2021 could aptly be described as the year of the NFT, to the joy of some, and the chagrin of others, but are they simply a fad, or is there a legitimate business application for them? The answer is complicated, to say the least.
In this blog, we’ll unravel the mystery by looking at what NFTs are, how they work, and if they have any legitimate applications.
‘N’ is for non-fungible token
A non-fungible token is a unique identifier that can’t be copied, replaced, or divided, and it is recorded on the blockchain. The latter part is important, and we’ll return to it later on. For now, think of an NFT as a receipt.
In essence, it is a line of code that is unalterable. It will exist, as is, for all time. NFTs have been popularised as digital collectables. The receipt in these cases proves that the owner has possession of that image, gif, or 3D model. Not the rights to that digital object, but that specific copy of the digital object. No one can “steal” it, but they can click on it and copy it. They’ll have the image, but they won’t have the specific image linked to that receipt.
A famous example is Jack Dorsey’s first tweet. It was “turned” into an NFT, but in reality, this doesn’t mean anything tangible. An image of Dorsey’s tweet was linked to a line of code. Anyone could just as easily take a screenshot of Dorsey’s tweet and make it into an NFT of their own.
It wouldn’t be the same NFT, but it would share the same image because the image has no real bearing on the NFT. While most NFTs have an image as a digital collectable, the NFT is not the image. It’s the line of code.
At this point, you might be wondering why everyone was going crazy for them. The short answer? Hype.
‘F’ is for fear of missing out
Following the crypto bullrush of 2017, which saw the value of Bitcoin skyrocket by about 2000%, people were on the hunt for the next big thing. In that same year, the CryptoPunks and CryptoKitties projects were launched, widely recognised as the first big NFT projects.
There was some interest in these, but they were still somewhat obscure. Shiny collectables for hardcore crypto enthusiasts. The Bored Ape Yacht Club collection, released in 2021, was what really propelled NFTs into the mainstream.
Many believed they had found the next Bitcoin and bought in. Some dumped cryptocurrency worth thousands of dollars into acquiring them, and yet, they had no real purpose other than being collectables. While many swore they’d have legitimate applications, those who were most zealous about acquiring them couldn’t really explain how.
Some NFT collections even ended up being full-blown scams, with individual investors losing fortunes.
In all honesty, people were buying them in the hopes of selling them for a higher price later. Some even succeeded in this endeavour, before the market effectively crashed in 2022. While you can still find NFTs worth thousands of dollars, there’s little chance of them actually being sold for those prices.
‘T’ is for tech
Most NFTs only have as much value as one is willing to pay for them. Like a work of art, or any real-world collectable. The time for making massive profits off of NFTs as collectables is over. No one’s buying them anymore. The only ones insisting they’re still a hot commodity are the ones that have been left holding them.
The world’s first taste of NFTs was part art project, and part get-rich-quick scheme. That said, the underlying technology, used sensibly, shows promise. The blockchain is an exciting new frontier, and it’ll only become more important.
Being able to mint receipts that can’t be altered could be used for legitimate business purposes. They could be used to record transactions, or even as more practical digital items. Concert tickets, vouchers, membership cards, and documents could one day be logged using NFT tech.
It’s certainly not as exciting as NFTs were made out to be at first, but good tech rarely is. Instead, it finds its place as a sensible staple.
As the NFT hype dies down, many have been left wondering if they have some legitimate application for business, and the answer leans towards the affirmative. However, we can’t be sure what form it’ll take just yet.
The blockchain and its underlying tech aren’t disappearing any time soon. While it’s easy, especially for business owners, to want to rush into the next big thing, in this instance, caution is recommended.
Many NFT projects ended up being scams, and blockchain technology at large is still misunderstood, leaving leeway for those looking to make some fast cash to mislead.
Becoming an industry leader in the next iteration of the web won’t be achieved by rushing in blindly. As frustrating as it may be to hear, on a frontier rife with pitfalls, slow and steady will win the race.