Talking frankly about NFTs: their past and future

Since the emergence of non-fungible tokens (NFTs) in 2014, and especially since the NFT market surpassed $24 billion, there has been a lot of hype and misinformation. The news about NFTs is often overwhelming. For new readers, these articles inevitably contain "NFTs are a kind of" expressions... If you have read a dozen similar articles and still don't understand NFTs, then you are in the right place.

NFTs are really important and useful, and they are becoming more and more important. But NFT evangelists and skeptics alike tend to simplify and exaggerate everything, and sometimes even screw things up. Here are some things you may have read about NFTs — both positive and negative:

• NFTs are a scam.

• You can convert your image into an NFT to prevent it from being copied.

• NFTs are just a fad.

• Each NFT is a proof of authenticity of a "one-of-a-kind" item.

• NFTs are harmful to the environment.

First of all, NFT itself is not a scam. Scammers use email to scam, but we wouldn't say email is a scam. Second, NFTs are not a fad, although it remains to be seen whether any particular series of digital collectibles will end up being a lasting set of cultural artefacts or just a fleeting fever dream of a techno-society groupthink. Third, while some blockchains currently have energy consumption issues, anyone looking to nitpick probably doesn't know what they're talking about. Finally, beware if someone tells you that you can "turn your artwork into an NFT", or that an NFT can prevent your artwork from being copied, or that an NFT can prove that a work of art is truly "unique" people. Because this language was invented by people who know how to manipulate popular perception, none of this is true.

Are NFTs digital assets? Yes. Because the definition of an asset is "something deemed valuable," an NFT is a digital asset if people are willing to buy it. Like an art collector deciding to buy a Monet painting, or Maurizio Cattelan's Bananas ($120,000) taped to the wall, the willingness to buy is not It needs to be based on any kind of objective reality.

That's all. When an art collector buys a rotten banana taped to a wall, of course he knows it's just a banana taped to a wall. So if you're going to buy a digital banana taped to a public blockchain by an NFT, it's best to have a clear idea of what you're getting for your money and what you're not getting.

When reading NFT, the most frequently seen word is "non-homogeneous". Terminology aside, an NFT is simply a record of something: a claim of ownership, a timestamped transaction receipt, an agreement. Just as we all agree that only those with tickets to seat 24A at sporting events can get there, we also all agree that NFTs are not universally fungible. We agree that there is no (or should not be) record of making the same claim repeatedly for the same thing. This is what "non-homogenization" means.

The value of NFTs

To understand NFTs, it's important to understand how they become valuable. Unlike cryptocurrencies like bitcoin (BTC) or ethereum (ETH), NFT’s value often comes from ownership of things that aren’t controlled by the blockchain itself: digital picture files, house deeds, tickets to exclusive clubs. Owners of NFTs must therefore grapple with the tenuous relationship between the record of ownership on the blockchain and what they rightfully own (which is not on the blockchain).

Consider this question: Do you only buy an NFT itself, a record on the blockchain with only a unique string of data, without any digital or real assets involved? Not interested, right? But what would you think if we told you that it's unique, or that Beyoncé once owned it, or that someone else is lining up to buy it at a bigger price?

When you "own" an NFT, what do you own? Almost every legal description of ownership involves the notion of possession and control over something. If NFT is used as a ticket for seat 24A, then you have the agreed right to sit on this seat. No one else can sit there, and if someone wants to sit, you can wave your ticket at them to get the hell out of the way.

In the case of NFTs representing digital works of art, things get tricky. In this case, the NFT usually contains a link to a public media file on the Internet, which can be accessed and copied by anyone. When it comes to physical art, it's very difficult to create fakes. But in a world of 1s and 0s, making perfect replicas is a piece of cake. So, in this case, the only thing you own and control is the transaction receipt itself: only you can decide to convince someone else to pay you by writing their ID into the owner field of the NFT record. But how much is it worth? In many cases, you don't own or control the artwork. You can't stop others from copying it. You can't stop them from doing something you or the artist doesn't like, like writing a nasty word on it. You can't even prevent them from creating a separate NFT record, pointing it to the same art, and making the same ownership claims as your NFT.

