So what is an NFT – NON-FUNGIBLE TOKEN?
We have started to notice this new term in our acronym tautology.
Another set of letters added to the 3 letters carried along, which goes beyond their simple shape. I wonder if someone etched NFT into a cave wall somewhere for a future archaeologist to find, what would be the fantastic story one would guess?
Gosh, how would our future archaeologist describe this etching? Would she know that NFT had a “non-fungible token” connotation? Would she rather say it means “Not for tourists” or the “National Movie Theater”, or how about “No Free Tickets” or just a phrase “No more text”?
How did this new meaning come about and will it stay with us?
Etheria and Devcon 1; London 2015
At Devcon 1, 457 buyable and tradable hexagonal NFT tiles remained unsold. The first NFTs on the Ethereum network. But today the same tiles cost a total of $ 1.4 million. They would have cost you $ 0.43 back then.
I wonder if our new linguistic phraseology now “A sign for your thoughts ” rather than “A penny for your thoughts.” With this in mind, where will my and your thoughts go in the future? How do we both understand this new way of collecting, trading, enjoying and sharing?
Let’s look at the last word in NFT first. A token is a representation of something. I remember when I was young getting a “token” to ride the CTA bus in Chicago. It represented money but was specific to the Chicago Transit Authority.
I think you could say that coins and even paper money are tokens that represent value to a desired tangible item. It appears that we use tokens for everything from religious artifacts to ceremonial events, game characters, birthday cards and cakes, and even wedding rings. These are all tokens. Used and understood, some profound, some incidental, but still depictions of something other than their mere symbolization. To be honest, tokens are then used in everyday life. Quite normal and gladly accepted in all cultures and all ethnic groups.
Let’s not confuse “tokenism” with a “token” that represents something. Language is strange and vague, and often we attribute our view to a word or phrase that is not meant. The “Schlumpfe Principle” as practiced in the media, for example, consists in including only one woman in a completely male ensemble; Miss Piggy, in the Muppets, Princess Leia, in Star Wars, Penny, in the Big Bang Theory, Elanie, in Seinfeld. These and others are prime examples of “tokenism”.
“Tokenism vs. Tokenization”
Therefore “tokenism” is NOT a tokenization of something tangible and real. Tokens can represent a musical score, an artifact of history, some thoughts written in time and space, some codes, some items, some collectibles, and the list goes on; This is surely what an NFT begins to do.
Our next word is fungible. It is usually an adjective and simply means “able to be used in place of another, can be substituted”. It began in law around 1818 and, as usual, is derived from the Latin mushrooms.
Not much of a help, but fungibility just means if you lend me, say, a ten dollar bill and I give you a five dollar bill and five one dollar bills, you wouldn’t care if that happened . You would accept that the fungible exchange was practically the same.
However, if you handed me a diamond and said, “Would you keep it safe for a while? Quality, color, cut and very fungible. It was unique.
So here we have it. A non-fungible token is a representation of something that cannot be duplicated. It is an isolated incident.
Enter the age of the distributed immutable records. A chain of events, open to the public and yet fully and clearly identifiable. In a sense, every transaction on a ledger, say your checking account or ATM card, is a non-fungible event, and in a very real sense it is recorded tokenized. The number you see represents a purchase or billing payment, etc. It is in no way real except for the ledger in it. Certainly understandable and also very useful. However, it is completely secret, unique and your own in a different way, not available to anyone or everyone. With that in mind, your ledger bank account is very non-fungible and changes in different ways from month to month.
What is unique in the world of NFTs is that they are registered in such a way that everyone can see what they represent and who is in control of the object of interest. So even though the item or item is unique and not fungible, the token it represents will be visible to anyone who wishes to see it. A blockchain transaction can be written much like a certificate of ownership or a claim.
Fungibility is not the same as liquidity. Keep this in mind when considering an NFT purchase with a liquid asset, such as Fiat currency, crypto, or any other asset that has liquidity like real estate, etc.
The other word we could consider is interchangeability. We may be able to swap out one NFT for another like we used to do with sports cards or marbles in our youth, but then the value is in the eye of the beholder. NFTs might have this interchangeability, but usually don’t show it yet. Hence, NFT exchanges are used to enable trading in NFTs.
Of course, many wealthy worldwide have always enjoyed the tax haven art and collectibles offered while enjoying the beauty of their holdings. Art generally gains in value, even in economically difficult times, during wars and unrest and also in quiet times.
The concept of an NFT as a tax haven has yet to be explored, but it certainly has its merits.
NFTs also allow an owner to let others have the art, collectibles, musical scores, historical documents, films, etc. while charging a small fee. That path has yet to be explored, enough to say that the reciprocity of it is currently at play. Let’s say I’m a songwriter and musician and decide to sell small parts or allotments of my newly founded work to my loyal fans and in this way finance it myself. A certain allotment is revealed and every NFT buyer receives a smart contract that guarantees them their property. Compare this to stocks, however, now easily converted into works of art, music, code, and even recipes. There will be a multitude of new NFTs that will allow individuals to buy, sell, and participate in without the burden of a broker, music label, or possibly even a film production and distribution company. We should see NFTs as a new and more consistent way to deliver crowdfunding with known attributes and identifiable and open distributed ledgers.