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Written by: Zara Mkrtchyan | Coinstats.app
NFTs are non-fungible tokens. To explain why that’s really cool if you don’t already know it yet, we have to back up a step to fungible tokens. Maybe we need to explain what fungible means.
Fungibility is the property of being perfectly interchangeable with another equivalent unit or amount of the same kind of thing. Dollars are fungible.
Every dollar is the same as every other and represents a certificate or token of universal exchange value. Every ounce of gold is worth the same amount on the spot gold market as every other ounce, so gold is fungible too.
Now imagine Weird Al autographed your US one-dollar bill and drew a mustache on the president. Now it’s different from other one-dollar bills and you could possibly sell it to a Weird Al fan or memorabilia collector for more than a dollar.
It has become non-fungible because of the unique autograph on it. Or imagine your spouse’s gold ring. It’s worth more to you than its value as gold because of its uniqueness as a sacred keepsake to memorialize your love. That is also non-fungible.
Pro: There’s Only One, Yours. Con: There’s Only One, Yours.
NFTs are an innovation that happened as a natural progression and outgrowth from bitcoin and other basic financial account-keeping blockchains for cash payments and deposit safekeeping.
One of Bitcoin’s sensational and revolutionary innovations was the creation of truly ironclad digital scarcity. That scarcity extends to a limited pool of only 21 million bitcoin that will ever be created.
Non-fungible token blockchains took that idea a step further, and said what if we used blockchains to extend digital scarcity to only one file, one that’s just yours on the entire network? (How to buy NFT.)
The pro side is you might have something unique and priceless to you. Or you might have something unique with high market value, like an NFT artwork that sells for major global metro fine art auction prices.
The con side markets for unique, one-of-a-kind things, are not as liquid as for fungibles like BTC or fiat money. And your NFT might be a dud.
Pro: NFTs Are Backed By Gas Tokens Used By Everyone Else. Con: Ditto
If you don’t have the knowledge base or interest in acquiring the knowledge to scour for fine art NFTs on bargain to resell during the next crypto bull market, but would like to support the technology and see if you can grow a little of your savings, then you can always buy some of the layers one chains’ use tokens to mint or exchange NFTs, and invest in those. That’s a pro for crypto investors who fit that profile. (How to buy NFT.)
On the con side, sharing the same base currency as a large, well-capitalized global user pool keeps an NFT’s and an NFT business’s fortunes somewhat hitched to that big market’s wagon. So if it’s a bull market, network congestion can be high, and so can fees to mint tokens.
Pro: NFTs Are Increasingly Interoperable Cross Chain. Con: Ditto
As developers build and build bridge infrastructure for cross-chain interoperability, there’s more portability for NFTs. That increases their value and liquidity and creates a much larger, much lower friction marketplace for NFTs. That can be of enormous benefit.
On the con side, that means more competition from other NFTs and other NFT businesses. As everything mashes together, the rich will get richer faster and the disparity between the extreme winners and the average will grow enormous.
Ideally, that will be balanced by greater upward mobility, more opportunities for everyone, and viable paths upward toward the greater accumulation of digital property.
Pro: NFTs Are Becoming More Sophisticated. Conn: And Buggy.
As Web 3.0 develops in earnest straight through this crypto winter, smart contracts are growing capable of handling increasingly more sophisticated jobs.
That at the same time means, with developers coding non-stop and deploying new smart contracts for execution and final settlement on the blockchain, there have been more incidents of bugs and costly errors.
Pro: Non-Fungible Tokens Will Rule The World. Con: People Will Stop Going Outside
Eventually, non-fungible tokens will rule the world. The Internet of Things will have everything chipped and sensor-bearing and metered and connected to the web of blockchains.
NFTs and smart contracts will govern all. People will live in their Ready Player One / Metaverse / 1984 / Brave New World, ultra-high-tech, open surveillance capitalism virtual reality interfaces at home all day, with everything that matters to them tracked by NFTs.
The only con is soon enough, it will be such good people will stop going outside, like those Japanese Millennials that don’t. Soon enough, it could be so good people will stop getting out of bed. Like the Matrix— but they’ll pay to get put in it. (How to buy NFT.)
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