Fungible Token Definition
NFTs’ Impact Can Reach Far Beyond Expensive Digital Art
According to the NFT Report 2020, issued by L'Atelier BNP Paribas and Nonfungible.com, the Non Fungible Token market will reach a value of $250 million in 2020, up 299 percent from the previous year. That is insignificant: it reached $208 million in March 2021 alone and over $2 billion in the first three quarters of this year.
William Shatner, a Star Trek legend and blockchain evangelist, created and marketed a non-fungible currency (NFT) based on an X-Ray of his teeth.
MetaKovan, an entrepreneur, paid $69 million to Beeple, a digital artist, for an NFT of "Everydays The First 5000 Days," a collage of Beeple's works. Many were perplexed by the fee, as everyone may view and reproduce the image for free. Additionally, in an acrobatic display of recursive journalism, The Economist auctioned off an NFT for its September 18, 2021 cover art depicting the NFT market, donating the $400,000 revenues to a charity that educates young people how to analyze current events.
NFTs are still in their infancy, and they generate as much confusion as they do promise.
The majority of individuals are unaware that purchasing an NFT does not automatically confer ownership of the digital property.
The majority of people are unaware of projects involving the use of NFTs for physical goods and biometric identification.
Without a doubt, the most effective applications of NFT will astound us.
The NFT Market is Skyrocketing
According to the NFT Report 2020, issued by L'Atelier BNP Paribas and Nonfungible.com, the NFT market will reach a value of $250 million in 2020, up 299 percent from the previous year. That is insignificant: it reached $208 million in March 2021 alone and over $2 billion in the first three quarters of this year. You may follow its progress in real time here.
The Tyranny of Jargon
Much of the ambiguity and uncertainty surrounding NFTs stems from the technologies' strained terminology and funny names.
When studying NFTs, terminology like as DAO, MANA, wallet, and dapps are encountered. There are virtual worlds such as Cryptovoxels and Decentraland, as well as individuals known as "Twobadour." MetaKovan may transfer MANA between Ethereum and Polygon in Decentraland.
Do you have any questions?
Vignesh Sundaresan, a young Singaporean, is MetaKovan's physical world persona. He transferred the $69 million in Ethereum's native currency, Ether, or ETH, to Mike Winkleman, a gifted South Carolinian known by the moniker Beeple.
MetaKovan was also responsible for the largest NFT purchase of 2019: $111,500 for a digital Formula One racer. It probably serves a greater purpose than a tangible collector vehicle does. MetaKovan is free to race his prize car in the game F1® Delta Time. In comparison, rare physical autos are generally stored in garages and trucked to events and auctions on a regular basis.
Let us translate "non-fungible token" into common parlance. Begin with companies that accept actual tokens. Often in the shape of coins, tokens make it simple for users to access facilities and services. Numerous transit systems make use of tokens.
Chuck E Cheese, a family restaurant and entertainment facility, operates on a token system. Customers exchange money for tokens and then use the tokens to play games at vending machines. Tokens are used to gain entry to the games. Children find the games easy to use because they all utilize the same tokens.
Additionally, these tokens facilitate Chuck E Cheese's operation of the games and encourage parents to spend money at the establishment.
The games are unconcerned with which of your tokens you insert into the slot. Chuck E Cheese coins are interchangeable and identical: they are "fungible." Thus, Chuck E Cheese coins on the Chuck E Cheese platform are fungible tokens.
At the majority of hotels, you use a programmable token: your room key. The key is non-transferable: it will only unlock your room, and the lock on your room will only open for that key (if the front desk staff did their jobs). Your key is a non-fungible, programmable token that grants entry to your room.
If the hotel suite is the $30K/night Grand Riad at the Royal Mansour in Marrakech, you may want to use Instagram to share selfies. This token entitles the bearer to bragging rights.
NFTs, such as the one Beeple invented, are entirely digital, consisting of lines of software. They have a number of distinct advantages over a room key. One is that they can be configured to contain rights and documentation for various types of assets, rather than just magnificent furniture and a world-class view. You can create an NFT for a song, proof for boat ownership, a university degree, an impressionist digital video of your teeth, or a lock of Lady Gaga's hair, for example (a cash crop).
Your hotel room key does not contain information about the previous owner of the room or the price they paid. Today's digital NFT retains an unalterable record of who produced it, who purchased it, when it was sold, and at what price. Provenance is incorporated.
