Hello, Iâm Crypto Casey. In this video we are going to talk about Non-Fungible
Tokens, or NFTâs for short. We will discuss what NFTâs are, how they
are created, how they are being used now, and how they can be used in the future. By the end of this video, you will understand
the vast and varied potential of non-fungible tokens and why they will undoubtedly become
pervasive in our modern day lives in the not so distant future. Awesome. So letâs learn all about Non-Fungible Tokens. Before discussing the specifics of non-fungible
tokens and the underlying technology, there are three key concepts we must understand
for the beauty of NFTâs to really sink in. Because my goal before the end of this video,
is for you to have the same eureka, âoh my gosh this is gonna be huge,â experience
that I had when really digging into this technology. So the three concepts we will visit briefly
are subjective versus objective value, fungible versus non-fungible assets, and the definition
of tokens. Nice. Concept 1: Subjective Versus Objective Value So, I think we all can pretty much agree that
the air we breathe and having access to drinking water are inherently important. Air to breathe and water to drink have objective
value for the most part, meaning someoneâs belief, perception, or preferences donât
really add or take away from the overall importance or value attributed to air or water. So, subjective value is the idea that an itemâs
value to a person is dependent on that personâs beliefs, perceptions, or preferences. For example, letâs say I have a roundtrip
airplane ticket to Iceland that costs $600 US dollars departing tomorrow and coming back
a week from now. If you canât drop everything you have to
go tomorrow, or if you donât have a passport, or if you are some deranged weirdo that has
zero interest in going to Iceland, then the ticket is pretty much worthless to you. Now, assuming you can and want to hop on a
plane to Icelandffffffffthree one tomorrow, if the ticket was for a middle seat, versus
an aisle or window seat, that would probably have an affect on your perception of the ticketâs
value. Some people prefer aisle seats, while other
people prefer window seats, and unless youâre some deranged weirdo that would literally
sit anywhere on a plane and zero feelings one way or another, even if itâs a middle
seat, the location of the seat adds another subjective value layer to the ticket. So breaking down the subjective value layers
of the airplane ticket to Iceland tomorrow, youâve got the mere fact that itâs an
airplane ticket, the airline, the destination, the dates of travel, and seat location. All of these factors make the airplane ticket
an item with subjective value. Regardless of the $600 cost attributed to
the ticket, everyone would place a different value on it due to the aforementioned factors. An even more obscure, in my opinion, and insane
example of something with so much subjective value, that I can almost guarantee every single
one of you that will ever watch this video would place 0 value on this item. Check it out. If you go to Ebay, do a search for a baseball
card, filter by pre-1942, and sort by the highest price. You will come across some fresh hell madness
like this: $300,000 for a 100 year old piece of printed
paper, of some TY Cobb. Who is that? Honestly, I donât want to look him up because,
Iâm worried, it might just cause me to want to buy his century old baseball card for an
amount of money that could afford a decent sized house in most places around the United
States. I donât know about you guys, but for me
watching baseball, watching paint dry, subjectively equal use and enjoyment of time. But I mean, 161 people are watching this card,
suggesting there are at least 159 people willing to shell out $300,000 for a color printed
piece of paper. And just for fun, if you do the search for
baseball card without the pre-1942 filter you get this: Tom freakinâ Brady. 79 people potentially willing to shell out
$1.8 million dollars for this particular colored piece of paper. But hey, at least this one is kinda like iridescent
or has some holographic quality to it. Also, I can futs with some football. Football is watchable in my book. I donât really like sports, but football
a close second to hockey for me. So what is the subjective value of this $1.8
million dollar Tom Brady card for me: $0, yeah I donât want that card or any sports
card. No no, not for me. Does nothing for me. But, now we know that a market exists for
these items with highly subjective value. So what is a market? The definition of a market is twofold. One, a market is a place where people can
physically go, or digitally access, to basically buy, sell, exchange, or trade goods and/or
services. So a market can be a physical place like a
grocery store, the mall, or a car dealership, or it can be a virtual environment like Ebay,
the Apple app store, or even a cryptocurrency exchange like Crypto.com or Coinbase. Two, the term market can be used to describe
the existence of people who have a desire to buy, sell, exchange, or trade a specific
type of product or service. So this use of the term market is more abstract
to describe, for example, the housing market. Believe it or not, there is a collection of
