What You Should Know About NFTs
Whether or not you follow cryptocurrency news, you could not have escaped the recent big splash made by NFTs in mainstream media. Like many things in crypto, NFTs have their fans and critics, but the notoriety of the most expensive NFT purchases may have obscured the real innovation and utility these tokens can bring to decentralized finance and web3.
What’s an NFT?
NFT stands for non-fungible token – one of the several types of tokens that can be created on Ethereum (for a general refresher on tokens, be sure to check out the Ethereum Tokens 101 article).
What makes non-fungible tokens special and different from any other crypto coin is that each token is unique and can’t be equally exchanged for another. Most tokens and currencies like Bitcoin, Ether, Dogecoin or USDC are fungible like fiat coins. Fungible means that one dollar bill is just the same as another, in terms of value and usability. If you swap your dollar bill for my dollar bill, we’ll still be able to buy the same amount of goods with them in the same stores. NFTs, on the other hand, are more like trading cards – each is unique and some may be much more valuable than others to different people.
Some NFTs are collectibles, where a limited edition of 100 will be represented by 100 different, unique tokens, one for each item. Even if there are quite a few of these items, they are like snowflakes – similar, but unique. If we both own the same collectible limited edition NFT item, yours will still be a different one than mine, just as if we bought two limited edition records.
Other NFTs can be completely, truly unique – like a painting, a birth certificate, a social security number, or a medical test result. The ability to prove this uniqueness of a digital asset is something referred to as digital scarcity.
What’s digital scarcity?
With the proliferation of digital technology and the widespread use of internet communications, we have gotten used to copy-paste sharing on the web. If I have a photograph, and I make a copy of that photograph to send you – now we both have this photograph. If it’s shared on social media, any number of people can download or screenshot the photo. There is no way for me to prove that the original photograph is mine, even if I attach some information to the original file. Digital information can be erased, or changed, so this kind of digital asset doesn’t support proof of ownership.
Digital scarcity changes all this. With non-fungible tokens, digital assets can be truly unique and their ownership can be proven, as well as transferred on the blockchain in minutes, resulting in an immutable and unalterable transaction record.
NFT Art, Games, Collectibles
Why is all of this a big deal? NFT art has even grabbed the attention of the notoriously impenetrable art market, commanding high prices and support from prestigious auction houses like Christie’s and Sotheby’s. Still, if you are not much of a collector, and feel indifferent toward owning pieces of digital art or getting a unique avatar on social media, what’s the point?
Well, maybe you’ve got a favorite game where you can earn and use items that help your progress? Gaming is one space where NFT adoption is very high at the moment, and for good reason. With non-fungible tokens, you can really own those special items: they won’t be lost if your account is compromised, or the game servers crash. If you choose to sell them, both you and the buyer can have confidence that ownership will be transferred securely. Potentially, you could even move items between compatible games and bring your loot into the next edition, the spinoff, or a parallel universe. If you are looking for examples of blockchain-powered games, check out Axie Infinity and CryptoBlades, both of which MEW wallet app users can play via the built-in web3 browser.
NFTs also hold a lot of potential for fans of creators and athletes. Limited edition recordings, posters, and videos can be distributed as NFTs to the blockchain, instantly giving followers a unique, collectible piece of the artist’s work. Alternatively, access to exclusive content can also be awarded as an NFT.
NFTs as Stocks: Tokenization and Fractional Ownership
Does investment into purely digital objects still seem dubious? Good news: the power of NFTs extends to the tangible world! Real-world assets can also be tokenized on the blockchain, so your NFT can designate fractional ownership of a Picasso painting or a lucrative piece of property. It’s a way of diversifying assets by investing into timeless art pieces and real estate for those (most) of us who can’t purchase the entire thing.
In fact, tokenization of physical objects and real-life experiences can redefine the way we approach shared ownership, memberships, ticketing, exclusivity, and branding. To use just one example – counterfeiting of event tickets is a huge and expensive problem. NFTs on the blockchain can provide solutions for tickets and supply chains because they are unique, unfakeable, and immediately verifiable.
NFTs may be digital, but it doesn’t mean they are ephemeral. There is a secondary market for NFTs of all kinds, and the value placed on them by digitally-native communities is very real.
Secure Identity and Data with NFTs
However, the NFT use cases that have the greatest potential to change our lives are still in the future. A range of unique documents can be represented by NFTs – birth certificates and passports, proofs of ownership, medical records, certificates of academic and professional achievement.
If you lose physical copies of your documents, or they are confiscated by an authoritarian government, the records of your identity on the blockchain will remain immutable and available to you as long as you have the keys to your wallet. Your medical history or your college degree – immutable and proveable on the blockchain, and only accessible by your permission. Even your vote for a politician or board member – submitted from the comfort of your phone and guaranteed to be counted.
Even if you are not interested in NFTs as art, collectibles, or investments, they may become part of your life sooner than you think.
NFT Wallet
NFTs can be kept in an Ethereum wallet just like you keep ETH and fungible ERC20 tokens. Given the high financial or personal value of many NFTs, it’s especially important to own the keys to your NFT wallet and retain full control of your assets, the way you do with MEW. As a non-custodial wallet, we give you complete ownership of your crypto, NFTs, and all blockchain assets. All MEW products provide full support for NFTs.
With MEW wallet app, you can view all of your NFTs in one beautiful manager, right next to your other assets and transaction history. You can even add other addresses – from your other wallets or publicly known addresses of NFT influencers – as watch-only accounts into the app, so you can see all of your collection and other people's collections in one interface. The in-app web3 browser allows you to visit any NFT marketplace or platform and fully interact with the site – buy, sell, mint, and trade NFTs right from your phone.
The Enkrypt multichain web3 browser wallet by MEW supports NFTs across multiple networks in addition to Ethereum – like Polygon, BNB Smart Chain, Moonbeam and Moonriver, and other Polkadot chains. As you would expect from a web3 wallet, Enkrypt also connects to DApps on any of those networks, so you can explore NFTs beyond the Ethereum ecosystem.
If you have a hardware wallet, a mobile wallet with WalletConnect, any web3 browser wallet, or software access methods, connect to MEW web to view and manage your NFTs in the desktop dashboard.
NFTs have become a mainstay in crypto and their potential goes much deeper than the media hype. As investments, as art, or as reliable solutions for problems we face as a digital society, they are here to stay and will continue to be important for decades.