It’s 2023 and some claim that NFTs are dying. Also, most people upon hearing those three letters will say “ it’s the most stupid bubble in history ” or “ it’s a past-time hobby for bored rich people”. On the other hand you will find people who swear on their life it’s “ the most innovative technology” or that it “facilitates so many obstacles for creators”. But what is an NFT really, and should it interest you in any way? Here’s the briefest unbiased answer you can find.
What Is An NFT, Technically
Non-fungible tokens (NFTs) are digital cryptographic intangible assets that represent forms of data (such as JPEG, GIF, or MP4) and exist on the blockchain through their smart contracts.
- The term “non-fungible” signifies that it’s irreplaceable.
- Often referred to as “digital collectibles”
- These Token follow the ERC-721 standard.
- NFTs are not like cryptocurrency. Therefore, you can not trade one NFT for another in the same way you can trade one bitcoin for another bitcoin. Simply because there are no two NFTs that hold the same value.
- Cryptocurrencies are used to purchase NFTs.
Essentially, an NFT is a bunch of code (Token ID and Smart Contract) that links to a digital file data (such as JPEG, GIF, or MP4). This file is stored either on-chain (in the blockchain) or off-chain (in a separate server).
You can think of NFTs like stocks but with pictures that exist in the mysterious Web3 realm of the blockchain instead of the web 2 version we’re used to. That’s why they’re often confusing to understand, because blockchain technology is confusing. But we got this blockchain ultimate guide to get you to pro level, if you’re interested.
Anatomy of An NFT
To understand what an NFT is you should be familiar with its anatomy, because there’s more than meets the eye. The non-fungible token you see is made up of:
It has the NFT’s full description in JSON format along with a link to the off-chain server storing the image/video/audio/gif of the NFT.
2- Smart contract:
A programmed software that acts as the middleman between you and another person. It’s basically who mitigates the interaction between you and the blockchain, for example it transfers ownership of the NFT to you. We got this Smart Contract guide too if you’re curious!
3- Token ID:
Do you know how in movies they plant certain chips under the skin to track a certain person? That’s exactly what the token ID does, except no one can remove it from the NFT. Actually, when the smart contract assigns the NFT’s ownership to you, it’s giving you ownership over the token ID. The blockchain’s ledger is able to keep track of NFT’s whereabouts through this ID.
4- Image File:
This is the part of the NFT you are familiar with, the picture of a funny doodle, weird ape , or anime on your screen.
Cool now why the hell would anyone go through all that trouble to make Non-fungible tokens? Whatever anyone claims, NFTs’ main goal is eliminating the middle man. To help make data decentralized instead of being controlled by a centralized entity. Take a look at the way NFTs were used in the following areas:
- Real Estate
- Domain Names
- Physical NFTs
What Is An NFT, Psychologically
To understand what an NFT is from a psychological stand point, you need to go over the history of NFTs. After giving it a good read, you will realize that NFTs reached their peak during COVID-19. That’s when people had literally nothing to do but surf the web.
-Why are people paying tons of money to prove they own an image I can just screenshot! The thing you don’t get is it’s human nature.
-Why do you pay so much money on your house décor when a simple bed with amenities is enough to live?
-Why do we spend so much time cooking the most delicious recipes when literally 2 boiled potatoes and yogurt can make us equally full?
See it’s not about the need, it’s a little deeper. We seek the aesthetics, the power status, the feeling that we are doing something beyond ourselves. That’s why you find people spending countless dollars on a Rolex instead of a simple time-showing watch. That’s why NFTs became a hype, because finally in the digital world someone paved the way for that. If you want a deep dive into the psychology of nonfungibles, then check out this guide.
You know how they say beauty is in the eye of the beholder? The hype of NFTs is in the perspective of the user. Sure NFTs were indeed a bubble that burst in our faces. Hype or not, we can’t deny the serious money people made from NFTs. Where we go from here is the ultimate value of NFTs. Data security, verified ownership, and blockchain technology can take non-fungible tokens so far to reach their full potential of being more than just an overly expensive JPEG. You can read about it here.
Now, if Non-fungible tokens caught your attention Chainwitcher has literally everything you need to know. You can start with this NFT Introduction.