people out there that wish to buy and sell houses. You can also be more specific like the Chicago
housing market, or even more specifically, the Chicago condo market. People also use the term to ask if a market
exists, which simply means are there enough people out there who would want to buy, sell,
exchange, or trade a particular good, service, information, or currency? For example, when creating a new good or service
that doesnât currently exist, sometimes people perform market testing, which is just
seeing if there are people that would want to buy the good or service, how many people
there are, how much theyâre willing to spend, etcetera. Cool, so now that weâve basically translated
these deliberately complicated finance terms, subjective value and markets, into concepts
we were already comfortable and familiar with, that being: different people are willing to
spend different amounts of money on all kinds of different things they want to buy. Simple enough, right? Nice. Letâs learn something else we already know,
but didnât realize it. Concept 2: Fungible vs Non-Fungible Assets First and foremost: What is an asset? Asset is a fancy finance term that just means
something useful or valuable. It can be something physical like gold, it
can be something digital like bitcoin, it can be something abstract like expertise,
it can be a financial instrument like a retirement plan, and it can be anything that helps you
generate income, like a computer or cell phone, for example. Sweet. Next letâs tackle the difference between
fungible assets and non-fungible assets. Fungibility describes an assetâs ability
to be evenly swapped with another asset of the same type. So a fungible asset is something that is interchangeable. For example, a $100 dollar bill is fungible
because, if I have a $100 dollar bill, and you also have a $100 dollar bill, we could
interchange the bills, or I give you mine and you give me yours, and the value doesnât
change. Ethereum and bitcoin are both fungible assets
as well. One whole bitcoin is no different from another
one whole bitcoin. Same goes for ether. One ether is no different than another ether,
as the value is equal. So a non-fungible asset is something that
is not interchangeable and not divisible for the most part. For example, letâs say I have a pet dog,
and you have a pet dog, and we swapped dogs. You can see how that transaction isnât an
equal swap of value. Even if we had the same exact type of dog
and they looked the same, each of the dogs harbor their own unique personality, memories,
and abilities. So examples of non-fungible assets are houses,
used cars, and baseball cards, like we looked at early. You can see how these items canât exactly
be divided evenly and retain their value, like you canât just buy half of a house,
or 30% of a car, and 1/10th of a baseball card. And itâs important to note that there are
semi-fungible assets as well. An example of a semi-fungible asset is an
airplane ticket. Each ticket for the plane, although look and
function the same, represents a unique seat on the plane, like the specific row and aisle,
versus middle, versus window seat. A concert ticket is also a semi-fungible token,
as it dictates which seat you will be in for the event, unless youâre one of reckless
pit section junkies, paying for some ticket to potentially get trampled. Crazy people. Concept 3: Definition of Tokens A token is something physical or digital that
can be exchanged for or represent a good, service, or other form of value or utility. In cryptocurrency and blockchain technology,
tokens are representative of value like a stake, voting right, a toll, a currency, a
store of value, it could represent ownership of something, or it could be multifunctional
within an ecosystem. So know that the token doesnât have value
in and of itself, the value comes from the asset it represents. Like a gift card would be an example of a
token. So the actual plastic card in and of itself
isnât valuable, but the card does represent value you can exchange for whatever terms
are dictated by the gift card. And when we create a token that represents
a good, a service, or any of the aforementioned forms of value, itâs called tokenization. Nice. So weâve covered the three foundational
concepts that will fortify your understanding of NFTâs: subjective value, non-fungibility,
and tokens. Next, letâs talk about tokenization on blockchain
technology. So, what is blockchain? The most plain and simple explanation of blockchain
is that itâs records of data stored on a network of computers. And there are 3 pillars of blockchain that
make it unique: Decentralization, Transparency, and Immutability. So letâs break down these 3 pillars. Pillar 1 - Decentralization: The word decentralization with regard to blockchain
is twofold. One, it means that the data is recorded and
stored on multiple devices in multiple locations around the world, as opposed to one central
place. And two, decentralization also means that
no one person, company, government, authority, or entity controls the data record and storage
process. So instead of traditional centralized entities
like the IRS, JP Morgan, or MIT recording, storing, managing, and controlling their data
