Probably heard a lot Not fungible tokens or NFTs. Although the history of NFTs goes back to 2014, this crypto has become increasingly popular in recent years. In this article, I want to make it easier for you to understand non-fungible tokens, a.k.a., NFT.
The word fungible means – easily exchangeable / exchangeable for something else of the same type and value. For example, money is a fungible asset. If you lend your friend a $ 10,000 bill, it doesn’t matter whether your friend pays you two $ 5,000 bills or ten $ 1,000 bills. As long as the total value of bills paid back is $ 10,000, you will have received the value you borrow.
In another scenario, imagine lending your car to your friend. In this case, expect your friend to return your car. It is unacceptable for you to have your friend return another car of the same make and model. That said, a car is a non-fungible asset.
Non-fungible assets are unique. For example, a baseball bat usually costs around $ 200. But the bat that Babe Ruth completed his 500th home run on sold for more than $ 1 million. There could be thousands of bats made in the same batch as this bat, but the value of the bat used by Babe Ruth is over 1 million. Because it has a qualitative value. Non-fungible assets that are difficult to trade or swap for assets of the same type due to their associated qualitative factors such as emotions, uniqueness, etc.
Is Bitcoin an NFT?
No, Bitcoin and other cryptocurrencies like Ethereum, Ripple etc. are not non-fungible tokens. For example, if you and your friend trade 1 bitcoin with each other, you will both still have the same value after the trade. That makes Bitcoin a fungible sign. Bitcoin is a fungible token, so it works well for conducting transactions. It can transfer values from point A to point B in a short time. Now is the time to study the properties of a non-fungible token.
The recent updates in the NFT domain are quite surprising. With NFT tokens selling for millions and images, emojis, etc. being auctioned at record levels, one wonders what is happening in this sector.
In simple terms, Not fungible tokens or NFTs are crypto tokens that are unique. Each NFT token has a unique identification code and metadata that distinguish it from other NFT tokens.
Do you remember the example of lending your car to your boyfriend? When you lend your friend an NFT token, you want your friend to repay the same NFT token and not another NFT token of the same type. Because as already mentioned, every NFT token has its value, which is derived from qualitative factors, and cannot be traded or exchanged equally.
Non-fungible tokens are unique. On the other hand, cryptocurrencies like Bitcoin would be considered fungible because you can exchange them for another Bitcoin and still have the same thing.
OK. So now we understand what an NFT is, but why on earth do we need one? Does it have any business applications?
An NFT can represent ownership of a variety of unique assets, which can be physical or virtual. This can include collectibles, digital art, rare digital resources, etc. You can buy or sell ownership of unique items and track the owner using blockchain technology.
The relevance of NFT becomes clearer when you think about it from this perspective – digital files can be easily duplicated. When you see a digital painting, you can just right click and save the work on your computer. You can even sell it to others because the owner of such works cannot be tracked in the digital world. However, NFT can be used to tokenize works of art and similar digital assets to create a digital certificate of ownership. Even if people replicate the digital asset, ownership of the original asset remains with one person or organization. This property can be bought or sold.
For example, digital artist Mike Winkelmann a.k.a Beeple created a number of NFTs for his digital ark works. Last October, he sold the first batch of NFTs for $ 66,666.66 each. And recently, one of the NFTs, which originally sold for $ 66,666.66, was resold to a digital asset investor in Singapore for $ 6.6 million.
Here the artist’s work entitled “Everyday – The First 5000 Days” was linked to an NFT. Title to the artwork was transferred to a buyer for $ 66,666.66. Then the buyer transferred the property to a new buyer for $ 69 million. As long as ownership of the specific digital art is properly defined and verifiable, scammers cannot replicate the artwork and sell it illegally.
There are a variety of use cases for NFTs. These applications keep growing over time and we are constantly looking for new ways to use these tokens. Some of the most commonly used applications can be viewed as follows:
NFT tokens can represent game assets such as weapons, powerups, vehicles, characters, etc. In the micro-economies that emerged in the gaming industry, gamers buy, sell, and exchange game assets with one another. Common goods include high-rated gaming accounts, in-game collectibles, etc. However, these transactions are vulnerable to fraud as fraudsters falsely claim they own an account or a collectible and try to sell it to a buyer. This is where NFTs are the perfect solution as they can provide players with authenticity and validation for the assets they are buying. It also facilitates the open trade in rare toys. NFTs can even be configured to be burned with a cool down timer or locked until they can be used again.
