Episode #70: What the &@(% is an NFT?!
Understanding The New Landscape in The World of Digital Art
A Simple Idea With a Not-So-Simple Title
Let’s start with the awkward stuff: NFT stands for “non-fungible token.”
Yeh, I know… 🤬
If that phrase confuses or annoys you, trust me: You’re far from alone. The world of technology is obsessed with using unnecessarily complicated acronyms and terms that confuse most of us. DDoS or DNS anyone….?!
As my readers know, I like keeping things simple, so instead of saying “NFT”, let’s just use the term “unique digital artwork”. That’s because - in simple terms - NFTs are just unique pieces of digital art.
What makes these unique pieces of digital art even more unusual is that each one is verifiable: it can be digitally authenticated as the creation of the artist who made it. Even more fascinating, all current and previous owners can also be digitally authenticated.
How is that possible? Glad you asked…
Blockchains, Digital Ledgers, and Decentralization
The technology which supports NFTs is called a blockchain. Blockchains are a kind of decentralized technology. This means they don’t exist in a single place or on a single server, operated by a single company. Instead, blockchains are built, and kept — by design — on many thousands or millions of computers, ensuring their safety and accuracy.
Bitcoin is one blockchain. Ethereum is another blockchain.
Now, here’s where the fun starts. The blockchain is just a kind of technology. Think of it as you’d think of a computer: it’s a hardware system. And, just like a computer runs software, a blockchain runs a digital ledger.
The digital ledger meticulously details every interaction which takes place on a blockchain.
In practice, the digital ledger is identical to our checking book ledger: every bill we pay and every check we deposit has its own entry. But there’s a big difference:
In the case of our checking accounts, there are only two authoritative records: ours and the banks.
In the case of a blockchain’s digital ledger, there are tens of thousands or sometimes millions of authoritative records because blockchains are decentralized.
As blockchains are all decentralized, the ledgers they keep are as well. That means they cannot be forged or otherwise manipulated.
This decentralization is what makes blockchains and their ledgers impossible to change. Think about it: if one, 100, or 10,000 ledgers become compromised, there are still tens of thousands or millions of others to prove what can (and cannot be) authenticated on the blockchain.
Central banks and central government cannot directly manipulate blockchains like they can tangible currencies like the Dollar or the Euro because they are decentralized. This is what makes blockchains so scary (and dangerous) to them.
But decentralization is also what helps to prove that a digital work of art is valuable… or not.