by following their own protocols, deciding which servers to use, where the servers are located, and using their
own proprietary software and security systems to protect their data, blockchain allows for decentralized record
keeping where data is recorded, stored, and managed on a network of computers with open
source software around the world. Any changes to the blockchain protocol go
through a consensus process that no one person or entity has control over. So that is the essence of the âdecentralizationâ
pillar. Pillar 2 -Transparency: The word transparency with regard to blockchain
relates to the way in which transactions are recorded on a ledger that is available for
everyone to see and that is saved on a network of computers around the world, making the
data impossible to change or alter. The best way to see the value of transparency
in data recording, storage, and management is by comparing these two scenarios: Currently, common citizens of the United States
are not privy to where and how every tax dollar is spent by the United States government. We just have to take the governmentâs word
for it. And even if the government had to show their
records, it would be very easy for them to create, forge, or manipulate any data they
chose to share with us, since they control their own data. Now you can see how that scenario is not transparent
and not exactly trustworthy. So, letâs imagine if everyone in the United
States had the ability to see a live, running ledger of where every single tax dollar was
spent by the United States government at any moment in time. A scary thought right? Basically all US citizens could see a full
disclosure of how our government is managing our money. And in this scenario, there is more trust
and transparency, the 2nd pillar of blockchain technology. Pillar 3: Immutability - Immutability simply means that the data recorded
and stored on the blockchain cannot be changed, forged, or altered. And this is achieved through cryptography
and blockchain hashing processes. If you would like to listen to a more in depth
video explaining what blockchain is and why it was developed, please check out my blockchain
guide by clicking on this link. So, to summarize the 3 pillars of blockchain
technology: Blockchainâs recording and storage protocols
make it such that once new data is verified, it is unmodifiable, itâs distributed across
a vast network of computers around the world so itâs hard to destroy, and no one person
or entity controls the data or network, creating a transparent environment. Awesome. Now that you are familiar with some of blockchainâs
important features, letâs talk about tokenization of digital assets on blockchain technology
in the form of Non-Fungible Tokens. What is a non-fungible token or NFT? A non-fungible token is simply a representation
of a unique digital asset that cannot be equally swapped or traded for another NFT of the same
type. So non-fungible tokens can represent digital
art, a ticket to an event, an in-game item, property in a virtual world, or even a real-world
asset like a deed or title to actual land in the physical world. So pay attention because this is where the
eureka moment will start to sneak up on you. Because you will see how blockchain adds unique
properties to digital assets by giving people ownership, management permissions, and transferability
on a decentralized, transparent, and immutable platform. Thinking back to our baseball card bit, currently
in the game Fortnite, people can buy skins that change the way their players look, and
what really blows my mind is these skins literally only change the way the digital character
in the game looks Iâm pretty sure; it doesnât give the character any extra
attributes or anything. Which is so strange to me. Back in the day when I played a lot of video
games, when you earned, won, or bought something that changed the way your character looked,
typically it also came with some abilities or powers or something that gave you an edge
in the game. But now people are just spending money to
change their characters clothes basically, just for vanityâs sake. A quote I always live by: vanity is insanity. Neither here nor there, anyway, if you buy
a Fortnite skin and then want to turn around and sell it on Ebay or something like a baseball
card, youâll see how thereâs a challenge with transferring that particular digital
asset from one person to another. Well, not for long, because blockchain technology
provides a coordination layer that will impart 6 key properties onto digital assets all predicated
on immutability which are: Standardization, interoperability, tradeability,
liquidity, scarcity, programmability, and authenticity. Before breaking down these key properties,
letâs quickly take a look at some examples of NFTâs that currently exist to help wrap
your head around the concept. We are going to Opensea.io, which is an NFT
marketplace, or place where people can buy, sell, trade, and exchange non-fungible tokens. On Opensea.io, if you click on the browse
button, then click the categories dropdown filter, you will see a list of different types
of NFTâs like art, domain names, virtual worlds, trading cards, collectibles, sports,
