NFTs, or non-fungible tokens, have been touted as the next big thing in music. They were mentioned more than 30 times in this year’s South by Southwest program. Dolly Parton even released an NFT of her record Run, Rose, Run during the festival.
But even with all the hype, most people don’t really understand what NFTs are.
So, Pause/Play hosts Miles Bloxson and Elizabeth McQueen decided to do a mini-season of the podcast explaining NFTs — how they work and what they could mean for Austin’s music.
The hosts wanted to go beyond theory and into practice.
“We decided the best way to understand music NFTs was to write and record a song and mint it as an NFT on the blockchain,” Bloxson said.
In the process, they learned that to understand NFTs, they needed to understand a lot more concepts than they initially thought.
So what is an NFT?
NFT stands for non-fungible token.
But what does fungible mean?
The Oxford dictionary defines fungible as “capable of replacing or being replaced by another identical item; mutually interchangeable.
Land is non-fungible; diamonds too.
Digital assets, like music, on the other hand, are fungible. Each digital copy of a piece of music is interchangeable with any other digital copy of that same piece of music.
So what is an NFT?
NFTs allow digital assets to become non-fungible or unique.
NFTs are like a digital certificate of authenticity that points to a digital asset. They cannot contain complete music or video files. However, they designate the owner of that digital asset and provide a record of ownership that cannot be tampered with or altered.
NFTs cannot be tampered with or altered as they are entries on a blockchain.
But what is blockchain?
A blockchain is a digital ledger where entries can only be added at the end. Once something is put on a blockchain, it cannot be deleted until the blockchain is deleted.
But removing blockchains is difficult because the information in a blockchain is not stored in a central location. Rather, it lives simultaneously on multiple computers or nodes. Every time something is added to the blockchain or a transaction occurs, the blockchain is updated everywhere in real time.
As long as nodes exist on a blockchain, all data on a blockchain exists. This is why many people say that blockchains are “forever”.
More phrases you need to know to understand NFTs
Smart contract: A smart contract is code in an NFT that tells the blockchain what an NFT does. Smart contracts can let people know who owns an NFT, what the NFT points to, and what will happen if the NFT is sold.
One thing that smart contracts allow is a secondary royalty on future sales. If an artist sells an NFT and the buyer later resells it to someone else, the artist can get a percentage of the secondary sales.
Cryptocurrency: Cryptocurrencies are digital assets that live on the blockchain and can be used to buy and sell things.
Web3: Web3 is expected to be the next stage of the internet, driven by blockchain technology.
Wallet: Wallets store digital assets such as cryptocurrency and NFTs. Wallets are secured by Seed Phrases (defined below).
Starting sentences: A seed phrase is a unique set of 12-24 words that must be arranged in a specific order to access your portfolio.
Click here to learn more about what NFTs could mean for the music industry. Listen to Pause/Play on Apple Podcasts, Spotify, NPROne or wherever you get your podcasts.