As a dictionary meaning, a qualified Intellectual Property, or a token that cannot be replaced — non-fungible token, NFT for short — by its popular name in English, is a unit of data stored in a digital ledger called a blockchain that confirms that a digital asset is unique and therefore cannot be changed. The term “notebook” is used here in the sense of a contract. This is one of the most critical issues that need to be understood.
What makes NFTs unique is the code and the contract structure behind it. In this article, I will try to provide insight into some of the most fundamental questions about NFTs for beginners:
What is value, and how do NFTs offer value? According to the modern utility theory, value is the benefit people get from something (an object, a right, a transaction, etc.). Most consumers in today's world tend to materialise this benefit. For example, when we buy an outfit, we think we are paying for its covering function and feel relieved that we are spending money for a tangible benefit. But the difference between a $10 T-shirt and a $300 T-shirt isn't just the quality of the fabric. Both functions more or less the same, but one is produced by a company that has spent significant money to create a brand perception that adds the feeling of being exclusive to the product it sells. The other did not invest in its brand as much. Here the question arises: what is brand value? In today's world, we unwittingly invest a significant part of our budget in this intangible proposition. Therefore, when trying to understand the value proposition of NFTs, one should not approach it from a "why should something I cannot hold with my hands be valuable" point of view. Because so much of today's economy is built on intangible value propositions, we are unaware of it most of the time. Since NFT is a digital technology, this side of it stands out more and is often misunderstood.
I can simply right-click on it, save it, and use it as I want, so why should I own an NFT? There are many differences between owning an NFT and having an image of an NFT. They offer many use cases, from digitalizing unique ownership to providing authentication for artwork. Let’s say you want to enter an auction or attend a meeting about NFTs; you need to have an NFT to prove that you are an accredited participant. During these meetings, you might receive information about the future of NFTs in advance, allowing you to invest early. In addition, many social media platforms, such as Instagram, have entered the NFT field and continue to do so. Instagram is currently trying to integrate NFTs by using specific filters and turning stories into NFTs. Although the things described so far may seem ridiculous or strange, I will ask you to compare this with when the Internet was found. Just as we all did not know WhatsApp until 30 years ago and cannot live without it now, NFTs will take their place in advance in our lives, just like the unusual applications mentioned above and the revolutions that we cannot foresee.
Why should I pay for this incomprehensible thing? What good will it do me? Although there is no fundamental difference between these two questions, people are more sensitive about spending their money. I think the answer to this question is: to capture the necessity of the age. I want to support this with a small example. Nokia was one of the first phones we bought in childhood and youth. Then Microsoft bought it but didn't get the yield it wanted, so it sold it to a Taiwanese company for $350 million. That was nearly the revenue that Nokia was making during its prime years. So, it was sold for almost nothing. Nokia had become a lagging company of its era and could not keep up with the new technologies. Nowadays, Apple is at the forefront of many electronic goods fields as it keeps up with the age and the fast-paced lifestyle of today's people. Given the uses of NFTs, if you can't make sense of this technology and this software and fall behind the era, you have the potential to become like Nokia. Nature is a race for adaptation. One must adjust to changing conditions to survive. Even though today the use-cases for NFTs might not seem many (although there are lots of use-cases such as digital proprietary rights of music, patenting, digital land registry, etc.) as with the case of Whatsapp, we cannot foresee what kind of new use-cases will emerge and how NFTs will have the place they deserve. Just to give you a sense of how crazy it can get, let me share with you a creative use case that Johnson & Johnson has come up with. The company sold a portion of sales royalty rights of a mouthwash product they produce at an auction. Sounds mental, right?
As long as the media and society continue to be interested in NFTs, many legal requirements are inevitable. Currently, the regulatory framework for NFTs is still unsettled and developing. Surprisingly countries in Latin America are closer to reaching a standardised legal framework for NFTs than the EU and the US. This, however, is mainly related to the high level of complexity regarding the financial sector in these jurisdictions. Since there are many layers of participants and related parties, regulating new areas is much more challenging. Nevertheless, the EU and the US are close to creating an everyday basis for this new area by creating new financial security legislation.