NFTs refer to Non-Fungible Tokens, which are cryptographic tokens (cryptocurrencies) that do not have a fungibility aspect. In economics, a fungible item (good or commodity) is one whose individual units can be interchanged since the units are indistinguishable from each other. Therefore, contrary to the common fungible cryptocurrencies like Bitcoin (BTC), Ether (ETH), Bitcoin Cash (BCH), Litecoin (LTC) among others, NFTs are not interchangeable.
If persons A and B have 0.1BTC each, they would easily interchange the BTC since the BTC held by one is similar to what is held by the other. But if the two persons held a unit of a similar NFT token, the NFT unit in the custody of either of the two people is completely different from what the other person is holding.
CryptoKitties, an Ethereum based blockchain game that allows players to purchase, collect, breed, and sell NFT tokens in the form of virtual cats, was one of the earliest NFT tokens to be unveiled. The token became so viral that it almost clogged up the Ethereum network. To date, this NFT game has raised over $40 million in sales.
Other popular NFTs include RareBits (used as a marketplace and exchange for non-fungible token), Gamedex (NFTs collectible card game platform), and CryptoKicks (NFT-sneakers launched by Nike) among others.
Why were NFTs Created?
NFTs are digital tokens that are created to verifiably prove the ownership and authenticity of an asset through blockchain cryptography.
For example, if an artist has a digital artwork, he or she can create an NFT tokenizing the artwork, and the NFT then certifies that the ownership of the digital artwork belongs to the artist. The created NFT is unique since the artwork is also unique from another out there. This information will be stored on the blockchain, which ensures that the ownership of the artwork cannot be changed without the permission of the original owner.
In case the artist wants to sell the artwork, they shall exchange the NFT of the artwork at a given value representing the value of the NFT, upon which the ownership of the artwork is completely transferred to the new owner.
Standards used in creating NFTS
Most NFTs are developed on the Ethereum blockchain using the ERC-721 standard, or the more advanced ERC-1155 standard. However, there are other NFTs that are developed on other blockchains that support smart contracts, such as NEO and EOS. Characteristics of NFTs
The non-fungible tokens have certain unique characteristics that distinguish them from the normal cryptocurrencies. These characteristics include:
•Not interchangeable
Every NFT unit is unique from the other. Therefore, one does not simply exchange one NFT token with another, much like they would with other cryptocurrencies. Every NFT has a permanent information tab where its unique information (like when it was created) is recorded, and this information is what acts as its certificate of authenticity.
•Non-interoperable
An NFT for one platform cannot be used on another platform. For instance, if you have a CryptoPunk NFT, you cannot use ii on the CryptoKitties game.
•Indivisible
NFTs are also not divisible; meaning you cannot have a fraction of an NFT. You can only own one whole copy of NFT, or more.
This is contrary to the common cryptocurrencies like ETH and BTC that are fungible and you can own any fraction of them. For example, it is possible to own 0.0001BTC or 0.0001ETH. But when it comes to an NFT like the Pudding Daintytot in Cryprokitties game, you can only own 1, 2, 3, and so forth of the Pudding Daintytot. •Indestructible
NFTs are stored on blockchains using smart contracts, and their ownership is therefore immutable. The holders of the NFTs own the NFTs; meaning ownership is completely transferred from the creators of the NFTs to the holders upon purchase.
NFTs applications
NFTs have found a lot of usability among different industries among them the gaming industry, digital asset industry, identity sector, and collectibles.
•Gaming sector
Cryptokitties, which was among the first NFT-based application, was developed as a blockchain- based gaming platform. Since then, NFTs have gained lots of popularity in the gaming industry with numerous other gaming platforms that utilize NFTs being developed over the years.
Other examples of gaming platforms that use NFTs include Fortnite, DeanBeat, Cryptofighters, Etherbots, Ethermon, Rare Peppes, and Spells of Genesis among others.
•Digital Assets sector
Developers have also come up with different platforms where users can buy and sell digital assets through NFTs. A good example is Decentraland, where users can buy and sell virtual land. Another example is Ethereum Name Service (ENS) that uses NFTs to facilitate the buying and selling off their. ETH domains.
•Identity sector
Due to their unique attributes, NFTs can be used to fight identity theft. NFTs can be used to digitize things like academic qualifications, digital artwork, appearances, or medical records, where every digitized item is unique from the other.
Digital artists are continually adopting the use of NFTs since there is a growing number of platforms that allow them to upload their artwork and automatically mint
NFTs, which they sell to potential buyers. For instance, Grimes, an artist, recently sold $6 million worth of digital artwork after converting them into NFTs and putting them up for auction.
•Collectibles
These are cryptographic digital assets that investors buy and keep to sell at a later date at a profit. One of the most popular collectible platforms is CryptoPunks, where over $45.2 million have been made in sales in the last seven months alone.
Disclaimer: The content in this report is from the open source and for educational purposes only, therefore should not be considered as financial advice. We all know that the cryptocurrency market is highly volatile. Therefore, all the financial decisions should be made after doing your wide spectrum research.
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