Chapter 1: What the heck is an NFT?
I am sure most of you are already familiar with NFTs, or at least you have heard about them in the last few months. In any case, before jumping into my story, setting the context may help. If you look on the Internet, you will find several definitions of NFT. Usually, they span from the financial to the technological. In my opinion, Etherum provides us with the best description (I rephrased the definition to make it platform-agnostic, but you can find the OG here):
Non-fungible tokens (NFT) are:
- A way to represent anything unique as a blockchain-based asset.
- A tool to give more power to content creators than ever before.
- A protocol powered by smart contracts.
Let's break it down:
- A way to represent anything unique as a blockchain-based asset.
A Non-fungible token represents your ownership of a unique asset (a picture, a soundtrack, a movie, etc.).
*Non-fungible *means that it can't be exchanged with another asset and maintain the same properties (it represents something unique, after all).
If you think about the €, you can easily swap a 1€ coin with an identical one and retain the same properties (purchase value). The result will be different if you decide to trade your original Picasso (if you're so lucky to have one) for an original Van Gogh. I am not arguing about which one is the most valuable. I am just saying that they are not the same thing (because they are unique paintings).
When an NFT is secured on a blockchain, its ownership becomes exclusive. People can eventually "copy" your property, but they do not own it (unless you decide to transfer your NFT to their wallet).
You can think about the "Monna Lisa". Several millions of copies and gadgets star the famous Lady, yet there is only one unique, original painting. I guess nobody would claim that a "Monna Lisa" printed on your coffee mug has the same value as the original painting.
- A tool to give more power to content creators than ever before.
Historically, the content business has been a centralised industry. Since Guttenberg invented the printing machine, only a few players have been able to reach large scale. That is especially true in the entertainment and art businesses, where artists usually rely on intermediaries (agents, labels, etc.), which eat a substantial part of their work's profit.
Thanks to the Internet, the situation has improved drastically. Platforms such as Blogger, WordPress, Myspace, Youtube, Facebook, Twitter, Snapchat, TikTok, etc., have given every wanna-be creator a suitable channel to unleash their potential.
More recently, Roblox, OnlyFans and Twitch (among others) introduced the possibility for creators to monetise their content through subscriptions and in-app tips.
And while more companies follow swift, one issue remains unaddressed: centralisation.
The distributed ledger technology makes (theoretically) blockchain networks highly decentralised, preventing any power unbalance. Blockchains are Transparent (every piece of information and transaction is publicly available) and Open (everybody can enter the ecosystem - no account needed), and the data stored in each "block" are forever immutable.
From the creator's perspective, this means that you can now prove your property, determine the scarcity, secure your royalties, and market your work without having to make compromises.
- A protocol powered by smart contracts.
Smart contracts are sets of rules that execute specific actions once certain criteria are met.
Insurance companies, for instance, could create smart contracts to automate the pay-out for clients when specific conditions occur (i.e. the airline communicates a flight delay, the mortuary registers the certificate of death, etc.).
For creators, smart contracts mean they can now bring their work to the next level and create derivatives that enrich the experience of the enjoyer. They can even transform what has historically been static (an image) into something that keeps evolving. Think, for instance, if the characters of your digital piece of art could age every year.