Non Fungible Token:
Nowadays, we’re all hearing how Non Fungible Token are the new thing. And how they are going to revolutionize blockchain, collectibles, trading and “hype” surrounding a certain issue. But before we look into their impact on causing a paradigm shift, we need to understand what they are, and what makes them special. So, the acronym NFT stands for Non Fungible Token, which in layman’ terms functions as a ticket stub. Whenever we go to the movie hall to watch a movie. That ticket states the date, time and duration of the movie you will be watching. It also states the the seat number from which you’re watching it from. Therefore, you’re not paying for watching the movie. In this case what you are actually paying for is the right to sit on the seat while it screens the movie in question.
Non Fungible Token functions in a similar manner. It basically provides you with the right to purchase the originality an item possesses, once that item converts into a digital form. Sounds weird, right? How can you convert in to something intangible? Well, the concept behind it is the reason why NFTs are revolutionizing the market space as we know it. Let us take a look at Fortnite, for example. The free to download game has always remained in hype over something and has good reason to be in such spotlights all the time. The costumes or “skins” are one of the flagship items which the game uses to boost up in game purchases
This is where the concept of a Non Fungible Token kicks in place. Whenever a player buys said “skin”, they are essentially just making their avatar change their costume, for which they are paying. However, the “right” to provide players with the skin is the property of Fortnite itself, i.e. the source code it possesses to allow players to have that particular skin.
This is what NFTs do for you. They allow you to buy the “source code” of an item. Technically it allows you to buy the authenticity and “originality” that the thing has. Thus it provides you with the ownership rights of doing whatever you want with it now that you’ve bought it.
The next major question is, how do you secure that right of ownership with yourself? This is exactly where the role of blockchain kicks in.
Non Fungible Token are based on a cryptocurrency called Ethereum. It functions in a similar to that of Bitcoin. Whenever an item is listed for sale in the form of an NFT, say it be the first-ever tweet that Jack Dorsey offered for sale some time back. It records the identity of the said item in a code, that too in a particular format. The code can never be manhandled since it is itself a part of the blockchain. Since people from around the world can access the same from their own terminals, the identity of the digital item can never be change, replicate.
TL;DR: Non-Fungible Token are based on Ethereum. It records the identity of each and every item made available for sale in the form of an NFT. It also records the purchase of the NFT in essence is the purchase of the code that makes it unique. And thus proves its authenticity.
This function of blockchain has been critical with respect to determining the authenticity of a piece of artwork or any other such object which exists in cyberspace. Forgeries of extremely popular artists like Van Gogh, Rembrandt, Picasso have always plagued the art world. Wherein huge amounts of money are spent to authenticate the paintings which are considered to be priceless themselves after having gone through checks, biddings, and auctions.
Role of technology:
The technology has allowed for the verification process of authentication to become extremely, extremely simplified. One person does not need forensic experts to see whether the canvas is carbon age for the exact year the artist was reputed to make the art piece in question, or a graphologist to study the strokes of someone’s signature. The technology facilitated by the currency’s blockchain will do the very same thing for you.
Of course, instead of doing that, you can download an image of the Mona Lisa instead of actually paying the most amount of money someone has ever dreamt to purchase that priceless artwork, for free right? Well, not so much, because you won’t be able to buy the original one, since the code that your downloaded version shall have, would clearly state that its not the original, since it does not possess that particular identification code that the blockchain gave it in the first place.
So, how are NFTs stimulating economic activity? Well, for starters, the possibilities are endless. For example: Earlier, when we thought of expensive artwork, we thought of rich people looking all suave in tuxedos holding placards with their bidding number and end up paying exorbitant amounts of money for something that anyone who did not belong to the said field would find completely irrelevant.
Herein, however, it is not up to the demand of Old Masters to stimulate their prices, but the simple demand of anything. Internet dweebs can gamers can bid huge amounts of money to buy the playable character’s stock sword from World of Warcraft. Or they can bid the first dragon from Dungeons and Dragons (I have no clue, I never played these games. But you get what I mean). Anyone, literally anyone, who belongs to a community that feels strongly about any concept or thing can use that power to buy, sell, and trade-related things of that field in the form of NFTs, allowing for money to exchange hands at immense rates.
Role of Governments :
Given governments around the world are extremely hesitant of cryptocurrency. They think that “fiat money” is something that shall be the stuff of dinosaurs over the coming years. They can play it smart enough to their very own advantage. The primary reservations of the governments are that cryptocurrency ownership, holding, and trading offer complete security and anonymity. A person can merely buy an NFT from an organisation that is dealing in criminal activities without having any idea. it’s the anonymity offered by the technology.
However, with the given uproar and hype, multiple businessmen and investors have become extremely vocal about Non Fungible Tokens and their impact, with the main ones being Gary Vaynerchuk, Founder, and CEO of VaynerMedia, even the Winklevoss Twins from Social Network disclosing that they are billionaires thanks to their holdings in Bitcoin, with the world’s richest man, Elon Musk being the apex supporter of all things cryptocurrency and NFTs.
Given that people around the world are not going to stop making a buck in this widely under-utilized environment, they can try (“try” being the imperative word here) and impose taxes on any capital gains that arise from the trading of NFTs in cyberspace and make millions, if not billions, in tax revenue out of the taxes that they may levy on them
However, they still face a problem, since the main premise of trading NFTs is the source of anonymity. That is being offered, and no one, not even one person, would like to disclose their earnings. And it gives a 30% tax on the huge profits they have earned on trading NFTs. Therefore, if we look at NFTs as a whole, a marketplace without governmental involvement in terms of taxes, regulations, and restrictions, they have the capability of revamping what we believe a “marketplace” is. You don’t need to travel to Italy and wear a tuxedo to sit in an auction. And pay huge amounts of money for the first gelato recipe. You can spend the same amount of money, sure, but you can do this while wearing pyjamas and eating your first plate of poha in the morning.
The possibilities that NFTs possess are endless. And if someone can truly leverage the knowledge they have of niche marketplaces and play their game right. They can very well end up being a millionaire in a time span of mere weeks or even months. So, the moral of the story? Appreciate your geek friends, and all those who are CompSci majors.