Written by: Bruce Woodruff, Executive Contributor
Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.
The author is a seasoned veteran in the NFT and cryptocurrency industry. Specific projects mentioned are done so for context, or to highlight specific examples, for educational and general informational purposes only. Nothing contained herein should be considered financial, legal, or any other type of advice. Cryptocurrencies and other tokenized assets are experimental technologies; never invest more than you can weather losing, and always familiarize yourself with the associated risks before making any financial decisions.
What are nonfungible tokens (NFTs)?
The term non-fungible token is used to universally classify unique or provably scarce digital assets that are used to signify ownership of their associated content. Breaking down the term: ‘Fungible’ is a technical term for an asset or commodity that can be freely exchanged with similar or indistinguishable counterparts of near-exact or identical value and are most often divisible. (EG: One US dollar banknote can be freely changed for any other one USD banknote, or for 10 dimes, 4 quarters, etc. and retain is $1 value.
Being the opposite of ‘fungible’ non-fungible simply means ‘unique’ or ‘individually valued differently than similar items” (EG: Michelangelo’s “Creation of Adam” and Van Gogh’s “Starry Night” are both paintings, created from similar materials and mediums, but have individual value based on additional identifying factors and cannot be freely exchanged, nor can they be efficiently divided to partially monetize their value).
In the current context, a ‘token’ is the term used for a cryptographically secured unit of value or of value exchange. So, in layman's terms, an NFT is just a unique digital asset (or synthetic asset) registered on one of a growing number of decentralized ledger technologies; also known as blockchains. For more information on blockchains, tokens, or other decentralized technologies; a very useful resource is the Ethereum Foundation’s educational content.
What do NFTs do?
From an external perspective, it’s likely that the NFT market appears to be a prime example of “tulip mania”, with the world at large beginning to take notice of the technology after exorbitantly priced sales of digital artwork and collectibles; the most widely recognized of which is ‘The First 5000 Days’ by digital artist Mike Winkelmann, aka Beeple. [More on this later; because the nature of the work has much less awareness than its’ sale price.] which was sold at auction for (at the time of sale) just over $69 million US dollars, with another well-known example being the Bored Ape Yacht Club, a collection of 10,000 digital ape images which have generated billions of dollars in sales since May of 2021.
But NFTs aren’t just digital art, or even just images. As the global adoption of cryptocurrencies accelerates, largely fueled by the unparalleled growth of the NFT market, we continue to see new, disruptive examples of the potential for NFTs, tokens, and other concepts that are made possible by blockchain technology and the decentralized ethos that led to their creation.
To be thorough, we’ll first explore why NFTs are arguably the most significant development in the history of the creative arts. Accompany me, if you will, on a trip down memory lane.
The year is 2014; in musty basements and bespoke internet cafes all over the world, futurists, cyber-anarchists, and knowledge-hunters are spending their digital coins to fund the creation of an experimental new network based on the technology introduced in Satoshi Nakamoto’s ‘Bitcoin: A Peer-to-Peer Electronic Cash System’, published by an anonymous (beyond the name Satoshi Nakamoto) person or person(s); a nine-page exploration of the benefits of a global payment rail system without 3rd party intermediaries or a requirement to trust that there will be no interference from human error, or by purposeful intervention. Called Ethereum, this new blockchain is said to be a much more functional evolution from the nascent Bitcoin network, which does little outside of serving as a financial exchange.
Though not entirely opposed to the concept, you, a talented digital artist, see little, if any benefit that this ‘magic internet money’ can offer; so, while you may do some occasional research out of curiosity, your time is largely committed to your work as a concept artist for a popular game studio. But, ever an optimist, you remain hopeful that your computer’s bitcoin mining will eventually become something of consequential value; the game studio you work for offers reasonable pay, but far less than you feel your work is worth, but there is little to be gained from expressing that belief. After all, you’re not able to sell your art in the same way analog artists do, since your work is digital in nature, there exists no way to prove you own the original work, or that there are no authentic reproductions of the same; once posted publicly online, anyone can download the file and claim they are the one who created it.
Similarly, musicians, live-stream personalities, writers, and even analog artists are forced to choose between pursuing their passions and accepting that the companies that employ their creative talents can benefit from ongoing sales or subscriptions that include their work, or to seek alternative employment unrelated to their creative impulses. But, unbeknownst to all but the most optimistic advocates for the nascent tech known as blockchain, an experiment is taking place.
