Even as non-fungible tokens routinely sell for upwards of hundreds of thousands of dollars, many people are still completely unaware of what an NFT actually is.
While it can be a complex topic to explain, put simply, a non-fungible token is just an immutable digital record of ownership. These records cannot be altered by a third party, and can represent anything from membership in a community to the deed of a house or plot of land.
To better understand, the word “fungible” refers to something that can be replaced by something identical of equal value – think a single Bitcoin, or even a physical $1 bill. It doesn’t make a difference which $1 bill you have, it’s always worth the same $1.
Conversely, if an item is “non-fungible”, it’s unique, and cannot simply be replaced by an identical item of the same value. Examples of this would be one of a kind works of art like a Jackson Pollock, or a hand blown glass vase; while there may be copies or similar items, there is nothing exactly identical.
Although NFT’s have recently become a mainstream topic, they have been around for quite some time; around 2014, non-fungible tokens started popping up in forums around the net, mostly as a joke at first. People began creating digital artwork in limited quantities and minting them on the Ethereum blockchain, which prompted some speculators in the niche to begin making alternative investments in the art, speculating that they would appreciate over time.
As the NFT space continued to grow, non-fungible tokens became more than just pieces of artwork. NFT’s started to be created that worked as digital membership tokens, like Gary Vaynerchuk’s Fly Fish Club, an exclusive upscale dining club that can only be accessed by holders of the NFT.
NFT’s have also begun to overtake the video gaming space – projects like Decentraland and Sandbox have each garnered market values in the billions of dollars according to data from OKX, with many smaller gaming projects hot on their heels. In these digital metaverses, anything from your avatar to the hat you wear in-game can be an NFT. In fact, shoewear giant Nike just collaborated with an NFT company RTFKT to create a digital pair of shoes wearable in the metaverse.
Industry experts predict that over the coming years, non-fungible tokens are going to become a part of everyday life for the average person. Further, some experts think that based upon the utilities that non-fungible tokens provide, the price volatility of the NFT market is likely to decrease compared to the cryptocurrency market.
Even many massive companies, from Nike to Budweiser, are beginning to realize the future potential of the technology behind NFT’s, and are rapidly working to find creative ways to integrate them into their business model. Budweiser recently ran an advertising campaign in the Decentraland metaverse where they invited users to congregate in a virtual bar setting, where you could consume virtual brews and interact with friends as virtual bar hoppers.
This is just the beginning for NFT’s; a large community of developers, artists, and visionaries are working tirelessly to innovate and build new projects that bring value to the space.