Many digital collectibles traders believe that it doesn't matter that they don't have ownership or control over the actual asset that is the artwork. They believe—and I have to say that they are really big-hearted—that it is in the interests of NFT owners that it is not possible to prevent others from copying NFTs and spreading fakes on the Internet. But let's be clear: if people are free to promote someone's artwork, that's great for the artist, but the massive uncontrolled appropriation, demeaning and unauthorized commercial exploitation of other people's intellectual output is clearly no.

NFT evangelists have recently turned to focus on the virtues of community and NFTs as gateways to a variety of online and real-life experiences. From exclusive clubs to virtual concerts in the Metaverse to chat rooms where people can connect with creators, fellow enthusiasts, and celebrities. There is nothing wrong with that. NFTs may be a complex and expensive way to manage tickets right now, but they are a legitimate and potentially useful method, especially as they become cheaper and easier to use. NFT can indeed solve problems such as counterfeit tickets and scalping.

Evolution of NFTs

NFTs are constantly evolving. As new NFT standards emerge, such as Ethereum’s new EIP-4910 (a compatible extension of the ERC-721 standard, by far the most commonly used NFT standard), we can start to make stronger claims than we currently have , which grants ownership and control and is enforced through the NFT’s smart contract itself.

To see how this works, we can turn our sports ticket example upside down. Rather than buying an NFT to get a 24A seat, what if the NFT represented an agreement that only you could offer someone else a seat, not just for a specific event, but for all events? As long as sales are only allowed via cryptocurrency, the NFT's smart contract could give the owner exclusive control over receiving payments, in exchange for the payer being seated in that seat. Here, the seat is not necessarily owned by the stadium or the league. In this case, the stadium could franchise each seat and use NFT's smart contract to not only allow NFT holders to get paid from everyone in seat 24A, but also allow venues, leagues, and even players to Get a piece of it. This is the management of permissions, and it is a very suitable and reasonable use case for NFT.

This is the crux of the matter. NFTs can represent and help enforce rights: rights of artists. Collector's Rights. Rights to distribute, resell and receive royalties. If all of these transactions are managed on the same blockchain as NFTs, then this little digital transaction receipt, and the smart contracts that govern it, will have real power and operational efficiencies that can change the economics of the arts and entertainment industry , and this is just the beginning.

Now, technologies such as zero-knowledge cryptography combined with new smart contracts based on EIP-4910 add scalability, privacy, and functionality for developers to build more useful services.

Using NFTs in this way lays the groundwork for artists who can make more money by signing fans, making them promoters and distributors of the game, giving them a place in the game, or even calling it a franchise. Earn a reliable, more stable living. You don't need to convince people that other people will be willing to pay more for NFTs in the future, but convince them that they can buy NFTs as rights to authorize reprints and distributions, and NFTs themselves represent such rights. From 10 first-generation digital prints, artists and their collectors, influencers and promoters can earn passive income from royalties from over 11,000 digital prints and the income they collect. Owning such an NFT grants true, enforceable ownership to the holder.

The new NFT standard allows us to do all of this entirely on the blockchain, without relying on third-party marketplaces, exchanges, or centralized services. Imagine being able to copy a simple embed code directly from your NFT to your own gallery website - the same as uploading a video to YouTube, but you don't need to rely on YouTube's servers to upload the video - and then upload it on your website Sell NFTs (could be a piece of art, concert tickets, event tickets, etc.) without the involvement of other platforms.

Finally, some exaggerated descriptions about NFT are also understandable, because with the development of NFT, many descriptions will be realized. Many times we are paying for the story. Today, whether it’s a new Tesla, a painting of a can of soup, or even a digital banana glued to a blockchain wall with an NFT, you’re buying a story. So maybe the hype evangelists are doing one thing right while doing other things. What a society has grown to believe can be a source of great value. After all, if we manage to convince you that an NFT is just a digital sales receipt recorded on a public Internet bulletin board — rather than a useful tool that improves the financial lives of creators and fosters the growth of more inclusive digital communities — then you How much are you willing to spend to buy it?

Cointelegraph Chinese is a blockchain news information platform, and the information provided only represents the author's personal opinion, has nothing to do with the position of the Cointelegraph Chinese platform, and does not constitute any investment and financial advice. Readers are requested to establish correct currency concepts and investment concepts, and earnestly raise risk awareness.