What Are NFTs and Why Should I Care?
A plain-language primer on NFTs that goes beyond profile pictures to explore fungibility, ownership, and emerging community use cases.
3 min read
NFT stands for non-fungible token.
A dollar, pound, or euro in your bank account is fungible. If you withdraw $1 and I asked you which dollar you withdrew, you'd think I was weird, because the dollars in your account are fungible—effectively interchangeable. They're distinct, but one is much like another.
An NFT, then, is a token (think symbol, representation, or pointer) which is not that way. It is not interchangeable—not fungible. If you lose your kid at Disney World, you would—presumably—not be satisfied if the staff were to offer you a different child. You specifically want your child back. Why? Mostly evolution. One child cannot be unnoticeably substituted for another. They aren't fungible.
NFTs are a primitive.
Webpages are a primitive.
People who dismissed webpages as a general concept because they didn't like the specific page they'd seen were making a category error. People who dismiss NFTs because they're not interested in specific art being tokenised make the same error.
Early use cases of new technologies rarely fully articulate what is made possible by the innovation—much less, its second-order effects.
The most commonly cited use case of NFTs is "buying JPGs".
There are far more important and interesting uses:
Think of anything you've organised locally. There are easy solutions to trust issues—only allow people already known to the group to attend events. Only allow people who show a ticket at the door to get into the show. A lot of these easy solutions translate poorly to digital environments. Ticketed live streams can be pirated—ask any sports organisation. Political organisations struggle with engagement. Now, those who engage can be rewarded.
Imagine if:
- the people who created value on Instagram/Facebook/Twitter were paid
- the people who created hugely popular Harry Potter fanfiction got paid
- a painter could easily get paid 10% every time his painting was resold
- community enthusiasts for games were paid for creations they made
Communism has killed more people than the Nazi regime (it is noteworthy that we choose to gloss over this), and vague propositions of collective ownership should definitely be treated with appropriate scepticism. Yet, inescapably, there remains an appeal to the idea of Uber drivers owning some future organisation which replaces Uber. (I'll write about DAOs in a separate post.)
NFTs are a way to enable membership, to reward people, to support artists, and to disrupt rent-seeking, value-extracting centralised networks. Be sceptical of anyone asking you to dismiss them who is unable to explain these use cases. This is just the beginning.