Understanding NFTs
Block Tides: Understanding NFTs
Like it or not, no one can argue that NFTs are the least understood technological innovation in recent memory. One side is the NFT bulls that see this new digital asset type as the future of digital ownership. On the opposite are the NFT bears that see NFTs as nothing more than just expensive digital images with no real-life utility.
To get a better look at NFTs, we need to understand first the underlying technology that makes NFTs possible — Blockchain Technology.
Blockchain Technology
Blockchain is a revolutionary technology that allows the creation of trusted public infrastructures that enable users to exchange value and information without intermediaries. Its value is from its innovative decentralized approach to reaching a consensus to arrive at a single, accepted truth within a distributed network setting.
It is the first technology created that can put into code the essence of truth and the act of trusting digitally and independently. It is a decentralized, transparent, verifiable, irreversible, and immutable way.
Blockchain is the underlying technology that powers most of the leading fungible (Cryptocurrencies) and Non-fungible (NFTs) tokens. Believed widely to be one of the enabling technologies that will usher in the next evolution of the web (Web 3.0).
In other words, NFTs are not your regular images or digital items.
Powered by blockchain technology or similar distributed ledger technology (like DAG), ensuring that they are undoubtedly unique and authentic. They use the very same technology that has made bitcoin the most secure and valuable decentralized value network to humankind.
It does not take a rocket scientist to deduce the enormous disruptive power of NFTs in the digital ownership realm. It opened up a deluge of different digital use cases for NFTs that is impossible to achieve without intermediaries that may not always act in the best interest of all stakeholders.
The following are some of the different real-world uses of NFTs:
Collectibles
NFTs are unique items that can be collectibles due to their limited supply. They can be bought, sold, or traded on the open markets. Their value depends on their rarity and the interpretation of their value by the buyer. Blockchain technology will ensure that NFT collectibles are unique, authentic, trackable, and verifiable. NFT collectibles can digitally represent real-world physical collectibles. It can also fractionalize ownership of digital assets. Imagine owning a small fraction of Leonardo da Vinci’s Mona Lisa if an NFT version gets created.
Game Digital Assets
Game developers can leverage NFTs to create in-game digital assets that their players can truly own. Since these gaming items are NFTs, you may trade these freely on secondary markets outside the game ecosystem. They will also continue to exist long after the game has exhausted its useful life presenting unique interoperability opportunities for game designers. You may use NFT items, avatars, badges, and equipment in other games or newer iterations of the games.
Metaverses
NFTs can also be useful when creating an entire virtual world where individuals can make their personalized digital persona. Metaverse NFTs can be avatars, digital real estate, artwork, collectibles, and digital wearable equipment. They are transferable, tradeable, and can be bought and sold in the open market, such as the Open Sea. Metaverses’ digital economy uses NFTs and cryptocurrencies that got real-world value.
Rewards
NFTs can also serve as rewards in Metaverse settings and the real world. They may be claimable digital vouchers tied to real-world redeemable items in physical stores, outlets, and other locations. NFT rewards can also take the form of special access to places, airdrops, merchandise, events, or items exclusively offered to those who own them.
Exclusive Memberships
You may utilize NFT memberships to create and administer hyper-exclusive digital memberships resilient against counterfeiting. Holders of these types of NFTs may have ultra-special early access, rare assets, and unbelievable perks. You may also program an NFT membership to have different access levels depending on the NFT holder membership type.
DAO Governance
NFT is one of the enabling technologies that allow a new type of governance structure called Decentralized Autonomous Organization (DAO) to work. It can function as a decentralized electorate digital identification giving the NFT holder voting rights during decision-making events. They can represent a single vote or successively larger voting rights depending on the number or type the NFT owner holds.
Certificates
NFTs can replace certificates and diplomas. NFT certificates have the unique advantage of being able to exist and be verified even if the institution that has issued them does not exist anymore. NFT certificate holders won’t need to ask the issuing institution to authenticate certificates. The requesting organization can easily verify NFT certificates using blockchain explorer or other smart contract functionality.
Final thoughts
Listed above are just a sample of the different use cases of NFTs. As the technology matures and more blockchain innovators continue to invent new utilities for NFTs, we can expect it to disrupt other industries like the internet did. Nobody knows how far-reaching this technology can affect entire industries. One thing is for sure, NFTs are not just your average overpriced gifs.
It truly represents a new and revolutionary way of ownership not only in the digital realm but in the physical world as well. We got a little taste of things to come in the exciting and fast-moving world of NFTs. Rest assured that Block Tides will cover the latest development in the nascent industry as they unravel.
About Block Tides
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