The explosion of the craze for digital artworks known as NFTs
NFTs, or "non-fungible tokens," have recently taken the world by storm. The history of NFTs really begins with the history of cryptocurrencies, Bitcoin in particular. It started with a picture posted on the internet and ended in an extravagant cryptocurrency bidding war.
Let's go all the way back to the financial crisis of 2008. When the Federal Reserve was bailing out banks and printing all this money, trying to stabilize the economy, this mysterious document appeared on an email list: a proposal for this new form of digital money called Bitcoin.
Fungible means you can exchange one for any other. Dollars are fungible because I can trade $1 and I have the same spending power with your dollar as I had with my dollar. Something like an artwork is non fungible because there is only one of them. If I have a Renaissance painting, I'm
not going to exchange it for a poster of that painting because mine is the original. It is more valuable. And why would I give you my painting?
Creating a certificate of authenticity in the Internet
We now have the ability to create just one of something on the Internet. Before this, the things that were on the Internet were infinitely copyable. If you had a song or a photo, you could copy and paste that any number of times. And each copy would be exactly the same and totally indistinguishable from any other copy. What the Ethereum blockchain allows people to do is to stamp these digital objects with a certificate of authenticity that says that this is the original of this item. And you can’t copy or fake the digital signature attached to that item.
The NFT is a token that represents one thing. When you have an NFT of an image or video clip, the NFT is not the image or video clip itself. It is the certificate of authenticity that is attached to that thing. We can also assign value to that original and see the full purchase and sale history of that original item.
A real market of infinite possibilities
In 2017, after years of people thinking about the theoretical possibility of NFTs, people started creating them: you have songs, music videos, even tweets of Lindsay Lohan's face or crypto punks, which is this set of characters from cartoons that people treated as digital action figures. Others would take memes, like popular graphics, turn them into NFTs and sell them. Later in 2020, they really exploded.
A clip of a LeBron James became an NFT and was sold for more than $200,000. Jack Dorsey, Twitter’s CEO, sold his first tweet as an NFT for $2.9 million. People are really willing to pay for these tokens, these digital certificates of authenticity.
We can classify NFT use cases into two categories:
1. Tokenization of intangible assets
2. Representation of physical assets in the digital world.
Tokenization of Intellectual Property rights
Patents, licenses and intellectual property assets are among the most valuable illiquid transferable assets. Blockchain and NFT enable a smooth exchange of assets by creating efficient mechanisms for the open and secure property rights transfer. With NFTs, we can trade and leverage intellectual property assets on the blockchain.
NFT for supply chain management
There are many use cases of NFT in supply chain management.
One of the biggest challenges in supply chain management is verifying product authenticity. A brand name is an asset with a specific value for consumers and businesses. Blockchain technology represents physical goods, such as branded accessories, clothing, and more. NFTs are used to determine ownership of products and who is responsible for this item at any given time.
Use cases can include:
● Tracking heavy (+30kg) packages. With NFTs, a token for each package can be created. There will be an identified owner with a package at each stage, and no package will be lost.
● In the automotive industry, NFTs are created to represent digital identity for any part of the vehicle such as engines, microchips, or batteries. This identity includes location, ownership, temperature, responsible party, etc.
NFTs in finance
The financial industry can take full advantage of this technology by implementing fast, cost-effective and error-free ways to verify bond insurance, prevent fraud and manage debt. Finance is an industry that needs better tools to verify the provenance of business contracts, so NFTs are perfect for asset ownership proving and confirming the existence of an insurance policy or title record.
The $15.9 Billion second market for event tickets has become a paradise for event promoters and fans around the world. Second-hand ticket sites are mired in unreasonable prices, scams, and bad actors of all kinds. Meanwhile, promoters rarely see a penny of profit from ticket sales that follow their hard work and investment. Some players like TicketSwap and Tixel have tried to fix the problem with AI fraud detection algorithms and strict price controls. But the bad actors seem to find a way around every barrier.
NFT tickets can be validated and tracked back to the original creator to ensure authenticity. Additionally, NFT tickets can be used for virtual and metaverse events, along with proof of attendance. Event promoters are watching closely as ticketing platforms seek to solve the problems that come along with this new paradigm.
Art, luxury brands and sports
Applications for NFTs that have taken off are primarily in the collectibles, art, gaming and virtual worlds. Early use cases include Cryptopunks, which are 24×24 pixel art images that are algorithmically generated, and Crypto Kitties, a virtual game. Other examples include:
● An NFT collage by digital artist Beeple that sold for $69 million in March 2021 ● A digital image of a New York Times column, which sold at a charity auction for $560,000 in cryptocurrency
● Ditto Music's placement of NFTs on its blockchain platform Bluebox to allow purchasing shares in songs
With the popularity of NFTs growing, we will see more development in this field and not only will this provide ease of use for many services, but it will also increase transparency on many transactions, especially when it comes to ownership of tangible properties such as real estate, artworks, or even an idea.
The growing use of blockchain will also fuel the adoption of NFTs in the future as a secondary measure for storing personal data on blockchain or selecting a crypto address. So, NFTs can definitely spell a future where people can use blockchain in daily tasks without realizing their involvement.
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