Non-fungible tokens, or NFTs, are a type of cryptographically generated token that represents ownership and value.
As mentioned, the most widely recognized application of NFTs is in digital collectibles, but we are only just touching the surface of what is possible!
This article will provide an insight into NFTs for those who have recently ventured into the flourishing space.
What Are Non-Fungible Tokens?
An NFT, short for non-fungible token, can be created on any blockchain that supports smart-contract programming, such as Ethereum (ETH) and Polygon (formerly Matic) networks.
The two most common examples of NFTs are ERC721 and ERC1155 standards that exist on the Ether network.
Essentially, NFTs represent ownership of a digital asset, usually a piece of art or a collectible.
Fungible vs. Non-Fungible
Fungible assets are essentially liquid, like cryptocurrencies or fiat (cash).
Take Bitcoin (BTC) as an example: there is no difference between the BTC or almost any other crypto I have in my wallet, and the crypto I acquire on an exchange; both have the same value. They are also dividable into smaller denominations.
NFTs, in comparison, are unique, and as explored above, have varying degrees of uniqueness.
Conversely, NFTs that use the ERC721 standard, like CryptoKitties, would fall at the other end of the “NFT spectrum” as each Kitty possesses traits that make it distinct from the next. With NFTs, it is this uniqueness that drives the overall value.
Until recently, you could not split NFTs into smaller denominations, and they could only be for sale as a whole. Now, innovation within the blockchain space, most notably with the rise of decentralized finance (abbreviated as DeFi), NFTs can be “sharded” — effectively broken into many pieces — as a way of increasing liquidity.
What Are the Use-Cases of Non-Fungible Tokens?
Besides art, video games certainly have the most use cases for NFTs, as virtual economies have been prevalent across numerous gaming titles – this makes gaming an ideal avenue for NFT adoption.
That said, we are now also seeing an increasing number of high-profile brands leveraging NFT-based consumer goods and services.
Non-Fungible Tokens In Gaming
The transfer of skins and weapons helps to drive in-game economies, alongside in-game achievements that ensure a seamless and incorruptible transfer of records, as well as proof of ownership for a particular gaming item.
Non-Fungible Tokens In Art
Imagine you are Leonardo da Vinci and you have just painted the Mona Lisa: the last thing you would want is somebody selling a counterfeit version of your work under the guise of yourself.
The application of NFTs in artwork essentially mitigates the risk of counterfeit work while also providing a digital trail for future sales of that art piece – and this is just one of many places where we can begin to see the value of NFTs.
NFT artwork has disrupted the rule of “first sale” in that the underlying smart-contract technology can ensure that artists receive their royalties even in future sales.
The potential for NFTs is astronomical. Their application in art, gaming, and broader industries will radically transform how an enterprise can provide products and services to its customers.
NFTs will revolutionize the way brands and creators can share not just art but experiences with their respective communities.
As the NFT space evolves, so too will the understanding of its application, by which point, it will be an unstoppable force disrupting a vast array of industries – these will include not just art, but music, and the esports and competitive gaming landscape.
NFTs are the future!
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