Luxury brands, like LVMH, are collaborating to develop the world’s first global luxury blockchain which utilizes NFTs.3 But what exactly are NFTs, and why are they currently drawing so much attention?
NFTs are digital tokens that can be used to represent ownership of unique digital assets on the Ethereum blockchain.
As the name implies, NFTs are “non-fungible” in that they are not interchangeable for other items because of their unique properties, similar to the ownership of a car with a unique Vehicle Identification Number. Any digital asset may be “tokenized” into an NFT through the “minting” process, which involves executing a piece of code (a Smart Contract) on the Ethereum blockchain to assign ownership and manage the transferability of the asset.
Ethereum is a blockchain platform with its own cryptocurrency, called Ether (ETH) or Ethereum, and its own programming language, called Solidity. As a cryptocurrency, Ethereum is second in market value only to Bitcoin, as of May 2021.
As a blockchain network, Ethereum is a decentralized public ledger for verifying and recording transactions. The network’s users can create, publish, monetize, and use applications on the platform, and use its Ether cryptocurrency as payment. Insiders call the decentralized applications on the network “dApps.”
As a result of the success and interest, several other blockchains are also now adding NFT functionality. A key characteristic of blockchains is that the record of ownership cannot be altered. As such, an NFT provides a verifiable and reliable claim of ownership over that tokenized digital asset.