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In this article, we'll explore everything you need to know about NFTs, what they are, and how they can have real-world utility.
At this stage, it's almost impossible to connect to the internet and not come across NFTs. That is, of course, if someone hasn't already tried to sell you one or you haven't read a story about the occasionally absurd prices they fetch.
Artists, celebrities and famous brands have all begun touting their own NFTs, some with incredible success, others less so. The craze and hype around this new technology have been almost surreal, to the point where it can be hard to understand what an NFT is. Back in March, someone paid $12 million for an NFT yacht, with a real-life version to follow.
Multiple platforms will tell you how to buy an NFT, thousands of articles are talking about them, and even greater numbers of projects promise to be the next big thing in the NFT crypto space. The blockchain-based assets are everywhere.
Blockchain technology is still in its infancy, albeit scaling rapidly. As a result, it's hard to give a single answer to exactly what an NFT is. Therefore, it's better to explain what the point of an NFT is and how they have come about.
So in this article, we'll delve into the world of NFTs, why you should know about them, and some NFT examples.
NFT is an initialism for non-fungible tokens. Non-fungible refers to an asset that is not interchangeable with another asset of the same kind. Blockchain assets like NFTs and cryptocurrencies are referred to as tokens, hence the name 'non-fungible tokens'.
One of the simplest ways to understand an NFT is to apply the concept to diamonds. Each diamond is unique. Each will have a unique cut, colour and clarity. You'd probably be hesitant if you had a diamond valued at £1000 and somebody asked if you wanted to swap it with their diamond valued at £1000. Your diamond might be free from defects and more aesthetically pleasing, while the other person's might not. Just because they are both diamonds valued at £1000 doesn't mean they are interchangeable. Each person has their own preferences when it comes to their taste in diamonds.
Alternatively, cash is an example of something that is fungible. Say you had a £10 note, you wouldn't care if you swapped it with someone for another £10 note, so long as the note you're swapping it for isn't fake. Both are £10 notes and are interchangeable without any consequences.
NFTs are non-fungible tokens, meaning no two tokens are the same and are not interchangeable as regular cryptocurrencies like Bitcoin are. At the end of the day, one Bitcoin equals one Bitcoin, but one NFT doesn't equal anything else because it's unique. It's this lack of fungibility that makes NFTs the perfect vehicle for use in event ticketing.
Now that you understand how NFTs are unique and can only ever be owned by one person at a time, you'll begin to see how this technology can be applied to real-world situations. Property deeds, vehicle registration, medical records, identity documents, and, of course, event tickets can be stored inside an NFT and live on the blockchain. Whoever owns that NFT would undeniably be the owner of the underlying asset.
Imagine a scenario where every event ticket is identical, not unique in any way. You'd be able to reproduce endless copies as there would be no way of distinguishing which tickets were valid or void. Each NFT ticket is traceable thanks to the transparent nature of blockchain technology and the unique identifiers attached to each NFT.
Now, back to the origins of NFTs.
NFTs can be much more than just digital artwork. They rose to prominence on the Gen-2 Ethereum blockchain in NFT games, profile picture (PFP) projects, artwork and collectable platforms.
However, even with the various projects, NFT art was the driving force behind the frenzy, which led to Collins Dictionary naming NFT as their Word of the Year for 2021.
The simplistic digital images referred to as PFP NFTs were a form of artwork. Still, the value was primarily driven by the owners' desire to show them off as symbols of their early adoption of the technology.
Outside of PFP projects, NFTs gave digital artists a way of monetising their creations. Until blockchain-based NFTs, digital artists were somewhat hampered in their art distribution by the inability to contain their work. Web2 offers little in the way of copyright protection for artists and the convenience of a "right-click, save as" meant that it was hard to market full-resolution pieces without people simply downloading them for free.
NFT artwork changed all of that. Suddenly, an entire generation of artists on digital platforms had a way to sell their artwork, with proof of originality and authenticity available via the blockchain networks that they were hosted on. In turn, this led to a spike in NFT artwork prices, which culminated in the artist Beeple selling a digital piece for $69 million.
