A way to store data that enables digital scarcity and ownership without relying on a central authority.

The first application of this was digital gold: Bitcoin.

Data stored on a blockchain is called on-chain data.

On-chain data entries cannot be changed or deleted. Only new entries can be added.

Adding new on-chain data is slow by design and expensive for large amounts of data.

Tokens: assets issued and traded on blockchains.

Fungible: units that are indistinguishable.

For example, all $1 notes have the same purchasing power regardless of being crisp or worn down.

Non-fungible: units that are distinguishable.

For example, every cat is different from other cats regardless of how similar they may look.

Non-fungible tokens are individually unique (or scarce) units that are issued and traded on blockchains.

Almost everything we love and own is non-fungible. For example homes, art, collectibles, etc.

NFTs make way for non-financial applications of blockchains, such as art, media, and games.

In the modern digital era, everyone is a renter.

You don’t buy music or movies - you buy temporary access from a gatekeeper.

They give you permission, so they dictate the rules.

In an NFT-enabled digital era, content can truly be owned by consumers. *

Anyone can be a creator or distributor without requiring permission to enter the marketplace.

* With some important caveats.

* Not all NFTs are created equal.

Digital goods

Ownership of data entries.

Digital media

Ownership of creative digital art.

Digital certificates

Ownership of physical goods.

Domain names, tickets, etc.

Pictures, audio, video, in-game items, virtual real estate, collectibles, etc.

Entitlements, real estate, etc.

Digital goods: GREAT!

All data can be committed on-chain.

Digital media: GOOD

Metadata can be committed on-chain.
Media is stored off-chain. *

Digital certificates: BAD

Regardless of any data being on-chain, it requires law enforcement and physical coercion to administer.

* Potential for improvement with IPFS and other innovations.

When you own a digital good NFT, you have full control over the asset.

When you own any other type of NFT, all you really own is an autograph.

Issuers can establish IP rights, commercial rights, copy rights, etc. prior to sale, but no legal precedence of enforcement and no guarantees of data permanence.

Value for art is subjective - everyone has their own reasoning for buying art (collecting, investing, commercializing, etc).

People aren’t really buying the art, but the rights that come with the NFT.

NFT art value curve looks like this 👉

NFTs don’t have any impactful energy consumption when issuing or trading them. That’s not how blockchains work.

Blockchains do consume notable amounts of energy. But that energy is used to produce something of immense value: decentralized digital ownership.

Regardless, several blockchains are moving to more energy efficient systems as well as greener energy sources.

Ownership rights of NFTs will be clarified.

Certifications for physical goods will be issued.

Fractional ownership will be more widespread.

Purchasing and using NFTs is not particularly about “investing” or making money.

NFTs create a new avenue for creative expression, ownership, and rights within a digital realm.