Last week covered cryptocurrencies; this week will journey into the crazy and infinitely creative world of NFTs, non-fungible tokens. You may have heard of a piece of digital art sold by an artist named Beeple for US$69 million at Christies Auction or kids as young as 12 selling their art as NFTs for hundred of thousands of US dollars.
NFTs are a new way to ensure your content’s ownership and future earnings. I say content because anything can be an NFT, an image, a poem, a video, or even a piece of paper with scribbles on it. We created an NFT of the article you are reading right. A 100 per cent of the proceeds are going towards local STEAM programmes. This is the first NFT based on an article published in a major newspaper in the region! I know, amazing.
Now let’s get into exactly what an NFT is. To understand NFTs, we have to talk about smart contracts, minting and what it means to be non-fungible.
Fungible and Non-Fungible
Fungible isn’t a type of fungus; it speaks to something being replaceable. For example, for a Nanny, a $500 bill is considered fungible. You can replace your $500 with someone else’s 500 dollars; the money is interchangeable. They’re not the same, depending on wear and tear, but we can replace one Nanny with another, and the value would be the same to us. Now grab a piece of paper and a pen, and draw something random. That drawing is non-fungible. The drawing is unique to you; how you draw, the pen you used, the object you drew, and that piece of paper all make it unique and irreplaceable. You may have a million-dollar masterpiece on your fridge.
Minting and Smart Contracts
NFTs serve as a digital certificate of ownership and authenticity for an asset and cannot be replicated. But, it is possible to replicate the digital asset an NFT is connected to; the US$69-m work of art we mentioned earlier can be downloaded for free. So you may be wondering why anyone would pay that much money for something you could get for free; Because it was minted. Minting is the process of publishing your NFT on the blockchain with a smart contract. The smart contract is a bunch of code that regulates your NFT’s transactions; it keeps track of the rules of the NFT and automatically enforces them. If you want to sell your NFT to someone, you send a request to the smart contract; it will take your order and transfer the NFT to the new person if the contract requirements are met. It keeps everyone honest.
The Benefits of NFTs
NFTs can be made using any digital or physical asset; case in point is this article. We could go further and make an NFT of a printed copy of this article or an NFT of me reading the article aloud; the possibilities are endless. The other benefit; anyone can invest in NFTs, and NFT ownership is secured by a blockchain, making theft very difficult.
The Dangers of NFTs
Firstly, NFTs are a technology to indicate ownership of an asset; by themselves, they are not worth anything. General misinformation and the buildup of hype surrounding NFT launches can cause the value of tokenised assets to be inflated and volatile; fraudsters have used this to prey on persons and swindlers to make quick money off of unsuspecting NFT buyers. Secondly, NFT generation is highly energy-intensive because the blockchain takes a lot of electricity to verify transactions.
Most of the uses of NFTs today are related to digital art, but the real value in NFTs is increasing brand value and making transactions better, cheaper and more secure. StarApple AI is minting an AI-based NFT to support our clients and STEAM in Latin America and the Caribbean. One day you could use something similar to NFTs to buy a house; with no humans regulating the process, errors and the time to complete the process will be reduced. For now, Jamaican artists and brands can use NFTs to increase brand loyalty and value. Reach out to us to find out how.
Stay Innovative, Jamaica!
Adrian Dunkley is the President of the Jamaica Technology and Digital Alliance (JTDA); founder of StarApple AI. Feedback to firstname.lastname@example.org.