Non-fungible tokens: a trend to watch

Non Fungible Token

 Emmanuel's highest selling Non Fungible Token (NFT) titled "Self redemption" sold at about Sh700,000 on SuperRare. 

Photo credit: Pool

Non-fungible tokens, otherwise known as NFTs, are making waves in the world – and they aren't as complicated as they seem. Kenya's creative class, especially those who create art, music, and videos, stands to benefit greatly from this.

Putting it simply, non-fungible tokens are digital assets with a unique identifier that distinguishes them from each other. The term "non-fungible" refers to something that cannot be replaced by another.

Money, for instance, is fungible because it can be exchanged for other things, but a train ticket cannot, since only the person whose name appears on it can travel. In the same way, if you exchange one bitcoin for another, you are in the same position as when you started.

An NFT represents proof of ownership of an asset by providing it with an identifier that is permanent and unique. The exclusive number makes the asset traceable only to its owner, thereby reducing chances for fraud.

Most NFTs today are digital. Digital NFTs benefit creators because they can give their fans something unique and rare, such as a piece of art, video, or music. Seeing the potential windfall in this businesses, prospective buyers are now collecting digital artworks, just as collectors have traditionally collected physical paintings over the years. Those who own these intellectual properties upload them online and convert them into NFTs, which can then be sold.

As an NFT art owner, you can decide whether to sell the art digital photo along with the physical art in your possession. As part of the sale, you display the physical art with its corresponding digital art on the online platform. Depending on how unique the piece is, its value could fetch hundreds or thousands of dollars.

Imagine the myriad of historical artifacts housed in the national museums or the incredible artwork by local artists, which is often sold at a bargain price. Artists from Africa stand to gain a great deal if they harness the potential of such platforms because the process is much more transparent.

Most NFT platforms require buyers to have a digital wallet and to pay with cryptocurrencies. Some of these sites include OpenSea, Rarible, and SuperRare.

OpenSea describes itself as being the world's largest NFT marketplace. Among its non-fungible tokens are art, sports, and collectibles.

One of the major drawbacks with the NFT market is the ambiguity surrounding how to price for the digital assets. NFT prices vary depending on the creativity, uniqueness, and scarcity of the buyers and owners. Additionally, there is no national or international regulation, which makes many would-be investors, nervous.

Furthermore, the popularity of NFTs has increased the possibility of cyberattacks. There are also many copy-cats of the original NFT stores on the internet. Though they appear authentic, they contain counterfeit products.

Despite these nascent challenges, the field of NFTs is one worth watching.

Mr Wambugu is an informatician. Email: [email protected] Twitter: @Samwambugu2

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