Industry players and regulators are working to develop standards to encourage innovation while protecting everyone.
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June 3, 2021
5 minutes to read
Opinions expressed by Contractor the contributors are theirs.
NFT stands for “non-fungible token”. A fungible element can be replaced by another with the exact characteristics, such as fiat money. If you were to give someone a $ 10 loan, it wouldn’t matter if the person returned the exact $ 10 bill to you when returning the money, as long as the coins or bills. total $ 10.
A TVN, on the other hand, cannot be replaced in this way. It is struck on a blockchain network with a code that includes unique identifiers. This code works the same as a signature that is then assigned to a specific asset outside of the blockchain, usually in the form of a link containing art or documents on a server. This is because the token serves as a certificate identifying the holder as the owner of the original asset. When someone subsequently purchases it, they can check the status of the token on the blockchain and see its entire history, thus eliminating the risk of fraud.
Related: A Closer Look at Current Trends Surrounding NFTs
NFT and art
The Mona Lisa is probably the most popular works of art around the world, but most people would have a hard time distinguishing the painting from a replica. Despite this, absolutely no one would be willing to pay the $ 850 million the painting is deemed to be worth for a replica. This indicates that the value of art is not in its physical form but in its perceived value due to its provenance and its rarity. Put simply, people like to own original or at least limited edition items.
As more and more artists have started producing digital art, NFTs have become popular as a means of granting a buyer ownership of a work of art. With ownership registered on the blockchain, this ownership is visible and can be verified by anyone, even though the artwork may be freely available on the internet. Most popular NFT artist, Mike Winkelmann, has sold an artwork for $ 69 million at Christie’s auction. Even established brands like the NBA have entered the game with collectible video cards.
Even though art is the area in which NFTs thrive the most now, the technology has much more potential in various industries. There is another category of NFTs called “real value” NFTs because their value is tied to specific off-chain assets. These NFTs could represent ownership of anything unique, such as a contract transferring ownership and royalty rights to a song, or anything else that can be contracted out. By linking the existing world of contract law to blockchain, ‘real value’ NFTs bridge the gap between the blockchain space and traditional business in the same way as so-called stablecoins. Since stablecoins are backed by real US dollars held by the issuing company, their value is relatively stable, hence the name. When a person purchases any amount of stablecoins on an online exchange, ownership of the corresponding US dollar amount automatically passes to the new owner, saving time and eliminating the risk of fraud.
Related: 3 Tips For Creatives Looking To Break Into The NFT Industry
The same concept is applied to the ownership of other assets such as cars, immovable, and other properties. While implementation is currently hampered by laws that require red tape to change the ownership of these properties, there are many companies currently working on getting the required technology in place. Besides physical ownership, NFTs are also used to provide investment opportunities, such as allowing people to buy shares of income from a musical artist’s royalty payments.
Disadvantages of NFT
Despite all of its benefits, the explosion of interest in NFTs has also created a host of issues that entrepreneurs and investors in the industry need to keep in mind. The first is that for art related DTVs, there is the possibility that the asset will be deleted from the server it was hosted on, either intentionally or inadvertently. In some cases, the company issuing an NFT could fail and shut down its servers, leaving NFT holders with an expensive blockchain link pointing nowhere. Fortunately, as platforms consolidate, more secure solutions such as PRüF began to emerge. Using this protocol, token issuers can create standards-compliant tokens that include permanent blockchain media storage and enable platform migration, reducing risk for NFT holders.
In addition, there have been many cases of people infringing the intellectual property rights of others by passing off the stolen work as their own. These cases often go to court and could result in a loss of the token buyer’s investment. There is also the problem of the lack of a full legal structure to enforce smart contracts. For example, while most NFT platforms allow the seller to insert a clause entitling him to the payment of royalties on each subsequent sale, US law does not recognize resale rights concerning paintings or other creative works, as is the case in around 70 other jurisdictions, such as the UK and the EU.
Ultimately, it’s clear that the NFT boom is disrupting the way we do business, and there’s still a lot of disruption to come as industry players and regulators scramble to develop standards and guidelines. regulations to encourage innovation while protecting everyone.