LeBron James of the Los Angeles Lakers certainly understands the importance of his legacy on the court as his career winds down and another championship run is in his grasp. But, what James might not realize is that a regular-season dunk (one of thousands LeBron has recorded in his career) in a meaningless game against the Sacramento Kings two years ago is a highlight now worth over $200,000.
What is a Non-Fungible Token (NFT)?
Anyone can look up a highlight of this particular LeBron James dunk on YouTube, but a Non-Fungible Token (NFT) beckons the opportunity for people to own the highlight through NBA Top Shot, a website that provides official league highlights through blockchain technology.
Blockchain is capable of protecting digital content with security that enables a user to prove verification of ownership. The only way another user can see this piece of digital content with blockchain technology is through a transaction. Non-fungible tokens cannot be replicated, which drives up value and creates a market.
Fungible items are exchangeable 1-to-1. For example, one U.S. dollar is exchangeable for another U.S. dollar. Non-fungible assets do not have 1-to-1 value, like furniture, electronics you own, or trading cards. Let’s say two people have Derek Jeter rookie cards; those two cards are not interchangeable as the cards may differ in condition or age.
So, think of these NBA highlight NFT’s as trading cards. There are multiple NFT’s of the same LeBron James dunk, but different editions of the highlight fluctuate the price. The very first NFT created for that particular LeBron James dunk, for example, garners the highest price.
And non-fungible tokens provide so many more use cases than just the sports industry.
What cryptocurrency is powering NFT’s?
Ethereum has been stealing attention a little bit away from Bitcoin because of the booming NFT craze. Non-fungible tokens are powered through Ethereum’s smart contracts. All NFT’s currently reside on Ethereum and are bought and sold on any NFT market that is Ethereum-based.
Ethereum also enables NFT’s to work because a token’s metadata and transaction history are verifiable publicly to prove ownership history. Because of blockchain technology this data is almost impossible to steal or replicate.
In addition, the backend for Ethereum allows all “products” on Ethereum to understand each other. The decentralized system Ethereum provides is what keeps the entire NFT ecosystem safe.
What benefits do NFT’s provide?
Non-fungible tokens can ultimately reinvent the infrastructure of how physical assets are maneuvered through financial and loan systems. NFT’s largest benefit is reducing middlemen needed in a supply chain.
Here are a couple of examples to illustrate what role NFT’s can play:
Whether they be an artist or musician, non-fungible tokens present the opportunity to remove an agent from the selling process. An artist can create a digital piece on the blockchain, reach out to their audience, and then sell an item directly.
Right now, an artist’s digital pieces probably mostly see revenue from the advertising the webpage hosting that piece generates. NFT’s can dramatically drive the prices of that work up. Even some of Banksy’s old work is tokenized and selling for close to $400,000.
Larger companies like Taco Bell created taco-themed art as NFT’s. Bidding started at around $1.79 and reached up to $700.
Much like the trading card analogy for NBA highlights, non-fungible tokens for artists bring value and ownership to digital items that otherwise could just be copy and pasted.
What the future may hold is the casual traveler not just having physical documents on them to prove their identity, but also NFT’s can enable a traveler to produce a digital passport when needed upon entry into another country. All info can safely live in a digital realm for you to access and verify with authorities, employers, or even doctors.
This can also help someone navigate the process of finding the right doctor or dentist by requesting to see their NFT with their diplomas or residencies. Lastly, non-fungible tokens can privatize your browser habits to keep companies from potentially gathering advertising information they collect from your browser or shopping history online.
Non-fungible tokens can further strengthen the security of event management by selling and managing tickets on the blockchain. Relying on generating smart tickets versus physical tickets also drives down the cost of generating tickets for an event, as thousands of NFT’s can be created for a few dollars. Even now there are services such as NFT.Kred that can create digital tokens for events.
NFT’s for ticketing also can better the scalping market for tickets. There’s always uncertainty with reselling tickets and it’s also difficult for an event host to control the number of tickets sold from the time of release to avoid an increased reseller market. Non-fungible tokens can be made as non-transferrable items to completely negate the risk of a reseller market if needed.
One of the more exciting use cases that is probably a long-time away from reaching its potential with NFT’s is the real estate business. Eventually, pricing for land can be represented with a non-fungible token.
Some companies like RealT are creating platforms that allow users to invest in real estate without the need for paper deeds. Instead, the asset or property is owned through digital tokens.
What’s the future of NFT’s?
Non-fungible tokens have the potential to add value for artists, creators, and even businesses to their digital assets; and NFT’s provide security that digital information has to yet have at the extent of what secured assets on the blockchain can reach.
With new technology comes the discussion of whether all this attention and hype is warranted or not, but non-fungible tokens have the capability to impact many different industries and even the everyday tasks every person does. Is there maybe a bubble growing for the prices regarding two-year-old highlights of LeBron James dunking collectibles? Possibly. But, overall, NFT’s have arrived and the use cases are endless.