Non-fungible tokens have exploded in popularity as a way for people to purchase unique digital items, but the expansion of this market highlights the blockchain technology behind it.
There are video clips of basketball highlights, thousands of digital art pieces, GIF files of cats, and original tweets. And they are now selling for millions of dollars through a digital currency called NFTs, short for non-fungible tokens.
While this novel form of cryptocurrency is an outgrowth of Bitcoin, which is only about 12 years old, it is quite different, University of Miami technology experts say.
In a series of questions and answers, Burt Rosenberg, associate professor of computer science who specializes in cryptography (or the mathematics behind securing information on computers), and Tarek Sayed, lecturer of business technology in the Miami Herbert Business School as well as the School of Law, demystify NFTs, describe the technology behind them, and explain why they are so alluring to consumers now.
What are NFTs?
Sayed: NFTs, or non-fungible tokens, are being used to represent original, unique items that cannot be divided and still retain their individual properties. These are things like art, or a house, or a one-of-a-kind baseball card. NFTs cannot be interchanged, like money or Bitcoin (which are fungible because they can be evenly exchanged), because each has a distinctive value. Let’s say I have a home, or a painting like the Mona Lisa, that is one-of-a-kind. I can take a photo of the painting, or buy a duplication, but there’s only one original.
Rosenberg: NFTs were created to provide a structure for contracts of ownership of individual works. Each NFT contains a number that is calculated from the digital artwork in a manner that is practically impossible to forge or predict. Only that specific digital artwork will calculate to that number. When someone buys the NFT, that number belongs to the buyer, and its ownership and resale is governed by what is called a smart contract. The NFTs that have become famous are contracts that exist on the Ethereum blockchain, which is a public ledger housed in cyberspace.
An NFT is similar to a title of a car. A car’s VIN is like the number written into an NFT, and this number is listed on a car’s title that is placed in a real-world “blockchain” of the motor vehicle registry. The difference is the motor vehicle registry is a trusted authority with power coming from the state, whereas blockchains spread trust among the digital miners, who are the only entities allowed to fill the blockchain.
And what is this blockchain technology that stores the NFTs?
Rosenberg: A blockchain is a public log of items or transactions that is arranged in chronological order.
The blockchain model was developed around 2008 by the mysterious Satoshi Nakamoto (this is an alias). Originally, blockchain was…