Source: https://opensea.io/collection/metaskulk

What is a NFT?

A Non-Fungible-Token, also known as a NFT, is a digital representation of an asset.

In today’s world, most of these digital assets are in the form of media such as jpegs, videos, art and much more. But in the future, there might be NFTs in the form of virtual lands, avatars, digital identity and what not. Although this is currently an imagination of what the metaverse might look like, it is not bound to exist as of yet.

Why even purchase an NFT?

Other than the dicey long term investment in the Metaverse, one area NFTs are proving themselves to be useful is Utility.

A good example of utility-based NFTs is event ticketing. The technical capabilities present in NFT’s solve numerous problems existing in the ticketing industry. Some of these being black marketing of tickets (ticket scalping), authentication issues, ownership and event memorability.

To understand how NFTs solve these problems, we’ll have to take a look at what they are technically.

What is an NFT technically?

Technically, an NFT is a piece of code (a.k.a smart contract) living on a blockchain that helps it maintain its unique state. This piece of code provides certain functionalities and attributes to a digital asset. Two of the most popular battle-tested standards used are ERC-721 and ERC-1155 provided by OpenZeppelin.

For example, let’s take the ERC 721 standard and see how it solves the problems. (I would highly suggest you having the ERC-721 code open in another tab) (Note: For example purposes, we will not be discussing the whole contract code but only the attributes and functions that solve our problems)

ERC-721 standard contract:

Attributes/Properties:

1. _name and _symbol

They are used to hold the name and symbol we need to allocate to our NFT.

2. _owners

The _owners is a mapping from the NFT’s token ID to the owner’s address.

3. _balances

_balances is a mapping from the owner’s address to the token count (number of NFTs that owner holds).

Out of these three, _owners plays the most important role in solving our problem of ownership and authenticity. After the ERC-721 contract is deployed to the blockchain and the _safeMint(to, tokenId) function (mentioned below under Functions) is called, the ownership of the NFT is mapped to the owner and stored in the attribute _owners while the authenticity is verifiable by the presence of that NFT and its attributes on the blockchain.

Functions:

1. balanceOf(owner) – returns balance of owner

2. ownerOf(tokenId) – returns owner of a token ID ,i.e. NFT

3. name() – returns name of NFT

4. symbol() – returns symbol of NFT

5. tokenURI(tokenId) – returns the URI of our NFT

6. safeTransferFrom(from, to, tokenId) – to transfer the ownership of an NFT to someone else

7. _safeMint(to, tokenId) – to create an NFT and assign it to the “to” address in the parameter

8. _burn(tokenId) – to burn the token on-chain

The above functions are basic functions that show how NFTs can be created, transferred and burned by just calling them.

The problem of black marketing of tickets or ticket scalping is solved by NFT royalties where the artist hosting the event is provided his share. To manage NFT royalties, we have the ERC-2981 standard contract. This smart contract includes functions that helps us set the default royalty an artist or creator wants to receive on each purchase.

Note: There is a common misconception that solving this issue of black marketing provides fair priced tickets to the customers. That is not true. The main problem that we’re solving is providing fairness to the artist or creator.

Lastly, the fact that we can utilise the underlying functions of an NFT and represent it as any form of digital asset opens up multitude of opportunities that solve the problem of Event Memorability. Nowadays, most tickets are provided in the form of either QR codes or paper-based tickets. With creative ways, NFTs can help us add memorability to our event experience, give us access to future events and store our memorabilia all in one place – the blockchain (The topic of NFT memorability is itself too deep to cover in this article).

Is it fine to say that all NFTs fall under the category of Utility assets?

We have seen how a NFT internally works in a utility-based sector. But is it fine to say that all NFTs fall under this category?

Not really. The presence of art and other invaluable assets still have some weight. Although it might make no sense now but in the near future, a person owning an invaluable art NFT in the metaverse can be associated to someone owning a Van Gogh painting in reality.

Can’t I just save the image and deploy it to the blockchain again?

You can, but that will hold no social value. You can copy an entire NFT collection but it’ll still possess no social value (unless you start scamming people). The fact that people know who the original NFT creator is or the person/organisation creating them is, they will continue to purchase those NFTs because of the social value that collection holds.

So, in short, if you deploy look-alike NFTs, it will have no relevance.

Conclusion

Do not take anything in this article as financial advice. Many individuals and companies like Meta, Microsoft and Nvidia are working on building the metaverse, which will raise the value for art and utility-based NFTs. The promising future of Non-Fungible Tokens (NFTs) awaits as there are yet huge improvements to be featured.

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