What Are Non-Fungible Tokens (NFTs)?
In recent months, finance experts have hailed Non-fungible tokens (NFTs) as the future of commerce.
In their defense, some NFTs are worth millions of USD. Even though we cannot forecast the future of NFTs in mainstream finance, they will surely be an integral part of the cryptocurrency ecosystem in the coming years.
So, if you have some interest in crypto and want to keep up with the advancements, you should know about non-fungible tokens.
In this article, we have explained everything you should know about NFTs.
What is a Non-Fungible Token (NFT)?
A non-fungible token is a type of digital token that cannot be interchanged. In other words, it is a token that you cannot replace using another token.
Each NFT has its unique properties, which other tokens would not have. An NFT may represent various digital items, including but not limited to photos and videos.
Even though you can use a non-fungible token in various instances, they mainly deal with digital assets.
Non-fungible Tokens are unique cryptographic assets that are stored on the blockchain network.
Each of these tokens will have a unique ID and metadata that you can use to tell two NFTs apart.
The best way to understand an NFT is to know how a fungible token works. Let’s consider an example of Bitcoin, a digital currency.
There is no difference between one Bitcoin and another. It means you can use one Bitcoin instead of another.
However, this does not happen in the case of Non-fungible tokens. Instead, each NFT in the world has some unique properties.
How do NFTs work?
NFTs are cryptographic assets that stay on top of the blockchain network, as we mentioned earlier.
In most cases, NFTs use the Ethereum blockchain, but other blockchains have also introduced support for NFTs.
As we mentioned, the blockchain will store the unique ID of the NFT and the metadata that keeps the NFT unique from another NFT.
Therefore, when somebody buys an NFT, the blockchain ledger will keep the transaction details.
More importantly, the blockchain will award the ownership of the asset to the customer. Let’s say that you buy an NFT that represents a digital painting.
From the moment you purchase it, you become the original owner of the digital painting. Even when someone else copies the painting, you retain the original ownership.
As you can guess, this digital certificate of ownership can be used for various needs. But let’s consider the event that turned NFTs into a buzzword.
Michael Joseph Winkelmann is a digital artist known by his professional name, Beeple or Beeple Crap. On the 21st of February 2021, he completed a digital art named Everydays: the First 5000 Days.
In the same month, he sold the original ownership of the painting at Christie’s, a British auction-house in London. It was the first digital asset to be sold as an NFT, and MetaKovan paid Beeple $69.3 million for it.
Here are the answers to some of your questions.
You can search for the image and find a JPEG file on the internet.
You can even download it.
No, the NFT does not mean MetaKovan, the buyer, has the copyright.
Instead, he has the ownership.
So, there could be thousands who have downloaded the Everydays image from the internet.
But, there will always be one owner: MetaKovan.
What can NFTs be used for?
NFTs can generally be used for selling unique digital assets. You can sell photos, videos, paintings, etc.
As you can guess, ‘digital asset’ is a broad term. It means you can find NFTs representing NBA virtual cards or a video clip.
While these items seem copyable, it needs to be noted that NFTs are not selling the copyright. Instead, they are selling the ownership of the original asset.
NFTs can thus be an effective way to support a content creator directly.
Even though the creator may retain the copyright, the buyer will become the original owner of the art.
Like any other collectible, the price of an asset may change over time.
By the way, you should also note that you can use NFTs to represent objects from the real world. It could be a physical painting or a piece of real estate in Colorado Springs.
In other words, NFTs can be used to represent and sell anything that has unique properties.
Popular projects using NFTs
Here are a few projects that are helping NFTs go mainstream:
- NBA Top Shot makes short videos of in-game moments available as an NFT. It is officially licensed via the National Basketball Association.
- Sorare is a fantasy soccer game. You can purchase NFTs to help you create your dream soccer team and even compete with other teams.
- CryptoKitties is an NFT-based game. In this game, each NFT recommends a virtual cat. You can buy these cats, boost them up, and combat them with other cats.
- Rarible is a marketplace where you can buy digital collectibles. You can purchase various digital collectibles, including but not limited to digital arts and memes.
- CryptoPunks is a platform where you can buy uniquely generated characters. Once you have done it, the character officially becomes yourself, and there will be a ledger entry.
In addition to these, many other NFT-based projects are under work. In the past months alone, more people have started looking at possibilities to invest in NFTs.