Every single thing ever made was made to solve a problem. The goal of NFTs was to get around the problems that its predecessors, which were made on the Bitcoin network, had.
What problem were NFTs supposed to fix?
Every single thing ever made was made to solve a problem. The goal of NFTs was to get around the problems that its predecessors, which were made on the Bitcoin network, had. NFTs have taken many years to get where they are now. When “hued coins” came out in 2012, it was the start of some of the first research into digital ownership in the crypto environment.
Colored Coins: Tokens Before the NFT
Colored coins were made on the Bitcoin network, not like NFTs of today, which are often linked to the Ethereum blockchain. Like NFTs, colored currencies tried to stand for a wide range of digital and physical assets. But because of the way Bitcoin works, colored coins could only be used if everyone agreed on how much they were worth. So, if just one person in a transaction doesn’t agree that a colored currency is tied to a certain asset, the whole system falls apart.
Use the Ethereum blockchain instead.
In the years that followed, there were more plans to issue assets through the blockchain. One of these is Counterparty, a peer-to-peer system that made it possible for the first meme assets to be added to the Bitcoin blockchain. But the full potential of tying assets to the blockchain didn’t become possible until around 2017 when these proto-NFTs were moved to the Ethereum blockchain. The Ethereum blockchain and smart contracts are much more flexible than the Bitcoin blockchain, which was made specifically for use in the Bitcoin token ecosystem. This helped make the first NFTs as we know them today. It also made it possible for NFTs to be permanently linked to specific assets.
NFTs link the world of digital things to the world of real things
Because an NFT is unique, it can also connect the digital world of crypto to the real world of physical goods. NFTs provide a record of transactions that can’t be changed and show who owns a digital asset. In the past few years, people who are interested in NFTs have started to look into ways to link them to real-world assets. Fabrica, for example, has used NFTs along with regular trusts to make real estate transactions faster, safer, and much cheaper.
In this case, NFTs are used to represent the real estate. On other occasions, well-known clothing and fashion companies like GAP and Nike have come out with NFTs that include unique clothes. This “physical NFTs” setting, which has both a digital NFT and a physical asset linked to it, has the potential to grow quickly. Even though it wasn’t the problem that NFTs were made to solve, it could be a very important part of the future of this technology.
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