lot of finance and investment news lately, you’re not alone. A non-fungible token (NFT) is a digital asset class that includes gaming, digital art, event tickets, and physical items managed using blockchain technology.
“Non-fungible” is a technical way to describe consumer behavior that we’ve seen for a long time. So don’t be overwhelmed by the headlines. The concept is more familiar to you than you think. Before we get into the ins and outs of the business of NFTs, let’s first take a look at common ways we handle more traditional, non-digital non-fungible items.
Maybe you’re not a billionaire who indulges in big yachts, private jets, and pro sports franchises, but you are serious about your credit card points, your MacBook Pro, or your limited-release Air Jordan sneakers. Those are all things said to be non-fungible because their value is not easily knowable and or tradeable, as opposed to fungible assets, like currency, which is worth the stated value on each denomination and can be easily exchanged or broken down. For example, a $20 bill is always worth $20 and can be broken into two $10 bills, four $5 bills, or other combinations and still maintain the stated value.
During this streaming music era, hundreds of millions of people subscribe to digital streaming platforms, yet vinyl now outpaces all physical media in revenue growth. Some are vinyl collectors for the auditory experience, others to show their loyalty, and still others want to own a collectible item that may one day appreciate. The main problem is that nobody knows you own the physical record in a digital world. One way to get attention is to share a post on social media. Another way would be to generate news for buying something really expensive in the first place. Pharmaceutical profiteer Martin Shkreli made waves on social media and in the news when he bought a $2 million album by Wu-Tang Clan billed as the only one ever produced. He acquired the album to “prove” he is the ultimate Wu-Tang Clan fan, but online bragging rights only last as long as an attention span.
Another way to think about NFTs is to compare them to a fully digital experience — video games. People have been exchanging real money for virtual currency for many years. You can use virtual currency in the bestselling basketball simulator franchise NBA 2K to buy a pair of rare Air Jordan sneakers, although only other 2K players will be able to see the digital you wear them. While playing the game, you might develop a virtual collection of rare shoes, accumulate a large amount of virtual currency, or attain elite status. You are exchanging your time and money for a badge of pride and accomplishment. While your account might be valuable to you, there’s no way to easily price or sell your account to another player.
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In real life, you probably wouldn’t trade those limited-edition Air Jordan sneakers for the shoes your neighbor wears to cut the grass, but you may trade them for a pair of Adidas Yeezy Boost 350. To assign a value to the shoes you own and the shoes you want, you need to know more than just the brand and model, but the condition, availability, going rates, and how much you like the shoes. Then, to trade your Air Jordans, you would list them on a marketplace like eBay or StockX where there are potential buyers, find the Yeezy kicks you want, and buy or trade verified listings of authentic shoes. This process is like the current way digital consumers buy and sell NFTs.
As Devin Finzer, co-founder of NFT marketplace OpenSea, said, “We’ve had tons of digital stuff, we’ve just never owned it.”
The items in these examples — including the virtual character itself — is the stuff we own but cannot yet easily and consistently sell or trade. When it comes to understanding NFTs, don’t think digital or physical. Think about the things you already have.
Joshua E. McCoy is a writer and photographer based in East Point, Georgia. His work examines structures and status quo aiming to find the seams and bare the threads.
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