Question
What makes an NFT unique other than the identifier? If you create an NFT of the Mona Lisa, there is nothing stopping you creating 100 or 1000, it is just each will have a different unique identifying number - correct? The underlying picture will be the same, so where is the value / protection?
Answer
NFTs derive value from their scarcity. Even though the underlying digital asset may be replicated, the ownership of the original NFT is limited, making it unique and potentially valuable. Even if you create multiple NFTs of the same digital asset, each NFT represents a unique token on the blockchain, creating scarcity similar to physical art pieces. NFTs can include metadata detailing the ownership history and provenance of the digital asset, providing authenticity and traceability. This transparent record can enhance the value and protect against counterfeit copies. The reputation and fame of the creator also influence the value of an NFT. If the creator is renowned or the work is highly regarded, it can significantly increase the NFT's value.
In the specific case of the Mona Lisa, since we are referring to a physical object, the NFT could serve as a token of authenticity. NFTs could be used to tokenize a digital representation of the famous artwork. This means that a unique cryptographic token could represent the digital version of the Mona Lisa, allowing individuals to buy, sell, and own this specific digital artwork. While the physical painting itself cannot be bought or sold through NFTs, it provides a way to add value and ownership to digital replicas or representations. So NFTs, relate to the Mona Lisa by providing a new way to authenticate and trade digital versions of the famous artwork. When it comes to minting the NFT and verifying its autheniticity, many marketplaces require documentation or third-party verification. It remains still a challenge and concern when it comes to confirming the authenticity of the artwork and ensuring it has not been replicated, as it is impossible to state which copy of digital artwork is original. One way to assign “ownership” is to record it in a public, write-only database for posterity. That way, people can continue to use exact replicas of digital assets but only one person could truly own the original, and prove it.
Question
What is the point? Who benefits? What is the need for non-tangible assets? I have got to age 65 without them and don’t see the need or benefit now. Please explain.
Answer
NFTs enable unique digital assets to be owned, traded, and authenticated securely on blockchain technology, revolutionizing digital ownership rights. NFTs allow creators to monetize digital content such as art, music, videos, and virtual real estate by tokenizing them, providing new revenue streams and empowering creators. NFTs democratize access to the digital economy by removing intermediaries, enabling direct peer-to-peer transactions, and fostering global participation in markets previously inaccessible to many creators. NFTs unlock new avenues for creative expression, fostering innovation in various industries including art, gaming, entertainment, and collectibles. Through blockchain technology, NFTs provide immutable proof of ownership and authenticity, combating digital piracy and ensuring transparency in transactions. FTs have sparked cultural conversations about the value of digital art, ownership, and the future of the creator economy,influencing mainstream adoption and shaping the digital landscape. NFTs represent a paradigm shift in how we perceive and interact with digital assets, offering profound implications for creators, collectors, and industries worldwide.
Non-tangible assets, such as intellectual property, brand reputation, and patents, are crucial for value creation in modern economies. They enable companies to differentiate themselves, innovate, and stay competitive. Investors benefit from non-tangible assets as they contribute significantly to a company's overall worth. Understanding and accounting for these assets can attract investment and drive shareholder value. Non-tangible assets inform strategic decision-making, helping companies adapt to market changes, innovate, and anticipate future trends. While you may have reached 65 without direct involvement with non-tangible assets, they play a crucial role in sustaining businesses, industries, and economies over the long term.
Question
In a public blockchain data is validated by every participant. Does this mean that all participants must validate the data, or can a single user stop validation (is this the challenges?)
Answer
In a public blockchain, data is validated by every participant. However, a single user cannot unilaterally stop validation, as the consensus mechanism typically requires the majority of participants to agree on the validity of transactions. While challenges such as scalability and energy consumption exist in public blockchains due to the need for extensive validation by all participants, the distributed nature of validation enhances security and decentralization.
Question
How do you audit NFT or asset tokenisation and their value? How do you value Assets Tokenization - Real Estate for example
Answer
Auditing NFTs or asset tokenization involves several steps:
Pre-Audit Assessment: Evaluate the project's goals, technology stack, and potential risks.
Code Review: Thoroughly review the smart contracts and codebase for security vulnerabilities and compliance with standards.
Security Testing: Conduct security tests to identify weaknesses and potential attack vectors.
Valuing asset tokenization, such as real estate, involves various approaches:
Comparable Sales Approach: Assess the value based on recent sales of similar properties.
Income Approach: Evaluate the property's income-generating potential, considering rental income or future cash flows.
Tokenization Impact: Consider the impact of tokenization on real estate, such as increased liquidity and fractional ownership, which may affect traditional valuation methods.
Question
Why do cryptocurrencies have a maximum supply ? What determines this maximum ? So why couldn't Bitcoin issue another 1 million tomorrow ?
Answer
Cryptocurrencies have a maximum supply to establish scarcity, which is crucial for maintaining their value and preventing inflation. The maximum supply is determined by the cryptocurrency's protocol and is often hardcoded into its codebase. In the case of Bitcoin, the maximum supply of 21 million coins is a result of the protocol designed by Satoshi Nakamoto. This limit ensures that no more than 21 million bitcoins will ever be created, preserving its scarcity and value proposition. Bitcoin cannot issue another 1 million coins tomorrow because its protocol explicitly prohibits such actions, and any changes to the protocol would require consensus among the network participants, which is highly unlikely due to Bitcoin's decentralized nature.
Question
Asset Tokenisation - what is the difference between asset tokenisation and incorporating in a SPV and selling shares of that SPV?
Answer
Ownership Representation:
Asset Tokenisation: Involves converting ownership rights of an asset into digital tokens on a blockchain. Each token represents a fraction of the asset's value and ownership.
Selling Shares of an SPV: Involves selling shares or equity in a Special Purpose Vehicle (SPV) entity, where investors directly own shares of the SPV, which in turn holds the asset.
Transfer Mechanism:
Asset Tokenisation: Tokens can be easily transferred on blockchain platforms, allowing for efficient trading and liquidity.
Selling Shares of an SPV: Share ownership typically involves traditional legal processes for transfer, which may be more cumbersome and less liquid compared to tokenised assets.
Regulatory Considerations:
Asset Tokenisation: Regulatory frameworks for tokenised assets are evolving, with considerations for securities laws and compliance.
Selling Shares of an SPV: Involves adherence to established regulations governing securities offerings and corporate structures.
Fractional Ownership:
Asset Tokenisation: Allows for fractional ownership, enabling investors to own a portion of high-value assets, which increases accessibility to investment opportunities.
Selling Shares of an SPV: Typically requires investors to purchase whole shares, limiting accessibility to those who can afford larger investments.
Blockchain Integration:
Asset Tokenisation: Utilises blockchain technology for transparency, security, and efficiency in asset ownership and transfer.
Selling Shares of an SPV: May not necessarily involve blockchain integration, relying on traditional legal documentation and processes.
While both asset tokenisation and selling shares of an SPV involve fractional ownership of assets, asset tokenisation leverages blockchain technology to provide enhanced liquidity, efficiency, and accessibility compared to traditional methods of selling shares in an SPV.