Non-Fungible Tokens (NFTs): What Are They And Why Are They The Talk Of The Town
You must have heard about non-fungible tokens and wondering what’s all about and their benefits to you. As a Blockchain enthusiast, hearing about a piece of Blockchain news and knowing nothing about it can leave you helpless and thinking. Reading about Beeple making $69 million off something you know nothing about can create a lot of curiosity.
Recently, the CEO of Twitter put up the first tweet for sale as an NFT. This tells you about the future potential of NFTs. Now, you may be wondering what an NFT is and why there is so much buzz about it. In this post, we shall thoroughly explore and explain the concept of NFTs, and how they are gradually transforming the acquisition of tangible assets.
What are Non-fungible Tokens (NFTs)?
They are cryptographic assets integrated on the Blockchain and can be used to represent real-world items like artworks and real estate. These NFTs come with unique identification codes as well as metadata that sets them apart from each other. They are not like cryptocurrencies that we can trade and exchange at equivalency. Cryptocurrencies are fungible tokens that are identical to each other and can be used for commercial transactions.
Today, we are seeing how these NFTs are taking the world of digital art and collectibles by storm. We are seeing the lives of digital artists change for the better. Also, many celebrities are joining the fray as they see it as an opportunity to further connect with their fans. You can use these non-fungible tokens to represent any unique asset. It is like a deed for an item in the physical or digital realm.
NFTs, let us tokenize items like art, real estate, collectibles, etc. There is only one official owner at any given time. The Ethereum Blockchain network secures the NFTs. You cannot modify the record of ownership and neither can you copy/paste a new non-fungible token into existence. Four years ago in 2017, Ethereum Request for Comments 721 (ERC-721) was released as a cryptocurrency standard for non-fungible tokens. The ERC-721 standard makes it much easier for the implementation of NFTS. It wasn’t long after that and NFTs hit the mainstream with CryptoKitties leading the way. The NFT ecosystem has expanded and is constantly growing. Today, there have been several companies finding novel applications of NFTs like domain names. Others utilize them as crypto art museums, physical collectibles, art marketplace, etc.
How Do Non-Fungible Tokens Our Work?
NFTs are designed to offer you something that cannot be duplicated or copied. For example in the use of NFTs for art or other collectibles, you will retain 100% ownership of the work but the artist will still have the copyright and reproduction rights. This is just like what we experience with physical artworks where anyone can buy a Monet print, but only one person owns the original piece.
Characteristics of NFTs
The major characteristics of non-fungible tokens include the following:
They are non-interoperable
You cannot use a CryptoPunk character on the CryptoKitties games, and vice versa. It is also the same thing with NFT collectibles like trading cards where you cannot use a Blockchain Heroes card on the Gods Unchained trading card game.
Unlike bitcoin or other fungible tokens, NFTs cannot be divided into smaller components. You can only get them as a “whole” item and they exist exclusively like that.
NFTs are indestructible
Since they are stored on the Blockchain, you cannot replicate, destroy, or remove any NFT data. Therefore, all ownership of these tokens is immutable. Thus, gamers and item collectors own their NFTs and not the companies that created them. This is unlike what we experience on iTunes stores where you can buy songs but you don’t own them. You only purchase the license to listen to those songs.
Non-fungible tokens are verifiable
One of the major characteristics of NFTs is that they can be traced back to the original creator. Therefore, you can authenticate the art or collectibles without the need for third-party verification.
Also read our article Consensys Quorum Blockchain A Comprehensive Review.
The Importance of NFTs
Today, these NFTs have become so popular in the crypto and Blockchain space due to the way they have revolutionized the collectibles, arts, and gaming industry. Since November 2017, more than $174 million has been spent on NFT projects. The advent of Blockchain technology has made it possible for collectors and gamers to be immutable owners of in-game items and other unique items.
There have been cases where people create and monetize structures like casinos as well as virtual parks in virtual worlds like Decentraland and Sandbox.
A good example is William Shatner, popularly known as Captain Kirk from “Star Trek.” He ventured into digital collectible last year (2020) and issued about 90,000 digital cards on the WAX Blockchain network. These digital cards showcased different images of himself. Whenever any of those cards are sold, Shatner receives passive royalty income.
Why Non-fungible Tokens Have Value
Like every asset, supply and demand are the key determinants of price. The scarce nature of NFTs and the high demand for them have made them valuable in the market. There are always gamers, collectors, and investors readily prepared to pay huge sums for these NFTs.
Some of these tokens have the potential to make a lot of money for their owners. A gamer on the Decentraland virtual land platform bought 64 lots and then infused them into one estate. The estate was dubbed “The Secrets of Satoshis Tea Garden” the estate sold out for $80,000 because of its good location and road access. Recently Beeple made a whopping $69 million from an NFT art piece. There was also an investor who paid $200,000 for a segment of the digital Monaco racing track in the Formula 1 Delta Time game.
The non-fungible token industry is still unfolding and the full potential is yet to be realized. It is certainly opening a new frontier in the crypto space. Time shall tell how this newfound marketplace unravels, but it certainly is a great one.
Read about Elastic Cryptocurrency, Ampleforth.