Deep-Dive: “The Future Is Here And It Looks Like Non-Fungible Tokens”
A woman looks at her phone with wide-eyed surprise. The speech bubble next to her reads: 'An NFT of a digital collage was sold for $69 million'. In the background is the very same digital collage by artist Beeple.
This piece is a systematic introduction to NFTs (non-fungible tokens) to make newcomers feel less frustrated when dealing with this new technology. Based on the direction of the NFT market, I have summarised the technical system architecture, programming language of smart contracts, development tools, and listed several important NFT wallets.
In addition, I have also written about some relevant technical problems with references. I believe that this in-depth piece will be helpful for both researchers and developers, to understand the essence of NFTs.
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Recently, NFTs have garnered remarkable attention from the industrial and academic communities. A recent report shows that the 24-hour trading volume on average of the NFT market is $4,592,146,914—which is about 4.4% of the entire cryptocurrency market.
This demonstrates that NFTs are not only popular within the blockchain community, but also increasingly important for the future of business development. The liquidity of NFT-related solutions has accounted for 1.3% of the entire cryptocurrency market in a short period (five months).
Early investors obtain thousand-fold returns by selling unique digital collectibles. At the time of writing, the NFTs-related market has significantly increased compared to one year ago.
Specifically, the total number of sales is 25,729, and the total amount spent on completed sales comes up to $34,530,649.86. The total number of primary-market sales is 17,140 and the number of secondary sales (user-to-user) is 8,589.
What Does Fungibility Mean?
Since ancient times, humans have used money as a means of exchange. During the 1990s, new forms of money—such as credit cards and digital currency—were introduced. Since then, new types of currencies such as cryptocurrencies have also made their way into the world economy.
While all of these forms of money do vary greatly in their specific characteristics, they all share similar traits that define them as being fungible.
Fungibility is an economic term with a specific meaning. It refers to the characteristic of a good or commodity that is equivalent or identical to another unit of the same type. It also refers to the interchangeability between two units of equal value.
Consider two identical copies of “The Immortals of Meluha” by Amish Tripathi: it does not matter which one you own because both copies are equivalent and interchangeable with each other.
It does not even matter if you own more than two copies, since all copies belong to the same category, and are therefore, considered to be fungible. So, a ₹10 note and a ₹100 note are also interchangeable since they are both mediums for the same thing: purchasing goods and services.
Also read: What Does Cryptocurrency Mean And How Is It Extracted?
So, What Exactly Is An NFT?
It represents a digital asset. You can think of it as a stock certificate. NFTs can represent anything that can be digitally represented: art, collectibles, or even a vote in an election.
A digital asset living on the blockchain is a little bit like a piece of trash sitting on a road: everybody can see it and nobody knows who owns it.
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