NFTs In The Digital Content Industry.
(Original article by CARTER HOFFMAN, in Trade Finance Global)
You might have heard a lot of hype around these things called NFTs, or non-fungible tokens. How can these digital things be selling for millions of dollars? TFG investigates.
Non-fungible what now? If you poke your nose around the blockchain space these days you have almost certainly heard a lot of hype around these things called NFTs, or non-fungible tokens. How can these digital things be selling for millions of dollars? Hopefully, this post can help shed a little bit of light on this rapidly growing section of the crypto sphere.
What is a non-fungible token?
According to the Ethereum website:
Let’s break this definition down a little bit, but first, we will take a quick look at what the terms fungible and non-fungible mean.
Fungible and Non-Fungible assets.
Non-fungible is a term used in economics to describe an item that is defined by its unique properties. This definition of the item means that is not interchangeable. A car would be an example of a non-fungible asset. The unique properties of one specific car make it inherently different than any other physical car. Most of the things in your house would also be examples of non-fungible assets. Think of things like your computer, watch, pants, or mattress. These are all things that are defined by their unique characteristics.
The concept of a non-fungible asset becomes much more clear when you compare it to a fungible asset. Fungible assets, by contrast, are defined by their value. The $20 bill in my wallet is fungible. Whether I have this exact $20 bill or another physical bill makes no practical difference since the bill is defined by its value rather than its unique properties (which in the case of a $20 bill could be how crinkled it is). Other examples of fungible goods include commodities like grain or common shares in a company.
A non-fungible token, then, is a cryptographically secure way of representing a unique asset. Once the asset, whatever it may be, is tokenized it cannot itself be modified. Additionally, there exists a cryptographically verifiable means of determining the owner of the asset.
NFTs in the Digital Content Industry
The biggest use of NFTs today is in the digital content realm. That’s because that industry today is broken, with the profits and earning potential of content creators swallowed by platforms they use to share their work. Take, for example, a photographer who shares their work on Instagram. The artist’s content makes money for Instagram who uses the platform to sell ads to the artist’s followers. While the artist may receive exposure for their work, more often than not through these platforms they are simply excluded from any monetary benefit.
In the world of NFTs however, the creator of the content does not have to hand ownership of their work over to a centralized platform for publication. Instead, ownership of the content is baked into the content itself. This gives the creator much more autonomy over their own work.
NFTs and trade finance?
In trade finance, there are also many examples of real-life assets and processes that could be represented or streamlined with non-fungible tokens. Think of a traditional shipment in global trade where the consignee must present a bill of lading to the shipper in order to take legal possession of the goods. The bill of lading in this instance, through the verifiable processes that have been put in place in the industry, serves to indicate that the consignee does in fact own the goods and that the shipper can transfer them physical possession. Tokenization of this bill of lading, or even the shipment itself, would allow this same ownership to be verified in a decentralized manner.