NFT -it is a unique token, it is like a digital entry in the blockchain registry, which gives you the rights to own a unique object of the digital space. In this article, we will not dwell on the explanation of this phenomenon. A simple explanation for understanding further argumentation you can read in this article: "What is NFT simple terms".
^
##What can be done with NFTs?
- Create, having received at your disposal.
- Give to another user.
- Destroy your NFT at will.
- Change the metadata in your NFT (more on that later).
But what does it have to do with possession, art, collecting, about which in the first place comes from all sides? Nothing! Purely human fantasy, nothing more. The ERC-721 standard defines only the way in which a unique "tick" is entered in the ledger and nothing else. NFT is just an abstract technical tool, given meaning by a specific service. Behind any screen, the user ends up with a “tick” and nothing more.
“Allow!”, many will exclaim, “because it is known that NFT is the ownership of an Internet link, which contains valuable content.” This statement is false. The ERC-721 format defines the presence of metadata in the NFT. Metadata is additional data for service purposes. The ERC-721 NFT metadata includes a link and a text string. Both can additionally report something about the “tick”, but are not a mandatory part of the NFT. Quote from ERC-721:
A mechanism is provided to allow an NFT to be associated with a URI. We assume that all NFTs will use this mechanism. The image size guidelines are from Instagram, they seem to have a pretty good grasp of pictures. The URI MAY be mutable (i.e. it can change). If the NFT represents the ownership of the house, then the metadata with information about the house (photos, occupants, etc.) can naturally change.
The owner of the NFT can change the metadata, which means they have no value. In addition, an “uncertified” Internet link is meaningless, which can change its destination at any time, or the content of the page itself can dissolve into a great nothingness. The main source of misunderstanding is that NFT is only the base part of the technology, the lowest, which is nothing. NFT is a symbol with no meaning. This is precisely the problem that people are trying to put meaning on the naked NFT. Without additional technological layers, the value of NFT exists only in one's mind and nowhere else.
Owning a cryptocurrency is like owning a real wallet with banknotes of different denominations lying inside. Within the framework of this analogy, NFT is a receipt that does not have a declared value (“Receipt for receipt of this receipt”), which lies in a bank safe, the owner can break it, transfer it to someone (during transfer, a bank employee checks for an agreement between the parties, controls the process of moving to a new box), show it to someone (at the same time, a bank employee certifies that this is a genuine receipt and it belongs to the owner).
If you look at the already objectively existing NFT market, another analogy arises: crypto money is exchanged for crypto diamonds. The cost of a diamond is almost not related to its practical use, but depends on a mixture of objective and subjective reasons. The less similar a specific diamond is to what is already sold in bulk, the more significant is the subjective factor. When they sell NFTs, they sell only a checkmark, a receipt. Pictures and text are just a spice that flavored the symbol. Chips with bacon, chips with herbs, chips with potato flavor. It's all the same product in different flavors, added to transform one product into multiple products and boost sales by satisfying consumer demand for variety. Similarly, NFTs with pictures are records in a database with different flavors. The receipt can be printed on paper, on papyrus, on silk, but in all cases, "receipt for receiving a receipt" will have an equivalent meaning. The real value of NFTs is created by the infrastructure that provides a service in exchange for tokens.
Problems of the current NFT market
The Internet is full of monotonous criticism of NFT, accompanied by screenshots of pictures from NFT. "Look, these fools are buying what you can get for free!" — that is their message. “Yeah, but does being able to google a famous painting make you an owner?” crypto evangelists proudly answer them. By confusing checkbox ownership with property ownership, blinded NFTs overlook the mountain of obvious problems that digital exchanges inevitably face:
- Is the creator of the NFT the real owner? Anything can be put up for sale.
- There is no guarantee of the uniqueness of the product. You can sell the same thing endlessly.
- Even if a content uniqueness control system appears, how can it work? What if I slightly change someone else's content? What if I'm the author and want to post a modified version? What if I gave a copy of the work to a friend who now wants to sell? The maximum that can be done in this direction is to show a notification to the buyer: “there are 10 more similar ones cheaper!”
- After the purchase, only the NFT itself is transferred to you, there is no opportunity to dispose of the asset from this.
5.Buying an NFT with an asset via a link to a certain resource does not oblige anyone to anything, today the resource is there, tomorrow it is not (separately for IPFS fans: the link is metadata, it can change unexpectedly. There are a bunch of reasons that contradict the use of the URL as rigid connection, the existing practice is a stupid crutch). - Most of the proposed scenarios for using NFT have already been implemented somewhere or can be implemented on regular databases. It will be easier and cheaper for the users themselves. The cases where you really need to use proof of ownership of a virtual asset in an environment with zero mutual trust are some things that lie in the field of cryptofinance.
- The absence of coherent mechanisms for establishing authenticity and price, without them, trading floors are flea markets that work at night without light.
All these points are solved using additional technical add-ons that will link NFT and ownership, something can be automated and raised on the same blockchain (for example, you can make a real crypto-depository for virtual assets that will refer to NFT internally), but ownership real values cannot be organized without state participation (this will be discussed in more detail in the third part of the material).