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.