Artwork, NFT collectables and PFP projects have given us new ways of viewing digital assets, but the buzz surrounding NFTs is far larger than simply these use-cases. The reason for this is that Web3 has the potential to change a great many industries, from finance (cryptocurrency) to real estate, supply chain management, and medical records. NFTs will even change event ticketing.
The introduction of the internet changed a great many things, broadly speaking. It irreversibly intertwined the physical lives of humans with the digital world. The connectivity provided by the global spread of the internet has increased accessibility to knowledge and allowed us to interact with one another immediately across vast distances.
However, the centralised networks employed by our current iteration of the internet (known as Web2) mean that data is controlled and managed by a small handful of extremely powerful companies. In this model, these individual companies are responsible for and have control over all of the data on their servers. As such, there is no ability to trust that certain information that they hold is correct.
By contrast, blockchain networks utilise distributed and encrypted data storage, which is not managed or controlled by any single party. Instead of holding information on a centralised server bank, information is distributed amongst the network, with data being time-stamped and put into blocks which are then encrypted and chained onto the previous block in chronological order, giving it the name; blockchain.
Since the data held on a blockchain is time-stamped, encrypted and distributed, it is possible to use the blockchain network as an irrefutable ledger for all the information and transactions that take place on it. As such, it provides a "trustless" platform for transactions, meaning no third-party oversight is required for parties to exchange data on a blockchain.
This is where non-fungible tokens come in. Since blockchains provide a guaranteed record of the data they hold, proving ownership of a digital asset hosted on a blockchain network is possible. This includes previous owners, when the asset was transferred and when it was created.
Even if two identical pieces of media exist on a blockchain, it is possible to see which one is the original and who owns it because of the way that blockchains record and store their information.
The point of an NFT is a digital asset, the ownership and authenticity of which can be proved by a blockchain network, something that was not possible in the centralised storage model of Web2.
Looking at NFTs in this way opens up a world of possibilities for how NFTs are used as the world begins to shift towards Web3.
NFTs can be many things, which is why there is so much talk about them. Any information that would be held digitally can be made into an NFT. As the technology around them has improved to become more stable, scalable and environmentally friendly, new use-cases for NFTs are popping up all over the place.
The NFL minted NFTs for the Super Bowl in 2022, and this summer saw the future of festivals, with NFT technology being used to enhance the fan experience. Similarly, NFTs are also replacing the Web2 social media "check-in" with Proof of Attendance (POA) badges being issued as NFTs, which prove an individual's attendance at a place or event without them revealing their real-time location.
Away from live events and fan engagement, NFTs are finding their place in many industries and are likely to continue to expand their reach.
Given the many different types of NFTs, getting your hands on one could be really simple or extremely expensive.
There are already many platforms designed for the sale and trading of NFT artwork, which can vary wildly in price (and sometimes quality!).
Without purchasing an NFT, it's also possible to receive one through participation in events or by scanning QR codes at various locations. Two recent examples of this include the house music giant Defected Records, who have recently joined Web 3 by offering their attendees the chance to mint a Proof of Attendance NFT by scanning stations around the venue with their smart devices. Likewise, here at SeatlabNFT, we partnered with Lost Village to create a pioneering festival experience for their attendees. Those attending could download the SeatlabNFT app to receive a free NFT membership card to The Lost Society 2022 which unlocked an exclusive immersive experience inside the festival.
By now, you should have a good idea of what an NFT is, where you can get an NFT and what the point of NFTs is.
The broad nature and utility of these non-fungible tokens, coupled with the emerging nature of the technology, means that it's hard to give a single answer to the question of what an NFT is.
Our project, SeatlabNFT, is using NFT technology to redefine event ticketing, creating a fraud-proof ticketing platform that helps event organisers take back control of the secondary ticketing market. Minting tickets as NFTs also has many benefits for fans, including improving the ticketing experience for buyers.
There's little doubt that although the market for NFT artwork has taken a sharp downturn in recent months, NFTs are here to stay as Web3 continues its expansion and we shift from Web2 to decentralised technology.
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