and utility. If you filter by art, you will see a collection
of static images, as well as gifâs you can buy to own. If you filter by virtual worlds, you will
see a collection of characters, digital properties you can own, accessories, and all kinds of
things you can buy, own, and use in the virtual world similar to video games work now, except
on a completed decentralized platform with itâs own peer-to-peer ecosystem. And if you go to trading cards, you see pretty
much a similar situation of the baseball card madness, except digital, so much less risk
of theft and no chance of it being destroyed by a fire or similar because you would literally
need to take out an entire global network of computers to bring down the blockchain
network, which would involve basically destroying the entire planet. In fact, domains or wallet names are also
a type of NFT. If you tuned into my 100k subscriber special,
you remember the ETH giveaway by Unstoppable domains. Unstoppable domains offers a solution to the
long, complicated cryptocurrency addresses currently in use, by replacing them with an
easy, human-readable name. An unstoppable domain also allows you to launch
uncensorable websites. The domain is stored in your wallet, just
like a cryptocurrency on the blockchain. So no one can move it around, put it up, or
take it down except you. And last month they launched a feature that
allows you to link your blockchain domain to your Twitter handle using Chainlink oracles. The Twitter handle shows up when you type
the domain into a wallet so you know youâre about to send money to the right person. So if you would like your own unique wallet
name or domain NFT, scroll down to the description area below and click on the Unstoppable domains
link to access the correct, official site. Awesome. So now, letâs breakdown the 6 key properties
blockchain lends to digital assets and their implications for future use - Standardization Traditional digital assets currently donât
have a single foundation they can all exist on. For example, electronic tickets reside on
ticket masterâs platform, while fortnite skins reside on fortniteâs platform, and
so you have all of these separate places where digital assets exist. So, by tokenizing digital assets on the blockchain,
users can create non-fungible tokens with set standards and uniformity. And you can think of these standards like
jpeg versus png formats for images, or another example of a standard is the http protocol
computers use to communicate with each other when we access websites on the internet. So blockchain allows for standardization in
the creation of NFTâs, which ensures all of the aspects of NFTâs like ownership,
transfers, access, and control are unified on one common system. To better understand this, image you buy some
virtual property in Decentraland and then you buy a digital house on OpenSea.io as well
as some digital artwork. These three separate non-fungible tokens on
one unified network can interoperate with each other, allowing you to put the house
on the property you bought and put the painting inside the house. And if Fortnite adopts the technology, you
would then theoretically be able to put your fancy fortnite skin in the closet of your
digital house, or you can even leave it on the floor if youâre a dirty slob. Lol So you can see how these standards allow developers
to build applications using the same code, essentially to build everything on one decentralized
platform, which the most common one at the moment is the Ethereum network. And if youâd like to see an in-dept video
explanation of what ethereum is and how it works, you can check out my video guide by
clicking on the link. So there are three standards that dictate
the tokenization process of NFTâs on the Ethereum blockchain: ERC-721, ERC-998, and ERC-1155 And before we talk about these ERCâs, letâs
talk about what ERC means. ERC is simply an acronym that stands for âEthereum
Request for Comments.â And it is similar to BIP, which stands for
âbitcoin improvement proposal.â So, since ethereum and bitcoin are blockchain-based
technologies, there is no one person or entity that is in charge of deciding what new features
to add, changes to make, or fixes to implement to the protocols. So, ERC is a process that was created as a
way for people to contribute information about ethereum or introduce new features to the
ethereum network. ERCâs, or ethereum requests for comments,
are basically how developers can propose improvements to the network. So the numbers 721, 998, and 115 represent
the unique ID number of those particular proposals. Cool, so letâs first talk about ERC-721. ERC-721 was pioneered in January 2018 by Cryptokitties,
which is a game where people can trade and breed digital cats, where each cat is represented
by a non-fungible token. The 721 standard allows for the creation of
tokens with different values, basically non-fungible assets like we discussed earlier. Before the standard, people typically created
tokens that were all equal or fungible, like ether for example. You can swap one eth for any other eth and
theyâre all the same. However, since the implementation of ERC-721,
developers can now deploy tokens with differing values and attributes like descriptions, quantity