Another significant advantage is that the digital NFTs, or those lines of software, themselves can be program-like. For example, an artist can develop an NFT of her work that automatically gives her a share of the proceeds whenever the work is sold. Assume Beeple's NFT remitted 10% of each resale. Mike Winkleman will receive $10 million for his talent, inventiveness, and work if MetaKovan sells the NFT for $100 million. It's similar to creating your own credit card reward program in that you have complete control over the incentives associated with your effort.
Consider an NFT as a programmable, custom-titled and-recorded asset.
When I explained the NFT to a Silicon Valley colleague, she responded, "Why don't you just call it a smart contract?" From San Francisco to San Jose, a linguistic bubble exists in which it is assumed that every educated person on and off the earth understands the term "smart contract."
What Can You Do with NFTs?
Here's a quick rundown of some of the most intriguing features and benefits of NFT:
- NFTs are self-contained programs. It executes when all of the terms, such as payment, are met. There is no need to wait for a notary public stamp or a stock exchange settlement time.
- NFTs are nearly impossible to fabricate or modify. (One of the characteristics of NFTs is that they are stored in blockchain databases. If you're interested in learning more about blockchain databases and how they work, this article provides an excellent overview.)
- The NFT's ownership record, which includes a complete history of the NFT from its inception through each sale or transfer, is eternal (Another excellent blockchain property).
- The ownership record is accessible to the public (Yet another blockchain benefit).
Due to the extensive application of NFT, entrepreneurs are focusing their efforts on a variety of application areas, including the following:
- Fashion, to track the provenance and supply chain of a garment
- Virtual worlds and gaming are where NFTs originated and continue to find their primary application. The owners of high-end art NFTs display their wares at virtual galleries in worlds such as Decentraland.
- Access to the physical world, such as event tickets.
- Domain names for the web.
Some NFT Misconceptions: Caveat Emptor
Do you own the art if you purchase an NFT for digital art? You will only if the provisions of the NFT require it. The seller is under no obligation to provide copyright. Always read the fine print, as you would with any contract.
The copyright for MetaKovan's NFT for Everydays The First 5000 Days is not included. Indeed, the artist has already sold another $6 million worth of NFTs for a component of the collage titled "Ocean Front." MetaKovan has the ability to resell the Everydays The First 5000 Days NFT, but only Beeple has the ability to make and sell NFTs of its 5000 components.
The NBA will release "Top Shots" in October 2020. It's a compilation of NFTs of renowned players and plays dubbed "Top Shot Moments." When you purchase a Top Shot Moment, the following applies:
- You obtain the video's digital token.
- You can demonstrate publicly that you own the video's token.
- You do not obtain ownership of the video.
- You are not permitted to use the footage commercially.
- You are not permitted to resell a modified version of the video.
- The NBA may always enhance the Moment by utilizing multiple camera angles, for example. You are relying on them not to do so.
Top Shots deals surpassed $527 million in less than six months. The majority are resales on the secondary market, and the NFTs automatically remit 5% of each resale to the NBA. The NBA's involvement into NFTs has aided in legitimizing the concept and market.
Everydays and Top Shots videos are both available online for free. Therefore, why would you pay for a video of a LeBron James dunk that you can view for free on YouTube? Here, cutting-edge technology collides with ingrained human psychology: While technology advances swiftly, humans do not.
It Sold for How Much??
Christie's, the legendary auction house, is intimately familiar with how humans value collectibles. In February 2021, Christie's will auction Everydays The First 5000 Days. In May, they released another "significant" collection of web art: a CryptoPunks collection. Their promotional materials demonstrate why collectors paid $17 million for low-resolution cartoon images: provenance, uniqueness, significance, and an unambiguous title, all of which are collectors' touchstones. That is how the NFT for animation with 187 million views on YouTube ("Nyan Cat," a flying cat with a Pop-Tart body spewing a rainbow trail) was sold for approximately $600,000.
Enrollment in digital art classes, I anticipate, will increase.
NFTs Beyond Art and Speculation: Social Impact
The skyrocketing prices of digital art have grabbed the headlines. However, NFTs may have enormous potential for resolving niggling societal problems such as identification, property ownership, and affiliation.
The Case of Missing Identity
Without formal, government-issued identification, you face serious difficulties:
- You are not legally permitted to work.
- You are not permitted to have a bank account.
- You are unable to attend school.
