To answer the question as quickly and bluntly as possible, when you buy an NFT, you get the NFT...that’s it.
What is an NFT? Well, NFT stands for Non-Fungible Token. Non-Fungible means it corresponds to an entirely unique digital asset with a unique value. It cannot be traded like for like.
Dollars are an example of a fungible item. If you have a ten dollar bill, you can exchange it with someone who has two five dollar bills and no one would be at a loss.
It’s a completely even exchange. Non-fungible means that there is no inherent parity between the digital asset and any other digital asset.
The NFT deed itself isn’t even a certificate that’s posted to you or something you can print off to keep in your records. It’s an entirely digital format, a unit of data held on a digital ledger otherwise known as a Blockchain.
So, we’ve established that you get an NFT deed when you buy an NFT, but what does this actually mean? What does it bring to the table that other formats of ownership authentication don’t?
Well, the answer is nothing. It’s just a small amount of data that does exactly what an old-timey deed to a house did back in the day. What makes an NFT deed special is that it provides the same amount of security as a physical deed but in a digital space.
When you buy an NFT, you’re not just given a random bit of data that declares ownership, it flat-out proves ownership through an unbreakable record of ownership. No matter how many times it’s bought and sold, there will always be a chain that leads back to the original creator of the NFT.
Even though the NFT deed only exists in a virtual realm, it’s not quite as ephemeral as you might think, as it provides indisputable evidence of the fact that you are the owner of the corresponding digital asset, and that the asset itself is the original version.
What About the Asset?
Of course, no one is spending their hard-earned cash on the NFT deed of ownership, they’re forking out for the digital asset the deed pertains to. An NFT asset could be any number of things, but more on that later.
You can think of the NFT deed as your portal to the product. It will normally have a link or serial code that will direct you to the product you’ve paid for. So, when you buy an NFT, it includes rights of access to the asset. However, an important distinction to make is that the NFT deed itself does not contain the asset. The asset is held elsewhere for safekeeping.
The reason for this is that the Blockchain isn’t sufficient for asset file storage. In fact, due to the nature of digital data storage, preventing NFT assets from being deleted is one of the struggles the NFT market and community faces.
Currently, the safest place to store digital assets is known as the IPFS (InterPlanetary File System). The IPFS is a peer-to-peer long-scale storage network.
You may be wondering why you can’t just store your NFT purchase locally on your computer. The answer is that you absolutely can do that. Say, for instance, that you’ve treated yourself to an audio NFT from one of your favorite artists. You can have that file on your laptop, so you can have a listen whenever you want, but the problem with local storage is that it’s not secure enough.
Anything can happen to a computer. You could spill your coffee over it while dancing to the audio NFT, you could drop it, it could be stolen...you name it. This is why it’s important the original asset is stored elsewhere.
Any copies you have stored on your computer will be just that - copies. This means that even if someone steals your computer and has the duplicate file, it’s not worth a thing. They don’t have the NFT deed, and they don't have access to the original file.
What About Copyright Rights?
An NFT deed will almost never bring copyright privileges with it, by which I mean that although you technically own it, you can’t claim creative ownership of it for commercial gains.
That’s not to say you can’t sell your digital asset should you grow tired of it - you can. That’s a large part of the market’s architecture. What you don’t have a right to do is sell duplicates on, although duplicates aren’t strictly prohibited.
It helps to understand these concepts if you put them into a physical context, so in this case, let’s think about a special edition print of a photograph. When you buy it, you take that print away with you and hang it in your living room - nice.
Now, can you make copies of that image and sell them on? Absolutely not. The photographer still owns the image and decides what can be done with it.
You can sell your individual limited edition print, or perhaps even hold ticketed viewing parties, but these are the only way you can use it to directly make money.
Bear in mind that this is just the default NFT purchase scenario. It’s not all written in digital stone. There are ways in which the parameters of the purchase can be modified should it suit both parties.
These parameters are hammered out in what are known as smart contracts, digital contracts that automatically regulate and monitor the legal aspects of any NFT transactions that take place. Should the creator of the NFT wish to give you ownership of the copyright, they can, but this is a rarity as they stand to lose a lot of money.
A smart contract will instruct you on what you’re allowed to do with your newly purchased digital asset, but sometimes the limitations aren’t only enforced by creators, but by the platform used to buy and sell them as well.
Take the company Drabber Labs inc. for example. They’ve created a basic NFT license that states buyers don’t have any control over the copyright of digital assets that are minted and passed on through their platform.
However, other companies are free to create their own licenses, as are creators. In the future, the nature of the NFT contracts will no doubt become the subject of serious diversification.
