The Crypto World is full of surprises. Each day brings new ideas. Some of them become reality and stay, others disappear. In 2020 the phenomenon that is being mentioned more and more often is non-fungible tokens (NFTs). Let’s take a closer look at them.
What are non-fungible tokens?
A non-fungible token is a kind of digital asset that has a number of special features. The main difference between familiar cryptocurrencies and non-fungible tokens is that crypto tokens are the same, while each NFT is unique. “Non-fungible” means that these tokens cannot be substituted by one another, they are not interchangeable. This peculiarity makes it perfect for them to be used as proof of authenticity.
NFTs can be divided into two main groups: absolutely digitized assets and digital representation of existing physical assets. Each implementation has a wide range of possibilities.
The next important problem to solve is how non-fungible tokens receive their value. Undoubtedly, tokens that serve as a representation of physical assets get the value from the initial asset. Tokens which only exist in digital form have value for as long as people, who use them, support these tokens. Basically, their value is based on users’ beliefs.
How do they work?
Now let’s examine how NFTs actually work.
First of all, non-fungible tokens can be issued in several ways. One of them is Ethereum blockchain on a framework ERC-721. There is also another standard, ERC-1155. This standard makes it possible to combine and issue fungible and non-fungible tokens at the same time.
Peculiarities of NFTs open a lot of doors for using them. Surely, the first thing that should come to mind is using NFTs as a means of verification. Moreover, some platforms require the use of individual items. For example, crypto art or crypto gaming platforms.
The most well-known examples of non-fungible tokens
Here are some famous examples of NFTs.
Everybody is familiar with this game based on the Ethereum blockchain. It allows users to buy and sell crypto kitties. The rules of the game stated that each crypto kitty is unique, is owned only by one person, and cannot be replaced. Actually, this is the definition of a non-fungible token.
It is another gaming platform. Here users can exchange football cards. Each card is unique. Users can buy and sell cards with football players, they also get rating according to the real-life performance of their card players. It is also possible to make a team and play football virtually. So in this case each card is a non-fungible token.
It is a charity platform. Celebrities can use it to sell their art pieces. Each collectible that is being sold on the platform is unique. Cryptograph operates on the Ethereum blockchain.
This is a decentralized art platform. It helps artists to sell their digital artworks. KnownOrigin provides an opportunity to tokenize art pieces, so that people who would like to purchase a collectible may be sure that it is unique and original.
It is one of the newest projects about NFT. Lyra blockchain brings in a number of features that allow managers to develop business in different ways. This platform is designed to enable using the most modern technological achievements. Lyra gives an opportunity to issue fungible as well as non-fungible tokens.
Nifty Gateway is a marketplace based on a blockchain. The main focus of the project is fine art and collectibles. From time to time the platform is holding auctions where any art lover has a chance to become an owner of unique items represented by NFTs. For example, several artworks made by Justin Roiland (the Rick and Morty cartoon co-creator) should appear on the platform and become available for purchase on January 19, 2021.
Expectations on NFTs
It seems that non-fungible tokens have great potential. They add opportunities to the use of blockchain technologies. On the other hand, it will take more time for people to start using NFTs.
So far non-fungible tokens are mostly used in gaming and digital art purchasing. The most famous NFT advocate is Vitalik Buterin, the founder of Ethereum blockchain. He supported the first NFT issued by Cryptograph that was sold on an auction as a promotion for the new platform.
William Quigley, a co-founder of Magnetic Capital and WAX (Worldwide Asset Exchange), believes that the hype around NFTs does not cover the whole potential of this new asset. He also mentions that the concentration on all the possibilities makes us forget about problems that are unavoidable and will appear from time to time. William supposes that the real adoption of NFTs will take longer than the community expects. He thinks that people have not got a full understanding of non-fungible tokens and their potential yet.
So, non-fungible tokens represent a new stage in the development of blockchain. It definitely will bring more opportunities to businesses that are willing to adopt new technologies.
Thank you for your attention, we hope that now you know the basics of non-fungible tokens.