NFTs, short for non-fungible tokens, have been shaking up the world recently. One of the latest booming cases is the first digital art auction where the NFT-based artwork created by the artist Beeple was sold for $69 million. In today’s article, we are going to explain what non-fungible tokens are, how they can be used, and how they are connected to crypto.
Non-fungible tokens are special cryptographic blockchain assets that have unique identification codes and metadata which distinguish them from each other. NFTs were created in June 2017 and are based on the Ethereum blockchain. Unlike fungible assets, NFTs are designed to be unique and cannot be replaced with something else.
How do NFTs work and where are they used?
Currently, most non-fungible tokens exist on the Ethereum blockchain, and their contracts are based on the ERC-721 standard. The ownership details of any digital object stored on the blockchain can be traced back to its original creator. NFTs can be created by users and listed on an NFT marketplace for auction. By verifying the ownership of digital assets and the right to use them, they can be used across different platforms.
NFTs can be implemented in a variety of ways. The main ones are the following:
- Artwork (one of the earliest uses of unique tokens, as they provide proof of a digital object’s authenticity and ownership).
- Virtual items in video games (NFTs are used to create game assets that are owned by the user and not the game developer).
- Tokenized real-world assets (a wide range of possibilities: real estate, cars, racehorses, designer sneakers, etc.).
- Collectibles (for example, digital trading cards).
- Music items (unique content made by artists).
Where can you buy NFTs?
- Which marketplace you would like to buy NFTs from. Many of the marketplaces have different requirements for users and may not support the same NFTs due to various token standards.
- A wallet that you will need to download to connect to the platform and buy NFTs.
- A cryptocurrency to deposit to the wallet to make purchases.
- Whether the non-fungible tokens you plan to purchase are sold at a specific time or platform.
- NFTs and crypto
Non-fungible tokens are undoubtedly a significant part of the crypto world. However, there are some major differences between NFTs and other cryptocurrencies:
- An NFT is not mutually interchangeable.
- NFTs are defined by metadata that creates their unique features. An NFT can be a video game asset, work of art, collectible card or image, or any other unique object stored and managed on a blockchain.
- NFT transactions may contain executable code, however, information attached to crypto transactions is generally only intended to store notes.
- NFTs can be conceived as a platform to facilitate contracts and applications through its own currency, while crypto was created as an alternative to national currencies and is thus intended to be a store of value and a medium of exchange.
According to the 2020 NFT market report by NonFungible.com, the value of the NFT market is $250 million and the growth rate in 2020 was 299%. Moreover, expansion of the non-fungible token market will continue to be a trend in 2021. The market is showing promising results. So, if you want to explore the world of NFTs, now is the time!