How Can We Understand NFTs?
Question of the week: What the hell are Non-Fungible Tokens (NFTs)? Let’s begin with an easier topic of scarcity before sliding into the hot topic of NFTs. Top universities are always full, arguably for the wrong reason as they bank on the value of their degree being rare or limited. It is largely based on scarcity. There will always be more people who want to be a part of the top leagues than the top leagues allow. As slippery as that may be, it is deliberate. It is intentional. Artificial scarcity, depending on how you measure it, will create a credential that appears valuable. At the end of the day, are you striving to be part of the top leagues to actually learn something or to simply walk away with a scarce credential? One day, the paper will fade, but what we’ve learned along the way of who we are and what we will become will hold for longer than we realise. The puzzle has less to do with choosing the best universities and more with choosing the best university for you. The problem is not many of us know what we want and the scarcity of slots make us feel like we’re missing something out.
Are we?
Now that we have a basic understanding of scarcity, let’s get back to Non-Fungible Tokens. What is an NFT? It is an entry on the blockchain that is unique which can represent one-of-a-kind things. A friend is non-fungible, you can’t replace that particular friend. A $10 note is fungible. If Person A lends Person B a $10 note, it does not matter to Person A if he is repaid with a different $10 note or repaid with five $2 bill. It is mutually substitutable. Simply put, NFTs can be considered a status symbol and arguably an item of value. Given that digital files can be copied infinitely and perfectly, an NFT token can solve this problem by proving that one digital file is the one-and-only “original.” Technically, anything digital could be sold as an NFT and as with all assets, supply and demand are the key market drivers for price.
Tips for Creators:
You may start minting NFTs to get paid for what you’ve created, provided someone values what you’ve made. Essentially, you can do what top universities are doing which is creating the appearance of scarcity for a cheaper price now given that NFTs is still rather new and granted it survives for a much longer time on the Internet. Who will buy your item? (1) Someone who wants to collect what you’ve created. (2) Someone who wants to resell what you’ve created for a profit. The trap for digital collectible is that the aesthetic beauty can be duplicated. So if no one cares about whether they own the original or not, your art piece can be worthless. That being said, it is possible for NFTs to be coded to allow the original creator to collect money each time the token is sold or changes hand. Dividends, perhaps?
Tips for Buyers:
There will be new operating systems, plugins and standards to render things unviewable often within a decade. This is where duplicability comes into the picture to preserve the digital file. Furthermore, when we make a copy and spread/preserve it across different timespan, all of us are having a first-hand experience. There is no second-hand documentation. So, it can be said that majority if not all NFTs are intended to be liquidated and valued as an asset first, artwork second. It is a speculative game of “How Much Will It Cost In 10 Years Time?” Essentially, NFTs is creating artificial scarcity for digital objects by recognizing an “original” that can be owned for the intent of resale. Is the technology here to stay? Yes. Will it swing in your favour? I really don’t know. Would I rather own a physical version of a 1999 First Edition Shadowless Holographic Charizard #4 or an electronic version of it? The former, almost definitely.
Final (Obscure) Thoughts:
We spend an incredible amount of time sending metaphorical letters to our past selves, regretting the choices we’ve made. I should have done this, I should have that done that, of which cryptocurrency appears to be a hot pick lately. It is not hard to spot the blame of the past as compared to discovering the opportunities of the future. We live in a weird time where we have more information than ever before and believe it or not, more information does not necessarily lead to clarity, but at times, causes more uncertainty. What is able to keep us sane when we make decisions in the face of uncertainty is to be able to properly weigh the potential costs and benefits of each risk. If we feel that we can manage the uncertainty, then we will feel okay about our decisions. You can’t say you regretted something when at that point in time, you knew for a fact you couldn’t manage the uncertainty. Better the devil I know than the devil I don’t, isn’t it?
