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Answer
A non-fungible token (NFT) is a digital receipt. “Non-fungible” indicates that the token is unique. For example, a dollar bill is fungible because all other dollar bills hold the same value; in contrast, an original piece of art is non-fungible, as its worth is determined by factors such as the artist, condition, year of creation, size, and type—attributes specific to that particular piece. The “token” serves as the distinct digital proof of purchase and ownership. Non-fungible tokens represent a component of a novel digital investment system, although the term NFT is occasionally used to encompass the entire system.
Non-fungible tokens are integrated into a blockchain—a digital ledger of transactions—that assigns web addresses detailing the item and its ownership. Each token is embedded with an unalterable unique code within the blockchain, rendering it “non-fungible.” As a digital receipt, an NFT does not equate to the actual item itself. Furthermore, it does not safeguard a physical item or digital file from theft or duplication. Initial encounters with NFTs have revealed that deceit, theft, and illicit replication remain plausible. Digital assets, unlike physical possessions, are also vulnerable to server failures, software glitches, and outstanding web hosting fees. Christians should carefully contemplate whether engaging in the NFT market aligns with God’s intentions for the use of their finances.
This cautious and prayerful approach pertains to all aspects of financial stewardship. In Matthew 6:19–21, Jesus imparts this financial counsel: “Do not store up for yourselves treasures on earth, where moths and vermin destroy, and where thieves break in and steal. But store up for yourselves treasures in heaven, where moths and vermin do not destroy, and where thieves do not break in and steal. For where your treasure is, there your heart will be also.”
Jesus was addressing tangible possessions like clothing and food. Ultimately, NFTs hold value only when they are.e tied to something valuable. The same spiritual principles concerning wealth apply to digital receipts as much as to electronic bank accounts, paper money, gold bars, or stockpiles of food and gasoline.
Non-fungible tokens are applied when the seller offers an item for auction. The digital auction house does not have possession of the item, just the authority to sell the item and provide a certificate of ownership. When the buyer purchases the item, typically using the cryptocurrency Ethereum, a block on the blockchain permanently stores the certification of ownership on many users’ chains— even users who have nothing to do with the transaction. Items tracked by NFTs can be digital or real-world.
The sale of digital assets like software and data has been a staple of the computer industry for decades. Since shortly after computers were designed to use internal software, the industry has developed a market for only-digital items such as games, programs, and files. With the proliferation of the internet, users have created content to share freely, like photos, memes, videos, and audio files. The digital marketplace has expanded, as well, to include not only games but in-game purchases like weapons and “skins” or character costumes.
For digital assets, providers create a digital item, like a meme, a child’s drawing, a 3-dimensional representation of a house, an audio file, an essay, or a Tweet. The purchase information is recorded in and validated by an NFT. Even if the digital representation of the item is ubiquitous on the internet, the buyer technically owns it; often, the more popular and copied the asset, the more valuable the certificate of ownership is, even though the owner earns no money for its use. The block that verifies the purchase typically includes two website addresses. The first has a record of the sale and a detailed description of the item— its provenance. The second is the online location of the item.
Non-fungible tokens can also represent real-world items.
Assets such as concert tickets or vehicles are often involved in NFT transactions. At times, the asset may be a virtual/real hybrid like the AI-designed tennis shoe known as X Evolutions, a pair of which recently fetched over $13,000 (source, accessed 1/19/22).
The entire system has a significant advantage and a couple of notable drawbacks, especially concerning digital assets. The advantage lies in the fact that the sale is recorded on the blockchain, creating an immutable transaction record duplicated across multiple chains. Unlike centralized platforms such as Facebook, Epic Games (Fortnite), or Apple, the blockchain is decentralized. This means that the token remains secure even if a server crashes or a company updates its system.
However, the safety of the digital asset itself is not guaranteed. It is typically stored on a server, making it vulnerable to loss if the server fails. Moreover, if the file format becomes obsolete (like Flash Player), the asset may become inaccessible. Redirecting the URL by the owner can also render the asset unreachable. Furthermore, if the hosting site deems the item to violate its terms of service, it might be deleted. Alternatively, the asset could be lost if the domain owner fails to pay the web host. In some instances, the asset owner might negotiate for control of the site to maintain it personally. Another approach could involve storing the asset on an InterPlanetary File System, ensuring redundancy across multiple servers. The NFT community might even collectively agree on the value of a digital file even if the referenced file no longer exists, as long as a copy remains somewhere on the internet. However, if no copy exists, the investment is likely to become worthless.
Furthermore, while non-fungible tokens are tamper-proof on the blockchain, the assets themselves can be subject to theft, moved to a different server, and resold under a new NFT. Due to the decentralized and unregulated nature of the NFT system, similar to cryptocurrency, victims lack a central authority to assist them. Their recourse often depends on the goodwill of the community.
Ash; a community that intentionally invests in non-regulated assets and may just as likely respond with criticism that the owner didn’t properly protect the asset.
The most significant disadvantage of non-fungible tokens from an investment point of view is that the value of digital assets is entirely arbitrary. They’re only worth what the community decides they’re worth. Of course, this is not unique even among physical things like art, trading cards, figurines, and model tractors. There’s no real reason a Pokémon card should be worth $25,000. The NFT community places a great amount of value on these digital assets; as of January 2021, digital items were a $10 billion market; NFT sales reached $10.7 billion in just the third quarter of 2021 (source, accessed 1/19/22).
Of course, growth doesn’t mean the NFT market is going to continue the same trajectory. Combined with the other disadvantages of non-fungible tokens, investment in digital assets may not be a good idea. All investments include risk, from stocks to property to gold. Determining what to do with money also requires wisdom. The Bible recognizes the tension between meeting real needs, enjoying God’s blessings, wisely investing, and meeting others’ needs.