A short video clip, titled “Quantum” has been published on one of the earliest alternative networks inspired by Bitcoin; by creating a digital currency with a single ownable and indivisible unit (token) holding metadata which resolves to display the associated content. As proof that this token could be used to transfer ownership of the associated artwork, “Quantum” was sold for $4 worth of Namecoin, and transferred to the purchaser’s digital wallet.
The news of this innovation spread quickly, if quietly, among the early blockchain participant community, leading to the creation of the Rare Pepe wallet and the Counterparty platform, both being among the earliest infrastructure created to enable the NFT concept.
Fast-forwarding to today (there’s far too much significant history to point out all of the significant events that gave way to the current NFT industry), the worlds biggest brands, celebrities, and even governments are jumping on board the NFT train. But that’s fairly common knowledge at this stage, what most people still don’t grasp is why there is so much growth in an industry that is perpetually volatile and is still very new and experimental.
So, let’s finally discuss what NFTs do. The simple answer is that NFTs are immutable public records of ownership, transfer, and sale; cryptographically secured via (most often) public blockchain networks.
The long answer could fill several more pages; but we’ll supply a few examples and leave the rest to your imagination; because it’s very likely that just about anything you’ll be able to imagine as a use for NFTs, would be a valid use-case. The NFTs that have been making mainstream headlines unfortunately encompass a small sector of the industry; specifically digital collectibles, and in some cases, art or music. Within these examples, the use of NFTs is already disrupting these centuries-old industries. Creators now have access to a global, 24/7 audience and potential collector-base, with no required intermediaries, instant payments, and ongoing, automatic resale royalties, forever, on every sale of the work. There are also a multitude of other beneficial factors that are only possible with the emergence of the Metaverse and Web 3.0; thrust into the spotlight by, you guessed it, NFTs. Brands and celebrities, along with creators worldwide, are now also able to build experiences, communities, and even exclusive content around their work; and all of it can be publicly and almost-instantly verified by anyone with an internet connection.
NFTs for Everything Else
Beyond art, music, or other digital content, the potential of NFTs is nearly limitless. This is because, despite not being mentioned in the headlines, NFTs have a lot more going on under the hood than “this token displays this artwork”. Every NFT is issued by a smart contract; essentially highly advanced “if this then that”. This means that any NFT can be programmed to interact with various protocols based on various manual or automatic triggers. The following are only a few examples, all of which have either been tested and proven to be valid or will be soon.
NFTs can function as
Keys to sections of content, specific web pages, or event entire websites; restricting access based on configured thresholds
Voting rights in decentralized organizations (or in standard government election)
Privacy-preserving proof-of-humanity
Deeds of ownership for real-world assets (a house was recently sold in Tampa as an NFT for $625,000)
Loyalty rewards (countless companies already employ a rewards program, with Starbucks notably adopting NFTs as the focal point of their new loyalty program)
Event tickets (imagine you have a concert ticket that you can’t misplace, can’t fraudulently reproduce, and can retain as a souvenir that can never be lost, damaged, destroyed or invalidated
In Japan there’s prototypes being tested of deadbolt locks that use an NFC reader to verify your matching NFT and unlock your door.
What people are beginning to realize is something I’ve been saying for almost 3 years; that within another 5-10 years, nearly everything we own or transact for that isn’t perishable will be represented by an NFT. Or at the very least, it will be more often than it’s not.
*To return to the aforementioned ‘First 5000 Days’ the art NFT that sold at Christie’s for a crisp $68.9 Million US dollars; there are a number of factors that lack awareness due to the spotlight on the price. The First 5000 Days isn’t just a digital painting, it’s the chronological culmination of 5,000 individual artworks; created and published on Instagram once per day for ~15 years. The artist, known online as “Beeple” (@beeplecrap) has amassed 2.5mil followers based on his “once-a-days", which were previously never monetized; thus, offering a shining example of the potential benefits to creators.
Bruce Woodruff, Executive Contributor Brainz Magazine
Bruce Woodruff (aka BruceTheGoose) is an early adopter of NFTs and other "Web 3.0" technologies who has been working exclusively in the blockchain sector since 2019. They're a 'man of many hats', with a few examples being artist, founder, and philanthropist. From his perspective, the NFT space completely changed, and very likely saved their life; and they have committed themself to improving the artists' experience as well as the mainstream awareness and adoption of these incredibly powerful technologies. They are the founder of DappGoose Labs, an R&D studio native to Web 3, and a unifying 'brand umbrella' for their portfolio of initiated or acquired projects.
