The Notions of NFT Ownership and Scarcity

An NFT, short for non-fungible token, is a digital asset. So, what are the concepts of ownership and scarcity in the context of NFTs?

The term fungible has a straightforward meaning: that which can be readily replaced by another identical item. In other words, non-fungible means that which is not replaceable by an item that is exactly the same, and the reason is simple: in the world of NFTs, there is no such thing as identical tokens.

But where did NFTs originate from? What are they, and what can they portend for art’s upcoming years? What do the terms digital scarcity and digital ownership mean in the context of NFTs?

NFTs, or non-fungible tokens, are separate digital objects that can be identified by their uniqueness and verifiable scarcity. NFTs, which are blockchain-based, have already changed the face of digital art.

Deconstructing Fungibility: What Makes NFTs Valuable?

Assets can be divided into two general categories: fungible commodities and non-fungible assets. Whatever asset retains an equivalent extrinsic value to another asset of the same kind is said to be fungible. A fungible asset is something that can be converted into another, such as the money we use on a daily basis. In most cases, if two individuals are each going to hold a dollar, they probably wouldn’t mind exchanging dollars. Both dollars are equally valuable and can be swapped without causing either side to lose anything of value.

An asset that seems to be non-fungible can indeed be interchanged equivalently for another asset of the same kind. A collectible or piece of memorabilia or ephemera is a typical example of a non-fungible commodity. Despite the fact that they are identical items, a baseball autographed by Babe Ruth cannot be swapped for a standard baseball. Perhaps, though they might seem identical, a genuine Monet can indeed be interchanged for a copy.

It can be difficult to distinguish fungibles from non-fungibles. An exchangeable asset may transform into a distinctive, non-fungible asset if it is suddenly given intrinsic worth or special capabilities. Contrarily, a non-fungible resource that is unexpectedly made common (such as your autographed Babe Ruth baseball being revealed to be a fake) may probably have found itself comparable to a fungible asset in terms of its specific value.

The Digital Age and Non-Fungible Assets

An asset needs to be rare or special in some way in order to be non-fungible. A self-sustaining, configurable way to do this online has never really been plausible before, until NFTs arrived in the game.

Online scarcity is infamously and incredibly hard. The ease with which information can be reproduced, duplicated, disclosed, and distributed is excessive. We have first-hand knowledge of this. The distribution of content, particularly art, is astonishingly simple. It produces an abundant supply of mainstream press that exposes us to digital art while preventing us from giving it any sort of value.

Online, authentic ownership, scarcity, and individuality are difficult to establish, making it challenging to demonstrate a fair market value for works produced in the digital sphere. It makes it more challenging for digital artists to launch and sustain profitable creative ventures. Plagiarism and intellectual theft have been made possible by it. Most importantly, it has made it more challenging for individuals and potential collectors to appreciate digital art in the very same way that we value physical artwork.

NFTs represent a paradigm change for online media in general and digital art in particular. They make it possible for internet assets to have unchangeable ownership and provenance as well as verified exclusivity. They introduce into the digital world the characteristics that provide value to actual works of art and other assets or commodities. In the process, they open new gates to lucrative digital art and offer chances for creators that have never previously existed. How do NFTs foster ownership and scarcity in the digital realm? Because blockchain technology has notably enabled these assets, we refer to them as non-fungible tokens instead of non-fungible assets (or perhaps even digitized non-fungible assets).

NFTs and Blockchain Technologies

To put it simply, bitcoin is a decentralized, networked, permissionless ledger. Decentralized means it is not owned or governed by anyone. Instead, it is kept and stored collaboratively by a number of unrelated individuals. This contrasts with decentralized ledgers (servers), which are frequently managed and administered by a single entity. Anyone may enter data, keep track of transactions, and explore the history of records if they have no restrictions.

Non-fungible assets, which have grown in popularity over the past several years and notably in the past year, are also supported by blockchain systems like Ethereum. A non-fungible token (NFT) is a unique, interlinked token on some kind of blockchain network, in contrast to a fungible asset like ETH. When an NFT is transferred from one address (i.e., a user) on the system to the next, the complete token is also transferred. NFTs cannot be split into smaller amounts (just like you wouldn’t cut a sculpture in half and expect its value to remain the same).

Importantly, NFTs are undeniably special. On a blockchain network, when a user mints (creates) an NFT, they do so with a predetermined quantity of tokens. Due to their rarity in comparison to the quantity of equivalent NFTs released during that minting occurrence, NFTs are frequently referred to as 1×1 or 1×100. Once published, that number can indeed be altered, and the set of materials is unquestionably proven to have been created by that person at a specific time. It will be publicly and irrevocably verifiable whose NFTs constituted part of the initial set and which were members of later sets, even if the creator mints additional examples of the same NFT artwork in the future (analogous to editions of a print). Since everyone can access the information whenever these NFTs are published on an open or public network like Ethereum, it is less expensive and difficult to confirm the legitimacy, authenticity, distinctiveness, and proprietorship of specific assets.

NFTs can persist to be traded and exchanged among collectors and the art world after being created by artists and purchased by collectors, much like any other secondhand market. Every NFT has a provenance, allowing enthusiasts to check for authenticity before making a purchase or placing a bid. Additionally, NFTs make it possible for automatic engagements, which is just one feature of their special capacity to support artists via digital mediums. A specific proportion of every sale could be hardcoded to refund a specific proportion of every sale to a specific address, including that of the miner’s original, as separate units of software on a blockchain system. This implies that even if they have little or no direct control over a sale’s outcome, the creator will continue to generate profit from subsequent sales of their works.

The surge in awareness and investments in the NFT market over the past year has demonstrated that there is significant demand for not only digital art but also for the special economic proposition of digital scarcity, exclusivity, and verified ownership. The involvement of both artists and buyers as well as curators demonstrates the interest in and advantage to both parties of the artist market. The NFT ecosystem will develop with blockchain technology as it proceeds to advance, increasing in scale, intricacy, and opportunity. The Fungible, a compilation of digital artwork by well-known makers, marked the start of their venture into NFTs, and Natively Digital: A Curated NFT Sale is the next step.