available, type, all from the same smart contract from which an owner can be assigned and then
the token can be transferred between users all in the same ecosystem. Nice. Next, letâs talk about ERC-998. ERC-998, is actually pretty simple. So imagine we have a video game character
with different clothing items, weapons, and accessories, and each one of those things,
like the shirt, the sword, the hat, all of these items are represented by separate ERC-721
tokens. So letâs say this character in its visual
totality is made up of 50 separate non-fungible tokens. If I wanted to sell my character to someone,
I would have to do 50 separate transactions to send it to someone, which would incur more
transactions fees, is cumbersome, and not ideal. So ERC-998 was developed and implemented to
mitigate this scenario by allowing bundles of separate ERC-721 tokens to be bought and
sold in one transaction, so you donât have to sell each item individually. Sweet. And finally we have the ERC-1155 standard
which was pioneered by Enjin, an ethereum-based platform and ecosystem developers can build
applications on. This standard allows for the deployment of
both fungible and non-fungible tokens from the same contract. So imagine you develop a game where every
player has a pistol and the pistols are all equal and the same. However, also within the game there are limited
unique weapons players can earn, win, buy, or trade. So maybe only 10 laser cannons exist in the
entire game, and maybe thereâs only one magic laser sword in the entire game. This was all made possible with the implementation
of the ERC-1155 standard. Nice. So you can see how standardization works and
why itâs an important property blockchain provides for the NFT ecosystem at large. Which brings us to the next key property:
interoperability. Interoperability just means that since all
of the non-fungible tokens use the same standards and operate on the same ethereum platform,
we donât run into the issue I mentioned earlier where we have digital tickets for
events on Ticket Masterâs platform, while we have Fortnite skins on Fortniteâs separate
platform. The interoperability property blockchain provides
NFTâs allows them to be easily moved across multiple ecosystems, so when someone creates
an NFT, itâs immediately viewable and tradeable on all NFT marketplaces, in virtual worlds,
and other applications due to standardization of the data recorded on the blockchain. And interoperability allowing free trade on
open markets takes us to the next key property blockchain lends to NFTâs, which is tradeability. So for the first time ever, users all across
the world can create and launch NFTâs that will instantly be displayed on marketplaces
across the entire ecosystem. In these marketplaces, people can buy, sell,
trade, exchange, bid, bundle, and auction NFTâs for cryptocurrency. This allows us to transcend from a centralized
or closed ecosystem like Ebay versus Fortnite marketplaces, to a true, open, free-market
economy. The ease with which people can create, launch,
and trade NFTâs across the entire blockchain ecosystem will revolutionize the game development
industry because virtually everyone will be able to contribute creative content to the
games, so itâs not all just on the initial game developers. So instant tradeability brings us to the next
property blockchain brings to NFTâs table: liquidity. Fast, efficient tradeability on marketplaces
will lead to high liquidity. Liquidity is just a fancy finance term that
describes the level of activity in a market, or how many people are buying and selling
in the market and at what frequency. So high liquidity means items in the marketplace
are bought and sold frequently and fast before much price change occurs. An example of an asset with high liquidity
would be bitcoin, as when you buy or sell bitcoin at market price, the transaction happens
instantly because there are a lot of buyers, as well as sellers, in the market. You can sell your bitcoin for cash instantly
pretty much on exchanges with high liquidity like Crypto.com or Coinbase. An example of an asset with low liquidity
is a house. So if you put your house up for sale, it might
be days, weeks, months, or years until you are able to convert it into cash. Even if there are a lot of buyers in your
housing market, itâs still not as fast to convert the asset to cash like with the tap
of a finger on your phone with bitcoin. So yes, fast, efficient tradability of NFTâs
thanks to the nature of blockchain will lead to higher liquidity in the NFT marketplaces. Another property key property is: immutability. We discussed how immutability is a pillar
of blockchain technology, how once data is verified and recorded to the blockchain ledger,
the information cannot be changed. So immutability is key to ensuring authenticity
of digital assets, as well as proving scarcity of digital assets. So people know in your game that there is
actually only one magic laser sword - no one can go back and change the quantity to 100
or something similar thanks to the immutability property. The final property that blockchain brings
to the table that makes NFTâs so valuable is programmability. Non-fungible tokens are fully programmable