AlphaWallet, an Ethereum wallet company, has signed a smart contract and sold tickets for the 2018 World Cup. In another example, OpenSea – an NFT marketplace – used NFTs to sell tickets to the NFT NYC event in 2018 and 2019. Each ticket is a unique ERC-721 item, which OpenSea refers to as a CryptoTicket. These tickets can be resold, transferable, bundled and bid immediately. The ability to link event tickets with NFT gives the organizer the option of selling the tickets to global buyers in an auction. Buyers can rely on the authenticity of the tickets, as the ownership of tickets can be easily verified in the blockchain network.
Some developers have suggested creating non-fungible tokens to keep track of elements and simplify blockchain supply chain management. The origin of raw materials, manufacturing details, etc. can be recorded in an NFT so that the end user can easily check the history of the product they have purchased. Nike has patented a method for verifying the authenticity of sneakers using an NFT system.
- Trading cards, collectibles
NFT can display individual works of art that have been provided with a token and are now represented by a unique token. Ownership of the NFT corresponds to ownership of the underlying artwork. Linking sports cards, collectibles, etc. to NFT makes it easy to sell, resell, and sell to a global audience.
NFTs can also be used for digital identification. In 2018 Oxcert was the first project to use ERC-721 KYC tokens to provide an extra layer of security for verifying digital identity. NFT systems can be used for simpler KYC verification, using a non-fungible token to represent and verify a specific person instead of paper documents to prove a person’s identity.
NFT tokens can be used in real estate. Here the ownership of real estate, land, houses, etc. can be recorded in an NFT token. The actual owner of each property can be verified on the NFT blockchain network. The real estate transactions can potentially be simplified to the simplicity of transferring a crypto token. The tokenized properties can be managed and title ownership transferred much more easily.
An NFT usually uses a blockchain to verify its authenticity. This makes it easy to tell the difference between an original and a duplicate token. NFT can take several forms depending on the standard on which they are based, e.g. ERC721 and ERC1155 for Ethereum NFT and TRC721 for TRON. Each of these standards has its own advantages and limitations that can affect the types of NFT that can be created. The vast majority of NFTs are currently based on the ERC721 standard.
Marketplaces are an essential aspect of the NFT world. These marketplaces are very different from regular cryptocurrency exchanges that are typically used for fungible coins and tokens. Often times, NFT marketplaces function like e-commerce platforms. Some of the most popular marketplaces are listed as follows:
OpenSea supports trading in ERC-721 and ERC-1155 tokens, which have been used to create more than 4 million digital items. Gods Unchained Cards, ENS names, CryptoKitties and Decentraland Land are just a few examples of supported non-fungible tokens. Since launching in June 2018, OpenSea merchants have completed more than 210,000 transactions.
KnownOrigin is a marketplace for digital works of art. Users can verify that every part of the platform is authentic and truly unique through the platform’s native ERC-721 token, KnownOriginDigitalAsset (KODA). Since launching in February 2018, KnownOrigin has supported more than 7,500 purchases and nearly 200 artists. KnownOrigin currently has more than 19,300 available artworks and more than 2,300 editions.
NFT standards are one of the main reasons they are effective. They ensure that assets work in a certain way and describe exactly how the basic functionality of the assets is to be interacted with.
ERC721 was the first standard for representing non-fungible digital assets. It is a smart contract standard from Solidity. This means that developers can easily create new ERC721 compliant contracts by importing them from the OpenZeppelin library. This standard provides a mapping of unique identifiers to addresses that represent the owner of this identifier.
ERC1155, developed by the Enjin team, enables the new concept of semi-fungibility with NFTs. With ERC1155, IDs represent not just one asset, but different classes of assets. In essence, it is a novel token standard that aims to get the most out of previous standards in order to create a contract for non-fungibility and gas efficient tokens.
In short, an NFT can represent your identity, qualifications, real estate, and more. They can be saved, shown, shared or sold. In this way, companies from all over the world can carry out transactions and manage entire stocks using digital tokens.