What Assets Can Become NFTs?
The largest determining factor of what you get when you buy an NFT is the type of digital asset you’ve purchased. The NFT system currently supports a ton of different files from GLB (3D models) all the way through to your run-of-the-mill PDF (read-only text-based documents).
At the end of the day, you get whatever you buy. If you bought a piece of digital artwork as a JPEG file, that’s what you get. Access to it and what you can do with it may be limited by licensing or smart contracts, but that JPEG is objectively your property.
If you really like the image, and you want it in a physical format for hanging on your wall, there are normally no restrictions in place that stop you from printing out a copy and framing it.
If, on the other hand, you bought an audio NFT, you’ll receive permission to access and listen to it as an MP3 or WAV file, but audio files and static images are just the tip of the NFT iceberg.
Almost anything digital in nature can be minted as an NFT, which means your options as a buyer are wide open. Let’s discuss some of the most exciting things happening at the moment.
NFTs in Games
In many ways, gaming and NFTs are a match made in heaven. They’re both virtual, and the crossover potential is incredible. An example I like to give of the symbiosis between gaming and NFTs is Decentraland.
In Decentraland, you can buy virtual anything using ETH (the native currency of the Ethereum Blockchain). There may be some virtual land for sale - you can buy that. Once you own it, you can do whatever you want with it within the remit of the game. You can develop it, use it as a virtual billboard for something, even sell it on.
It’s not just large items you can buy as NFTs in Decentraland. You can buy pretty much anything. Want a new virtual hat? Done! Fancy a new pair of virtual sunglasses? No problem. Want a new virtual car? Easy.
After a while, you can use your Decentraland account to create your very own NFT markets - amazing, right?
So, if you invest in game NFTs in Decentraland, you get literally nothing, but the digital items or space you’ve purchased have value, and so you can make money by playing and trading. It’s not exactly pocket change either. Recently, a plot of land was sold for 1.4 million Mana (Decentraland currency), which equates to roughly 1.3 million dollars.
Another example of how NFTs are being utilized in the gaming sphere is Gods Unchained, a virtual card collection and combat game. Those familiar with Blizzard’s Hearthstone will be well acquainted with this sort of format, but what makes Gods Unchained different is that you spend cryptocurrency on in-game NFTs rather than “real” money from your credit card.
NFTs in Decentralized Finance
It may seem like what you actually get when you buy an NFT is fairly limited, but you have to think outside of the box. Whatever that NFT can be used for, you get, and that may well be collateral for loans using decentralized finance.
That’s right, folks, that gif you purchased on a whim because it made you smile may be accepted as collateral by a decentralized lending company. So, in this scenario, you own an original gif; that’s what you got with the purchase, but it’s also an asset that can be used for borrowing purposes.
This side of NFTs is yet to really blow up, but it’s by no means flying under the radar at the minute. Event managers and promoters are now minting invitations as NFTs, so if you wanted, you could treat yourself to a ticket for the hottest show in town.
You will receive the NFT that directs you to the ticket, but you’ve also bought access to a real-world or digital event, which is pretty neat. You’re essentially using NFTs to accrue fond memories - a noble pursuit.
NFT ticket sales promise to be a pretty revolutionary turn in the events industry. With authenticated chains of ownership and controlled pricing, it stands to eliminate scalpers, ensuring that nobody has to pay over the odds to see a show.
Will I Own Currently Existing Duplicates of an NFT?
Some NFTs have become so ingrained in popular culture via the internet that it’s fair to say that they’re ubiquitous. It wouldn’t take long before you naturally bumped into them online. I’m talking about digital items like the Nyan Cat gif that recently sold for $580,000, and the “Disaster Girl” meme that sold for $500,000.
But do the buyers of these digital assets now own the versions spread out across the greater internet? The answer is no, they don’t. An important thing to understand is that an NFT is a singular, indivisible digital item. It won’t infer ownership of duplicates in any way.
The new owner of Nyan Cat only has the image that the NFT directs them to. The same is true of the buyer of the hilarious meme. They own the original digital JPEG file of the girl smiling menacingly as a house is consumed by flames in the background. They do not own the countless iterations across the internet.
I’d like to bring things to a close by mentioning that just because an NFT is a singular entity, it doesn’t mean that it can’t correspond to multiple digital items. Digital artist, Beeple, recently made the biggest NFT sale in history by selling a collection of their artwork for $69,300,000.
That’s that folks. I hope that’s answered some questions. To reiterate before we part ways, when you buy an NFT, you receive a Non-Fungible Token that grants you access to the assigned digital asset and proves its authenticity.