Dr. Quin and Jonathan Button's Lecture on Non-Fungible Tokens
Introduction
NFTs, Non-Fungible Tokens, a concept which puts the free market to the very limits of its functionality, utilizing value at its base function. Dr. Quin and Jonathan Button give a glimpse into the NFT and see how it’s blooming into the modern-day market. Art, Music, Fashion, and even Sports are the first areas where NFTs have started to take root. Using the information given about NFTs, I will be dissecting the negative and positives of the new world of NFTs.
Defining NFT
The Doctor Buttons started the presentation with a with why NFTs are called NFTs. The simple definition they gave was a unique digital identifier that cannot be copied, substituted, or divided. This definition made sense when looking on how the phrase Non-Fungible Token was constructed. Fungible means mutually inter-changeable. This means that if an object is fungible then it can be switched out with another object to equal the exact effect. The non part adds the negative tense to fungible, making this object not interchangeable. The token part works as a unit or object which is non-fungible. With the descriptions out of the way, it can now be discussed how an NFT retains and portrays value. The doctors showed how this value actually shifted between the different ways NFTs were applied, but the general concept stays similar between each genre. The definition fits very well to what is being described. This is alongside the idea of ownership. The value power of a NFT lies in its ownership and following that ownership. On the blockchain, the purchasing area of NFTs, it can be tracked who bought an NFT. This allows the person who bought the NFT to prove their ownership and collect profit as the value of the NFT increases. To my understanding, it’s similar to stocks, in the same way a business doing well raises the value of the stock, the artist of the NFT becoming more popular, the value of it increases. This is where my understanding stops, and I begin to become critical of the idea of NFT. The value of an NFT relies solely on that of the consumer. At a base level, this is not a bad thing. Because of this reliance, the value of an NFT can be fully trusted since a purchaser knows that this value has been chosen by and only by other purchasers like themselves. However, this technically makes the value more volatile. If the artist of the NFT does not become popular, then the value will drop. A drop of this kind would result in a loss for the owner of the NFT. My critic of NFTs relies on its money-making potential for the purchaser. As an artist myself, I am for the development of communities who can financially benefit from helping artists. I love the idea of this symbiotic relationship between artist and artis enjoyer. However, I do not see it as money making potential. To me, for an NFT to start making money, then it needs to start functioning as a business. It needs staff to improve marketing, and making sure it can respond to the consumers’ whims. And if this becomes the case, NFTs seem too similar to stocks. It is a more complicated version of stocks, which makes me weary of them.
The Value of NFTs
NFTs can operate using art, which its value system is as I described, but it has spread out to other genres. With the genre of music, an owner of a music NFT can collect royalties off of sales of albums, encouraging promotion. With fashion, games, metaverse, exclusive membership, and sports, the process works similarly to a carrot and stick process. Using fashion as my first example, if I purchased a certain NFT, then later down the line I will be able to turn that NFT into an exclusive fashion item. Companies have used this as marketing, encouraging customers to engage more with the advertising process to try to earn these NFTs. Similarly, in sports and videogames, if you go to a certain amount of games or perform a certain amount of tasks, you could earn exclusive NFTs that will have actual real world value. I gave a few examples to show how the NFT process works. As a consumer, I only want to collect these NFTs to gain value. This value does not have to be just financial. I might be able to gain exclusive access to certain restaurants just by having an NFT. I see no problem with the proof of ownership of NFTs. The Doctor Buttons helped describe the process to show how airtight proving ownership was. What I still cannot understand is the advantage NFTs have over stocks. Both are a way to acquire profit by utilizing the change of value. So as a purchaser, I don’t understand why I should pursue NFTs over stocks, or even alongside them. With my NFT, I am putting faith in that others will see it at a value higher than for what I purchased it for. This might even require me to go out and market for it. With my stock, I am putting faith in that the company will try to convince others that the value of my stock is higher than what I purchased it for. It’s in a company’s advantage to increase its own value. NFTs seem riskier and more unorganized than the stock option. This is my suspicion toward NFTs and the doctors made sure to say in their presentation that they were not giving financial advice. It is up to the consumer to research and find the most reliable NFTs.