Blockchain
Nov 9, 2022
There are probably no people left who have not heard of NFTs yet.
Being a vital component of Web-3: the next iteration of the Internet, along with the Metaverse and De-Fi, NFTs evoke, perhaps, the most contradictory feelings in society - from enthusiasm, sometimes bordering on insanity, to outright hostility and harsh criticism.
NFT - a non-fungible token - is a unique unit of data that is verified and stored in the blockchain and can be linked to digital or physical assets to provide immutable proof of ownership. Blockchain technology allows NFTs to be tracked in an immutable digital ledger that provides a history of assets and can be verified at any time. So, NFTs cannot be replicated, destroyed, or counterfeited.
NFTs are primarily created on Ethereum, but other blockchains support them as well.
For selling NFTs, they must first be minted. Minting an NFT means converting a digital file into a digital asset that can be published and stored on the blockchain, making it available to potential buyers. The minting process is not free - you need a crypto wallet and a certain amount of crypto currency to cover the Ethereum "gas fees." The most popular NFT marketplaces on the Ethereum blockchain are: OpenSea NFT, Rarible, and Mintable.
Today, almost anything can become an NFT: paintings, photos, videos, music, gifs, memes - any kind of unique art that can be represented digitally. Or it can even be real estate, collectibles, event tickets, website domains or tweets.
Famous auction houses Christie’s and Sotheby’s have already made sales of NFT artworks for several hundred million dollars.
The first experiments with NFT started back in 2013, but the wave of hype rose only in 2021, and sometimes it looked like real insanity. So, the creator of the Nyan Cat meme received $580,000 in cryptocurrency for a gif with the famous cat meme, and the digital artist Beeple sold the token of jpeg collage - Everydays: The First 5000 Days, for $69.3 million.
NFT technology is actively used by both well-known and not yet recognized artists. The main factor in the growing popularity of NFT is the opportunity for a beginner to present his or her work to a wide audience. A few years ago, a new artist had to work hard for several years before reaching the first serious exhibition, and still success was not guaranteed. Today it's enough to convert your painting into a digital format, create a corresponding NFT token (it's not that complicated) and sell it for real money.
Actually, NFT technology can be used for transactions with any digital assets, however, the recent trends show a growing interest in selling real things as NFTs. These can be, for example, sculptures, antiques, a coin collection, etc. But if converting paintings into a digital format is a common thing today, how can a real physical object become an NFT?
The first way is to create a 3D digital copy of the object. Technologies that allow the average person to create such copies are becoming more and more available. And of course, it attracts a lot of interest from businesses and corporations that have been already using and investing in 3D technologies to promote their brands and products not only in the real world, but also in the virtual world of the metaverse. In addition, NFTs of 3D objects are expected to replace our favorite real-world things, objects, and assets in the metaverse, making it even more similar to our everyday environment.
But what if we take objects that are difficult to digitize? Last month, for example, a three-bedroom house in South Carolina was sold as an NFT for $175,000. The buyer indicated that he was able to make the transaction for that property with just one click. How does it work?
In simple terms, the selling company creates an NFT that represents ownership of the house. Those who buy this NFT become the owner of the property. Despite the fact that the purchase is made digitally, the ownership is considered absolutely real - whoever owns the NFT owns the house in the real world.
Although such transactions are still viewed with suspicion by the majority, there are serious reasons to believe that NFT technology could open the door to a decentralized economy without intermediaries such as banks or a government. In the future, it may completely change the rules of the markets.
Today, besides the arts and real estate, the most potential for NFTs have gaming, education, healthcare, supply chain and logistics industries. NFT tokens can be used to confirm any important document: a diploma, health records, a marriage registration certificate, etc.
A serious barrier to NFT adoption into the mentioned areas is the lack of government regulation. And it is very likely that in case of a fraud or hacker attack, the affected party will not be able to recover its losses.
Moreover, NFT technology faces many other challenges today. For example, one of the main arguments against NFT is its huge energy consumption and extremely negative impact on the environment. However, after Ethereum has switched from a power-intensive Proof-of-Work protocol to a mining-free Proof-of-Stake, it is possible that NFT will become more eco-friendly and increase its audience.
Since NFT has both - the devoted fans and haters, it remains one of the most hype-boosting components of web-3, and is mentioned every now and then in the news and social media, either along with the figures containing impressive number of zeros, or along with facts that cause a no less impressive number of questions and misunderstandings.
