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NFTs have been the center of many debates over the last few years.
Some skeptics say they waste time, money, and effort. But dig a little deeper, and you’ll find many people still don’t know much about NFTs, how they’re used today, the benefits they can provide, and most importantly, how they can be used in the future.
But let’s start at the beginning—what is an NFT?
To understand what non-fungible means, let’s start with what it means to be fungible.
An asset is fungible if it can be exchanged for another of its type. For example, any currency like the US Dollar, the Euro, and any cryptocurrency like Bitcoin are all fungible.
A $100 bill can be exchanged for another $100 bill without any loss or gain in value. Likewise, 1 BTC can be traded for someone else's 1 BTC with no change in value. Same with any other denomination of currency.
That 1:1 exchange makes them fungible tokens. That means they can be traded for another of its type.
Unlike US Dollars, NFTs are non-fungible tokens. That means each NFT is unique and can’t be automatically exchanged for another of its type.
Using a real-world example, there is only one Mona Lisa by Leonardo da Vinci. It’s located in the The Louvre in Paris and owned by the French government. We know this because it’s arguably the most famous painting in the world. The Mona Lisa is non-fungible.
The only difference between the Mona Lisa and an NFT is there’s an easy and unarguable way to differentiate the real Mona Lisa from a replica. But since every NFT is unique, they’re perfect for verifying ownership of both digital and physical assets.
How? NFTs host pieces of information known as metadata which can determine traits, proof of ownership, and even media like video, sound, and images.
Using NFTs—to back digital and real-world assets—can streamline the transfer of ownership process and make ownership more secure and verifiable.
But there are still a lot of people who don’t trust NFTs. Usually due to misconceptions they’ve heard.
In the early days, most NFTs took the form of images on a blockchain. At first glance, outsiders assumed people were wasting money by purchasing an image they could find on the internet for free.
And while yes, anyone can right click and save the image associated with an NFT, they don’t actually own it. Circling back to the Mona Lisa example, anyone can Google an image of the Mona Lisa and print it out.
The reason you’d pay money for a ‘JPEG,’ so to speak, is ownership. In order to benefit from an NFT, the only way to do so is through ownership which is far beyond downloading an image to your desktop. It’s undeniable verification on the blockchain and value derived from being an original.
Many NFTs provide what’s commonly referred to as utility. NFT utility could include redeemable value for things such as physical goods, memberships, exclusive offerings, and more. The utility offers simplified verification and security for NFT creators and holders.
In fact, NFTs can offer the flexibility to do more. The ability to grant owners different privileges and benefits is one thing, but the creator of the NFT can evolve that utility over time to expand usability for owners.
However, even if an NFT has no utility or you can’t ‘do anything with it,’ NFTs can easily be compared to any collectible. You can’t technically do anything with your 50-year-old baseball trading cards, but they can act as a collectible or a hobby. So the ability to do something is really in the eye of the beholder.
While cryptocurrency and NFTs often go hand in hand, there is no correlation between owning cryptocurrency and NFTs.
This is a common misunderstanding because, technically speaking, they both live on the blockchain. But all that means is they can be digitally verified through unalterable transaction records.
Nowadays, most NFT marketplaces (RECUR included) provide plenty of ways to pay, such as credit cards, debit cards, Apple Pay, Google Pay, and more. So the main benefit to owning cryptocurrency is that it offers you another option for buying NFTs.
NFTs will have many applications in the future. Some we can predict, and some we can't—yet. They’re already being used for far more than just “JPEGs.” Businesses and individual creators are utilizing NFTs for:
Loyalty and rewards—Big brands are already using NFTs to reward customers and fuel loyalty programs. Offering dedicated customers more flexibility through true ownership and igniting longer-lasting engagement are just a few reasons why loyalty programs are being changed for the better with NFTs.
Events—Concerts, festivals, and sporting events are using web3 to offer event attendees exclusive access, get first dibs on tickets, give free virtual commemorative tickets (VCTs), and more.
Digital art—With NFTs, artists can create verified 1-of-1 digital art pieces and sell them on the blockchain. Individual artists can make more money by cutting out distribution intermediaries and going directly to their fans. NFTs are their means to do this.
Profile pictures—Many enthusiasts use NFTs as their profile pictures (also known as PFPs) on social media sites like Twitter and Discord, and messenger apps like Slack and Telegram.
Real estate—Rather than having a paper deed or mortgage, your home purchase could be secured and verified with an NFT. In fact, in early 2022, a blockchain real estate company called Propy facilitated the sale of a Tampa home as an NFT for 210 Ether, which was worth approximately $650,000 at the time.
In-game items and rewards—Gaming has always been at the forefront of innovative technology. That’s why their intersection with web3 is no surprise. Game studios have started exploring adding NFTs to their in-game items and rewards, giving players liquidity for their in-game purchases like accessories, skins, power-ups, land, and more.
Businesses, developers, and artists—on our team and across web3 at large—will continue creating new use cases for NFTs and onboard new users to web3. But no matter how much we prepare and innovate, there will always be surprises in the future.
Even so, we know one thing:
NFTs are here to stay.
And the more you can do to understand them, the more likely you are to thrive in the future—no matter what that future entails.