Omega Technical Solutions Blog
So, You’re Wondering What an NFT Is…
With cryptocurrency having its heyday over the past few years and the increased attention it has brought the blockchain, it should be no surprise that another trend has arisen. NFTs. or non-fungible tokens, have been all the rage as of late… but is this trend something that might apply to businesses?
Let’s dive in and define what an NFT functionally is, for starters.
What is a Non-Fungible Token?
Investopedia offers a simple definition of NFTs, calling them “cryptographic assets on a blockchain with unique identification codes and metadata that distinguish them from each other.”
So, while a cryptocurrency has a consistent value in relation to others of itself—one Bitcoin equals one Bitcoin, seven Dogecoin equals seven Dogecoin—each NFT is unique and irreplicable.
As a result, NFTs have been adopted as receipts, of sorts, for big-ticket transactions in the real world, largely in art and real estate. Basically, the NFT serves as a certificate of ownership, recorded and tracked through the blockchain.
However, another use of NFTs has also come up: upscale digital collectibles. Jack Dorsey, the founder of Twitter, turned the first tweet ever posted (“just setting up my twttr”) into an NFT. The NBA has created NFTs depicting show-stopping moments during games, and many other online collectible NFTs have popped up. If you’ve ever heard of Cryptokitties or the Bored Ape Yacht Club, you’ve heard of NFTs.
Nearly all of the above collectibles have been exchanged for the equivalent of millions of dollars. A Cryptokitty referred to as “Dragon” was sold for 600 ETH (or Ethereum, the cryptocurrency of the Ethereum blockchain), which at the time equaled around $1.3 million.
Considering the issues with the blockchain, particularly in terms of power consumption and the impact on the environment, this all makes the idea of an NFT seem a bit silly—not to mention the recent price crash that the market saw recently. However, there are other use cases for NFTs that are important to keep in mind.
NFTs Still Have Some Use
As we’ve said, NFTs are primarily proofs of ownership, so instead of unique pictures of monkeys or cats, they can be used to attribute real estate or physical art to its owner—and using NFTs for this purpose offers a few other benefits. On top of eliminating the middleman from transactions and keeping all exchanges transparent, NFTs make it easier for multiple people to share ownership. NFTs also have potential as a means of supply chain management through tracking individual goods, or as a means of identity management.
So, despite what popular culture may be focused on, NFTs are more than silly collectibles. Whether or not their use cases become widespread in businesses, we’ll just have to wait and see.