Non-Fungible Tokens - Q&A
What is an NFT?
NFT stands for ‘Non-Fungible Token’. This is a type of cryptographic record that is or relates to a unique real world asset or form. The specific asset is not fungible or interchangeable with any other similar asset or form.
A non-fungible token is a unique digital item typically associated with a blockchain. The digital asset is created in accordance with a framework or standard to facilitate mutual recognition of the asset. As an example the ERC-721 standard is applied for the issuance and trading of non-fungible assets on the Ethereum blockchain. On the basis of this mutual recognition the digital asset can be owned, traded and managed by people applying the standardised approach depending on the properties of the token. The properties of a token are determined by the applications, protocols and computer code that applies to that token when executed by users or nodes operating on that blockchain network. This is the smart contract governing the existence of the relevant token.
Why is there so much interest in NFTs?
Blockchain platforms and NFTs provide an opportunity for significant growth in a number of markets and particular interest has already been identified in areas such as digital collectables (eg sports trading cards) and artwork. Individual rights have traded for tens or even hundreds of thousands of dollars and the volume of activity has been increasing. The ability to access digital products globally with confidence that the product being acquired is verified in accordance with standards applied relative to that network and in accordance with arrangements accepted in the industry has resulted in some significant value creation in the form of NFTs. For some businesses a move to digital may replace the entire existing market whereas in other areas there may be an opportunity to open up new revenue streams or expand geographic reach. All these factors make NFTs an exciting product to follow in the near term.