meaning that they are capable of immense complexity like forging, crafting, redeeming, random
generation, and much much more. The sky's the limit, really. Awesome. Now that we understand how blockchain technology
adds unique, value-driving properties to non-fungible tokens, letâs talk about how NFTâs could
be used in the future across multiple industries and its implications. So we are already seeing art, collectibles,
domains, gaming, and virtual worlds. Staying mindful of NFTsâ core properties,
that being, verifiable digital scarcity, ownership, indivisibility, interoperability, and transferability,
NFTs can be used in a myriad of different ways. As I mentioned earlier, the gaming industry
will be drastically affected, as NFTs will make gaming more tangible and rewarding, while
also fostering new economies and markets within the games themselves, allowing players to
generate income from time spent in the game as well as creating and selling NFTs that
enrich the game. So game developers will start creating new
incentive systems for players, which will spark value creation for game developers,
publishers, and players alike. Filmmakers and musicians could register their
work on the blockchain in the form of an NFT to protect it against copyright infringement,
or to manage performance rights which would remove the need for intermediaries like agents
and managers. So funds would go directly to the rightful
creators of the content without third parties taking a share. Since NFTâs are completely programmable,
people can create non-fungible tokens that contain cryptocurrencies and digital files. NFTs can be traded and redeemable for real
world assets. For example, if you check out Unisocks exchange,
a total of 315 SOCKS NFTs were created and circulated. So if you bought a SOCKS NFT, you could either
redeem it for a pair of socks, or trade it on the market, or continue to hold it while
the price, ideally appreciates and sell or redeem when youâre ready. Almost anything in the real world can be tokenized
as collectibles or similar like athletes, celebrities, and fictional characters. Proof of ownership of real world collectibles
can be easily stored or transferred and impossible to forge. NFTs could also represent official documentation
like birth certificates, academic credentials, warranties, identities, and DNA data. Depending on who created an NFT and all of
the previous owners, we could see value derive from an NFTs provenance. Like if Elon Musk created an NFT and maybe
at some point in its ownership history, Vitalik Buterin owned it at some point could have
some subjective value to someone. The mere concept of ownership will change
drastically as NFTs make it possible to own a real world asset that could be thousands
of miles away. And undoubtedly NFTs will absolutely introduce
new people to cryptocurrency and help drive adoption of blockchain technology. Yes, super exciting times we are living in,
however, it wonât happen overnight. Letâs quickly go over a few bearish aspects
of NFTs current reality. Building decentralized applications for NFTs
is challenging and time-consuming. As someone is software development myself,
you usually have to triple the amount of time you think it will take to complete. That being the case, we do see in current
applications that the user experience and user interface isnât simple enough for people
unfamiliar with blockchain to just jump in and start using easily. Some NFTs that are created and listed on marketplaces
could experience something similar to the DeFi food craze, where we have a YAM that
went over the moon and hours later fell flat on its face hours later. So some buyers that fomo into an emerging
NFT market could be stuck with a worthless NFT when the hype fizzles out. Also, most NFT projects arenât retaining
longterm users. And since there arenât a lot of users in
NFTs right now, lack of liquidity could stifle growth of the ecosystem. Also, although when an NFT is deployed, itâs
recorded on the blockchain, it doesnât mean users will have access to it forever. Right now, the access to the blockchain is
hybrid, in that if we access OpenSea.io for instance to trade NFTs, and then one day OpenSea.io
doesnât renew their domain or takes down their website, you wouldnât be able to access
the marketplace anymore. So we are still using centralized portals
to access the otherwise decentralized blockchain for the time being. Once the tech has more time to develop, we
will start to see a lot of progress and growth in the space. So if youâre watching this video, youâre
super early to this new and exciting blockchain use-case. Awesome. I hope you found this video guide about what
NFTs are helpful. If you enjoyed the content, please make sure
to like and subscribe to my channel for more crypto content. So are you pumped about the prospects of NFTs? Do you own any NFTs right now? If not, use the link below to secure your
unstoppable domain today. What other questions do you have about NFTs
that I may have missed? Let me know in the comments below. Be safe out there.
This youtubers been around a long time. I found her a while back when I started to dive into crypto. Very friendly from what I can tell and seems to know her stuff. Highly recommend!