Explaining the buzz around non-fungible tokens

If you’ve been online and surfing around some of the tech news, you’ve inevitably heard of NFTs. Today I’m going to explain what NFTs are, give some common examples of why they’re interesting, and approach the topic from a technology as well as a consumer perspective.

Hi, I’m Peter Nichol, Data Science CIO.

NFTs stands for non-fungible tokens—digital, blockchain tokens representing a physical or digital asset. Let’s get into what fungible means because that gets to the heart of NFTs. First, we’ll review what fungible and non-fungible are all about.

Fungible means that something can be replaced. Fungible things might include dollar bills, common shares, options, gold, oil, #2 yellow corn, etc. Fungibility, in this context, means that #2 yellow corn, regardless of where it’s sold, has roughly the same intrinsic value. Inversely, non-fungible implies that the object or thing in question is unique, not replaceable, or non-interchangeable. Great examples of non-fungible goods include art, baseball cards, real estate, etc. In each case, these things aren’t directly replaceable with something that’s exactly the same. However, they can be replaced with something similar, as in the case of oceanfront property. They also might hold a similar type of total cumulative value, as in the case of two old but “excellent” condition baseball cards. But, ultimately, a particular piece of land is the only piece of land in that spot with its specific attributes.

As we ponder the potential of non-fungible tokens, we realize there’s a clear benefit when you have something that’s non-fungible, unique, or non-interchangeable. Once in the form of a digital token, these items are permanently stored and recorded as proof of ownership.

We can observe the dynamics of fungibility from two differing perspectives—the seller and the buyer.

This model works well from a seller’s perspective when selling something unique and challenging to monetize. For example, we came up with a great idea for organizing our to-do lists using an AI algorithm that we developed. How would we monetize this idea? We might even have a working prototype. Squeezing out financial value from this remarkable idea will be very challenging. However, this is an excellent use case for building an NFT and selling this on a marketplace as a token. This would be one approach to monetizing the idea for investment purposes.

From a buyer’s perspective, we also have benefits. First, we have the classic benefits of supporting the original authors of assets; e.g., music, art, and ideas. Second, there are the advantages of clearly defined usage rights that often accompany the asset. Additionally, you have the right to sell or transfer as a seller, and you have immutable proof of ownership.

As you explore the use, utility, and benefits of NFTs, you should now be empowered to understand NFTs, the benefits of fungibility, and how these tokens are being leveraged to capture potential value.

If you found this article helpful, that’s great! Check out my books, Think Lead Disrupt and Leading with Value. They were published in early in 2021 and are available on Amazon and at http://www.datsciencecio.com/shop for author-signed copies!

Hi, I’m Peter Nichol, Data Science CIO. Have a great day!

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Peter is a technology executive with 19 years of experience, dedicated to driving innovation, digital transformation, leadership, and data in business. He helps organizations connect strategy to execution to maximize company performance. He has been recognized for Digital Innovation by CIO 100, MIT Sloan, Computerworld, and the Project Management Institute. As Managing Director at OROCA Innovations, Peter leads the CXO advisory services practice, driving digital strategies. Peter was honored as an MIT Sloan CIO Leadership Award Finalist in 2015 and is a regular contributor to CIO.com on innovation. Peter has led businesses through complex changes, including the adoption of data-first approaches for portfolio management, lean six sigma for operational excellence, departmental transformations, process improvements, maximizing team performance, designing new IT operating models, digitizing platforms, leading large-scale mission-critical technology deployments, product management, agile methodologies, and building high-performance teams. As Chief Information Officer, Peter was responsible for Connecticut’s Health Insurance Exchange’s (HIX) industry-leading digital platform transforming consumerism and retail oriented services for the health insurance industry. Peter championed the Connecticut marketplace digital implementation with a transformational cloud-based SaaS platform and mobile application recognized as a 2014 PMI Project of the Year Award finalist, CIO 100, and awards for best digital services, API, and platform. He also received a lifetime achievement award for leadership and digital transformation, honored as a 2016 Computerworld Premier 100 IT Leader. Peter is the author of Learning Intelligence: Expand Thinking. Absorb Alternative. Unlock Possibilities (2017), which Marshall Goldsmith, author of the New York Times No. 1 bestseller Triggers, calls "a must-read for any leader wanting to compete in the innovation-powered landscape of today." Peter also authored The Power of Blockchain for Healthcare: How Blockchain Will Ignite The Future of Healthcare (2017), the first book to explore the vast opportunities for blockchain to transform the patient experience. Peter has a B.S. in C.I.S from Bentley University and an MBA from Quinnipiac University, where he graduated Summa Cum Laude. He earned his PMP® in 2001 and is a certified Six Sigma Master Black Belt, Masters in Business Relationship Management (MBRM) and Certified Scrum Master. As a Commercial Rated Aviation Pilot and Master Scuba Diver, Peter understands first hand, how to anticipate change and lead boldly.