NFTs are more than just a buzzword — they represent a new era of digital ownership and authenticity
I am writing this article as part of our prelaunch of Niftnack NFT app. Not a technical deepdive about NFT, but a quick introduction to the technology and some interesting points (hints on what we are building with Niftnack). Please feel free to leave us comments/suggestions/questions below and we will get back to you.
Click here to check out our pre-release collection on OpenSea. Support our community and become a VIP by collecting our NFTs, you will get access to our pitch deck and can vote on community topics. We have started internal testing of our app, iOS version for now. Been working on the chaincode. :)
What is NFT?
NFT stands for Non-Fungible Token. Non-fungible means things that are unique and not interchangeable for other items because they have unique properties. Where fungible, means it can be exchanged with other things of the same type, for example, $1 USD (token) exchanged to 4 quarters (tokens).
It is kind of a catchy buzzword, but it is not new, been around since 2018 with CryptoKitties. But back then, NFT wasn’t a hot trend, not for millions of crypto dollars, CryptoKitties was just a prime showcase of a non-cryptoexchange decentralised app (dApps).
A better way to think of it should be, NFT, non-fungible, means it is “unique” and can’t be directly “replaced”. You can’t replace the Mona Lisa with another visually perfect replica, it just won’t be the same, right?
Technology behind NFT
It’s worth getting to know a little about the technology behind NFT. At a high level. These are the 4 core tech foundations of NFT.
- Hashing — To uniquely represent any digital file.
- Public-key cryptography — To ensure that all transactions/actions are verifiable to the private key or wallet owner.
- Blockchain — Distributed immutable ledger to have full records of all transactions.
- Smart Contract — Just some code that runs on the blockchain. Not very smart and not really a contract. But like most crypto tokens, most of them are defined and transacted with smart contract.
Hashing, it’s a one-way function that takes any digital file (of any size) and return a unique 256-bit number (called a hash). You can be assured that it is unique and even the slightest change in the original file will result in a very different hash. The key point is, you can use the hash to uniquely represent any digital file of any size, not just a photo, can be video, music, software, document, or any other digital file. And computers are now very good at calculating hash, very quick, even for very large files. Now why “represent” it with a hash? Because it is much more efficient for computers to compare and store fixed 256-bit numbers rather than having to compare megabytes or gigabytes of files each time. The main take-away is, the hash is a unique representation of any file, if the hash is the same, they are from the same file. (People have been trying to hack this for a long time, but no known hacks yet. Yes, it’s simple to see that mathematically there can be duplicates, as long as there are over 2²⁵⁶ unique inputs, you will get 2 identical hash value. This is known as a hash collision. But practially, no one found any duplicate hashes from 2 different files yet. 2²⁵⁶ is a very large number, that’s 1.158 x 10⁷⁷, 1.1 with 77 zeros after it. So you can “safely” ignore such risk for now.)
Public-key cryptography, also known as asymmetric cryptography, might be a little harder to explain, but essentially, it means the ability the encrypt and decrypt some data using a pair of keys, public key (which may be known to others) and a private key (which may not be known by anyone except the owner). The two keys work together to provide a way for everyone to validate the authenticity of the data can only be written by the private key owner. (Just as importantly, the other way around, it also allows for everyone to encrypt a message that can only be read by the private key owner.) This, together with hashing to uniquely represent any data of any length (or digital file), is the basis of the trust on blockchain, only the private key owner can access and perform actions with the wallet, when everyone else can validate and verify the transactional data.
NFT is based on blockchain technology which provide immutable records to all transactions, solving the digital trust and security issues with mathematics and transparency. Can think of the transactional data organised into blocks and they are mathematically (cryptographically) linked up into a chain so all previous blocks cannot be (easily) changed without breaking the chain.
Smart Contracts — Just small programs that run on blockchain. Usually very simple logic to avoid bugs. All NFT transactions, ownership, duplicate checks, etc, etc, are all in the smart contracts. Blockchains are usually general purpose so it wasn’t designed with NFT in mind. NFT can be seen as a dapp (distributed app) on the blockchain for all users to interact with. The most common form are the ERC-721 and ERC-1155 standards (ERC-1155 is for multi-tokens therefore lower fees), which specifies what information is needed for each NFT and the actions you can do with it.
