What are NFTs and their implications?

The BUZZ

NFTs have seen massive interest and traction lately, largely from attention-grabbing headlines such as these:

Nyan Cat going to the moon (theverge.com)

ELI5: Non-Fungible Tokens(NFTs)? 🧑‍🏫

In short, NFTs are an application of blockchain technology that allows users to create and assign unique IDs to any item. Since every ID is unique, no two items will ever share the same identification. And because technology is inherently digital, any digital content can be easily linked or created as an NFT and assigned a unique ID. This includes any digital files, online game content, and even web domains. However, for physical items, some linkage has to be established between the physical item and the digital ID to benefit from the technology. Similar linkages between physical and digital have already been in place for years such as the ubiquitous UPC barcodes and QR codes.

The first item scanned with a barcode was a pack of Wrigley’s Juicy Fruit chewing gums in 1974 (medium.com)
The Samsung Frame serves as both a TV and an art display (samsung.com)

What are NFT’s broader implications?🤷

The advent of NFTs effectively allows the digital identification of all goods and enables the customization of their nature. In short, having a globally unique identification system for all physical and digital goods allows any user to interact with almost anything in a systemized and organized manner. Not only will this reduce the massive friction that comes with person-to-person trading, but it also enables limitless potential with native digital goods. Some more advanced implications of this technology include:

  • Potential for secondary markets for any NFT goods with secure transactions and price discovery options
  • Significant increase in liquidity, transforming a regular item into a viable asset with the potential to be used as collateral
  • Enforceable royalty programs can now unlock the sharing economy of all assets. Since secondary sales can be monetized by creators as well, creators are no longer in competition with their own buyers
  • Commercial licenses can now be easily tracked and managed because of their output’s digital traces
NBA Top Shot leverages NFT to create ownable sports moments (onflow.com)

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