NFTs, or Non-Fungible Tokens, are cryptographic assets that represent tangible or virtual items like art or music. While Bitcoin and similar cryptocurrencies can be traded, each NFT is unique and cannot be replicated or exchanged. NFTs operate on a blockchain, which IBM defines as a “shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network.” Blockchains are decentralized and largely unregulated, allowing for greater transactional freedom but raising concerns regarding public safety and economic stability.
There are several benefits to NFT’s conversion of physical assets to a virtual form. First, NFTs encourage market efficiency by streamlining production processes and connecting consumers directly to original vendors. This ability to explicitly interact with and buy from artists or creators has greatly incentivized many buyers to turn to NFTs and fueled the popularity of this new technology. Second, NFTs have potential to help the economy by creating new businesses and industries. However, some economists worry that, like the dot-com crash of 2000, NFTs may represent a bubble in which the frenzied excitement of investors and consumers in this technological innovation will trigger another market collapse and have catastrophic impacts on the economy. Third, NFTs could help simplify identification procedures, such as a virtual passport, through blockchain’s use of unique identification codes that easily differentiate between NFTs and determine their owners.