Business & Finanza
A quick guide to NFTs, Non Fungible Tokens
NFTs, what are they and how can they be used? Here is a brief insight into these special tokens and their potential.
NFTs is an acronym for Non Fungible Tokens, i.e. unique tokens that represent a digital property on the blockchain.
To better understand how a non-fungible token works, let's first define the concept of “fungible”. This term indicates those goods or resources whose value is not determined by their uniqueness, on the contrary, their units are mutually interchangeable. A kilo of flour, a coin or a ton of iron are examples of fungible goods or assets. A particular piece or unit is not relevant per se, as it can be replaced by another identical item.
On the contrary, a car can be considered a "non-fungible" asset since the focus here falls on particular elements that characterize it and make it unique: brand, model, color, accessories, etc. Each car is uniquely identified by a plate and a certificate provides evidence of the ownership of its purchaser. The NFT can be assimilated to this certificate of ownership. Another good example of non-fungible items are unique art pieces. Just think, for example, of the Mona Lisa, there is only one in the world, unique and irreplaceable.
Due to their uniqueness, NFTs are not mutually interchangeable. They are possibly rare (scarce) and each of them has different functionalities and characteristics.
NFTs are used to create verifiable digital scarcity, digital ownership and the possibility of asset interoperability across multiple online platforms.
NFTs therefore represent an evolution of the physical ownership of a given asset. They are unique digital assets that allow those who use them to be the real owners. They can be exchanged in special marketplaces thus creating a tokenization process from reality to digital form.
NFT, the characteristics
To sum up, an NFT:
- is a special type of cryptographic token;
- is created and conveyed in a specific blockchain;
- represents something unique and not interchangeable (it has a unique ID), as opposed to cryptocurrencies or other utility tokens which by their very nature are mutually interchangeable;
- is indivisible, i.e. it is not possible to possess only a "part" of it
- has rules that regulate its transactions which are defined by a smart contract
There are various protocols that allow the issue of NFTs. To date, the best known is ERC-721, a standard protocol for issuing and trading non-fungible assets on the Ethereum blockchain. More recently, the protocol ERC-1155 has also been released, which allows you to insert both fungible and non-fungible tokens into the smart contract.
In fact, starting from 2017 - the year of the creation of the first collectible tokens called Cryptokitties and released on the Ethereum network thanks to the ERC-721 protocol - dozens of alternative blockchains have arisen with the aim to provide technologies for the creation, management, dissemination and exchange of non-fungible cryptographic tokens.
The uses of non-fungible tokens are innumerable. Tokenization theoretically makes it possible to replace precious and / or sensitive data, goods, rights, payment cards and more, with the creation of a unique, non-modifiable, certified, freely exchangeable digital asset.
Areas of use
- Intellectual property
NFTs can represent a painting, a song, a patent or other intellectual property rights, allowing authors to control their work, avoiding theft and plagiarism.
- Self Sovereign Identity
NFTs can also be used to verify someone’s identity or represent birth certificates, licenses, academic credentials, honors, and more. Thanks to NFTs these documents could be kept secure in digital form and safeguarded from counterfeiting or abuse.
- Gaming
NFTs have already been used as digital collectibles or props for the video game world, such as weapons, clothing and other special items. In fact, NFTs make it possible to create digital scarcity for gaming gadgets. This is a valid alternative to the centralized management of the security and validation of these items in the hands of the creators of the games themselves.
- Real Estate
Real estates, but also precious objects, vehicles and other material properties can be tokenized and used for the financing, expansion or potential liquidity of their owners in a decentralized, secure and transparent way.
- Financial documents
Financial documents (invoices, orders, guarantees, bills, etc.) can also be transformed into NFTs and exchanged. But not only that: they could also be used for ticketing, loyalty points, KYC procedures and self sovereign identity, humanitarian programs, supply chain tracking, and much more.
A project to protect digital content creators
In a previous article, we described the project promoted by the LKS Foundation which involves the creation of an NFT for the protection of copyright for online content:
>> The LKSCOIN project: an overview
The project has an ambitious goal which involves also the social platform Cam.TV, partner of the LKS Foundation, which is currently the protagonist of a crowdfunding campaign to collect resources to take, thanks to the LKSCOIN blockchain, the last steps to fully integrate NFT technology as well.
The aim of the project is to make it possible to transform any content published on the platform into a work protected by certified copyright, concretizing the joint effort of the company and the LKS Foundation for a safer, more authentic and valuable internet for users.
For more details about the project, please refer to the official page dedicated to the STO (security Token Offering) of Cam.TV: https://www.camtv.io
NFT and copyright
Non Fungible Tokens, in fact, can also be used to protect digital property rights since they are able to guarantee the traceability of their origin and in this way they can always trace their author.
Tokenized content could be bought, sold and exchanged in blockchain in a decentralized, transparent and secure way and the non-fungibility would safeguard against theft and fraud. In fact, content wouldn’t be transferable without the permission of its owner.
So far, content published by creators has been shared and dispersed within social networks and platforms without effective control measures in place. In this context, NFT-technology would represent a new protection tool in the hands of all online content creators who could finally find a solution to the delicate problem of lack of copyright protection for their online work.
But not only that: thanks to its ability to indissolubly link the ownership of a content to its author, NFTs can offer a valid response to the fight against fake news, setting off an improvement of the information market which would become more reliable and responsible.
The next steps of this project can, in fact, build the web of tomorrow and revolutionize the way we live and work online by triggering new dynamics for the creation of wealth and value.