- Your travel options are extremely limited.
The destitute and refugees are the most likely to be without identification; their numbers are large. For instance, the United Nations Refugee Agency projects that 26.3 million people would be international refugees by 2020. According to the ACLU, 21 million Americans lacked a government-issued photo ID in 2017.
Identification is so critical that aim 16.9 of the United Nations' Sustainable Development Goals (SDGs) calls on all countries to attain universal legal identity by 2030.
Birth certificates, which serve as the cornerstone for formal identification, are readily lost or destroyed. For instance, imagine a homeless individual without identification informs a social worker that he is John, 36, a civil engineer with a bachelor's degree. John's identity restoration may take months and dozens of paperwork. John may join what one worker refers to as "The Disappeared" during that period of battle to exist among society's garbage.
Assume John owns an NFT that contains his government-issued identification. Its provenance may be traced all the way back to a genuine governing entity. Its contents are irreversible and accessible to anyone granted permission by John. It would relieve John and others determined to assist him of an enormous load.
Kaliya Young, a digital identification expert, recently stated that NFTs may not be the optimal answer for credentials such as passports and academic transcripts. However, alternative attempts, such as the EU's Digital Identity plan, are underway. With emerging technologies, it is critical to experiment with use cases and select the solution that is most appropriate for the consumers' demands.
Land is a prized and important possession, particularly for farmers—however, many tiny landowners, or "smallholders," do not have formal title to their property. It is a global issue: four-fifths of the food produced in the developing countries comes from small farms. The overwhelming majority of individuals who live in abject poverty work on tiny, family-run farms.
A real estate NFT may contain descriptive and legal information regarding the property, such as documentation, disclosures, reports, image files, and even films. That NFT serves as proof of ownership, and whoever owns it legally owns the property. Numerous start-ups are experimenting with blockchain-based technologies for physical real estate.
A clear land title reduces the investment risk associated with property improvement. Extending legal land titles to smallholders has yielded positive effects in a number of developing countries (Page 6 in this IDB report). These have included more investment in irrigation technology, increased loan availability, and cheaper borrowing rates through land collateralization. As a result of this, smallholders produce more food and money.
Land title, like identity, is not a problem exclusive to the developing world. In the United States, issues such as "Heirs Property" continue to exist. Numerous families have lost land as a result of inadequate documentation, complicated ownership contracts, and inheritance restrictions. As a result, they were unaware that their property had been sold at auction.
Permanent and transparent ownership records are provided by NFTs. Contractual provisions can require all parcel owners to be notified and assent to any attempt to transfer or financially encumber land.
Even if a corrupt government seizes land, an NFT will preserve the property's complete provenance in a globally distributed database that is inaccessible to the government. A subsequent government with different goals may be able to reclaim proper ownership.
That is a significant obstacle to attaching NFTs, or any other indelible digital record, to property titles: corrupt governments are financially motivated to block it. Another significant impediment is the diversity and complexity of legal systems between nations and locations. It's a tough task to accurately capture and update local real estate regulations, broker fees, and property registration titles, among other things.
Making Association Private and Global
NFT cards are used to identify members of Distributed Autonomous Organizations (DAOs). Unlike mainstream social networks (e.g., LinkedIn), DAOs are owned by their users. ExO Economy's latest online town hall meeting featured panelists who appropriately described DAOs as "online cooperatives." With NFTs serving as tangible proof of membership, global groups can convene, using pseudonyms as necessary or desired, to design and complete projects and share the benefits. The possibilities for organizations of all types, including enterprises, governments, and non-governmental organizations, are tantalizing. As Tokenly CEO Adam B. Levine stated during the ExO Economy town hall, NFT-enabled DAOs are still in their infancy but hold enormous promise.
NFTs May Impact All That We Own
NFTs are in their infancy, and there are numerous rough edges to smooth. A case in point: portraits demanded by bidders from a digital artist known as "neitherconfirm" were changed mid-auction from stained glass faces to jpeg images of rugs. "I am the artist," Neitherconfirm tweeted. My choice, correct?"
Human beings do not truly change. Every new technology has the potential to be used constructively, aimlessly, or even destructively. The potential influence of NFTs on the global society extends beyond 2021's digital art gold mine. They may develop into robust technologies that enable tens of millions of vulnerable people to ultimately secure their identity and land, and for all of us to safely establish our personal global associative networks.
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