That’s it. That’s all NFT really is, a hash of the file in a smartcontract with your wallet address on a blockchain. It is more of a permanent receipt of a file associated with your wallet, rather than the actual file in your wallet.
Why is it important to know these? Because unlike a piece of physical artwork or objects, there can be perfect digital copies of the file. The digital content can actually fully replicable and fungible, one file can be fully and perfectly replace another. But when we are talking about NFT, it is only the particular receipt record of it, on a particular blockchain or even smart contract. So it is much more like an honour system. Even if you didn’t pay millions, you can still get perfect copies of all bored apes out there for your private viewing. But what you won’t get, is that official record of ownership which might give you other privileges as an owner, kind of like a VIP card of some sort.
So why is NFT so (not) special?
- The truth is, as digital art collection technology, it’s not that special.
It’s not even very unique. Because the actual artwork is a digital file and it is commonly stored online (using IPFS or other decentralised storage) for public viewing, you can get a perfect copy of it for your own enjoyment. But what you will not get, it that official certification that you “own” it, usually from the creator directly.
- Now why did I say you “own” it with such scepticism? Not only are we talking about just a receipt of owning some zeros and ones on some decentralised storage, but because there is no such global recognition of copyright. Countries can have their own copyright laws and some might not even have any. Also, like most legal contracts, it has an expiry date, can often be extended, but certainly not indefinite copyright. So how can that be compatible with blockchain which is designed to be a “permanent” digital records with no centralised governance?
- Is it a fad? Naming these as tokens kind of helped with the recent crypto trading craze. More as a get rich quick scam to buy and sell them because someone else will pay more for it, just like other tokens which have no utility. More about FOMO, we don’t want to miss out on the latest trend or chance to be rich.
- Not saying that pixellated images, simple combinatorial cartoons, AI generated pictures are any less enjoyable or collectible as art form.The current wave of 2D NFT hasn’t pushed the boundaries of digital art. They are just at best digitisation of traditional 2D drawings and paintings, maybe a bit of automation with AI to generate countless combinations. Digital art should be able to bring us new experiences, multimedia, AR/VR, 3D, immersive, interactive or even smart. Or at least put a frame around it to present as expensive art?
A few hints on what we are building at Nicknack.
(If you want to see the full pitch deck, get any one of our NFT on Opensea and then contact us.)
- Collecting knick-knacks can be fun, digital or not. And we all collect things.
- Not all artwork are masterpieces, can just be whatever catches your fancy.
- Good to be able to reward and engage with the creator or like-minded collectors directly.
- Take pride in your collection. Show it off to friends or fellow collectors. Or even “rent” it out to them.
- It’s too “easy” to just say NFTs, being unique, will automatically be valuable items. Any photo you take can easily be a very unique arrangement of pixels and noise, but does it mean it is valuable to everyone? Something can be valuable to you, or just a small circle around you, but not to others.
- Is your phone or even computer the best way to enjoy digital art? Why not on bigger screens? AR/VR? Take it anywhere with you, into Metaverse or visual social media.
- But should there be a permanent record of what you have ever collected publicly available? Should there be a choice to remove something from your collection with no trace of it ever?
- Crypto wallets is still rather scary to most users, and rightfully so, losing your private key means all your digital assets can disappear is just not right. But part of decentralisation kind of pushes the responsibility back to the users. Can there be a compromise?
- Blockchain Gas fees are still too high for wide adoption of NFT, considering that it is just a digital record of ownership. Polygon is helping to reduce the fees and Ethereum with PoS later in 2022 will hopefully drive gas cost down too.
- Privacy is important, not just about secrecy on who owns what, but it’s your choice to tell anyone your name, just as you do when you visit a gallery or a shop.
- AI can learn a lot about what we like, not in a scary way, and help us to explore and discover more efficient. :)
We are starting our iOS app private beta testing in Q3 2022. We have our prelaunch NFT series on Opensea at https://opensea.io/collection/niftnack-eva, if you want know more about our project or contribute to it, go ahead and just buy one! Owners of our NFT can get access to our pitch deck and special (voting) rights on upcoming community events.