Explaining NFT the way that actually makes sense
Before talking about NFTs. I will ask you an obvious question that we sometimes overlook. How do you own an Asset? like your house, business, or land that you bought. These assets are not small enough to carry around in your wallet. If that was the case you definitely would have a claim on it just like your claim of ownership on a currency or some gold biscuits in your pocket. But assets like building, land, equity, etc are available on public space regulated by the government which is accessible to every citizen. And it’s the government that issues ownership certificates of these assets for you to own and trade them on market. This works very well because literally, everyone around you acknowledges the government as the issuing authority. So when the govt says this property belongs to you, nobody in their right mind would dare to challenge you.
But how can someone own an Asset on the internet? There is no government to issue an ownership certificate on the internet. Even if someone attempts to start one, everyone might not get on board. They will question the authority. But what if everyone on the internet can take a part in building such an authority. When the internet itself is a decentralized network it is natural to have an issuing authority that is decentralized. The result of such an ambition gave birth to distributed ledgers or commonly known as the blockchain. It is a non-editable database that anyone can keep a copy of. So if I can register my asset on this uneditable database it will be easy for anyone else on the internet to validate any claim of ownership on that asset. But this works smoothly only when everyone associated with such asset market accepts the issuing authority of that particular blockchain.
There are at least thousands of Blockchain start-ups on Internet currently. And it will only increase in the coming years. It seems everyone wants their own decentralized database these days, but the irony is not lost on me.
Although it’s not entirely useless to start your own blockchain one day. Because blockchains can vary based on their utility, value, features, and scalability. So, if a wide variety of Blockchains can work interoperably with each other it could impact the future of finance by solving a large set of problems together.
Your claim of ownership is only good as the blockchain that issue the ownership certificate
Right now Ethereum is the most adopted blockchain that provides programmable features. And that is why issuing Non Fungible Tokens are making the buzz these days. NFTs are just certificate of ownership that is recorded on some blockchain. And it’s starting to work well because of the keyword that I mentioned above "Most adopted".Currently it’s not feasible to issue NFTs of land and buildings, instead you can issue only those things that are publicly available on Internet like a digital art, game collectibles, memes and even a tweet. But this isn’t because of technology limitation rather it’s a limitation of regulations and adoption rate. When the world overcomes it, you will be able to buy lands in Europe sitting on your couch in India! Wouldn’t that be fantastic?
First rule of smart contract: Never screw up!!!
Ethereum developers has released a standard for writing the code for such NFT tokens. It’s called ERC 1511 and ERC 721. They are common standards on how to write your smart contracts without screwing up. These smart contracts are used to issue and trade NFT tokens in a secure and decentralized way. Because one small mistake in code and you could lose millions. Has happened before, can’t say won’t happen again.