What is NFT? Uses, Benefits, and Examples
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What is NFT? One of the best trends in the cryptocurrency space right now is non-fungible tokens or NFTs. These types of tokens are similar to fungible tokens, but there are some important differences between them. Wondering what is NFT? Read on to find out.
What is NFT and How It Works
When people hear about non-fungible tokens (NFT), they usually don’t know what to make of them yet. This sentiment is understandable, as NFTs are new and have no direct analog in traditional digital assets (like crypto-collectibles). There are some similarities to fungible tokens, but NFTs are mostly unique in function and usage.
In this article, we’ll take a look at what NFTs are, how they’re used, and how they differ from fungible tokens like ERC-20s and ERC-721s.
What Does NFT Mean?
Before learning about the whats and hows of NFT, let’s discuss first what is NFT crypto. Again, NFT stands for non-fungible token. It’s a type of cryptoasset (digital token) that’s designed specifically to identify, track, and assign ownership of unique assets.
According to CoinDesk, NFTs are unique digital assets with distinguishable attributes. The specifics of each asset are tracked on a blockchain to verify its identity and ownership. This can be applied to both tangible assets like houses or cars as well as intangible assets like images or game characters.
Think of an asset as anything that has value. In traditional finance, these assets include real estate, gold coins or bars, stocks, or bonds. But in crypto, it includes collectibles like CryptoKitties, KittyHats, or unique digital artwork for projects like Maecenas.
There are hundreds if not thousands of different NFTs being developed across every industry and vertical you can imagine. And you’ll learn the different kinds as you go along in the next sections.
Non-Fungible Tokens vs Fungible Tokens
If you’re building a decentralized application or game, chances are you’ll need to issue non-fungible tokens (NFTs) instead of fungible ones. But what exactly are these types of tokens and how do they differ from each other?
Fungible means that all units in a class or series are identical or interchangeable. For example, a one dollar bill is identical to any other dollar bill. This definition can be applicable to cryptoassets like Bitcoin, Ether, and XRP since each unit can be exchanged for another without altering its value.
Non-fungible assets, on the other hand, share similarities with fungible tokens. However, they aren’t exactly alike. You can verify and store NFTs on the blockchain, which makes them a truly unique digital asset.
NFTs are becoming increasingly popular in the blockchain community. But how can you use and maximize them? There are a few primary use cases for NFTs, including:
The most popular use case for NFTs is in sports memorabilia. NFTs provide sports fans with a chance to purchase rare and unique items that are indelibly tied to a game, player, or team. For example, there’s a Super Bowl ring with each owner’s name inscribed on it. Owners also have one-of-one cards commemorating specific plays during games, which enable players to buy collectibles created using their digital likenesses.
Virtual Reality Experiences
Cryptokitties pioneered NFTs to represent virtual cats. Users can buy, breed, and sell virtual cats on a distributed ledger. These unique cats are non-fungible tokens because other users can’t copy or clone them—their existence is only recorded on their original owner’s blockchain. NFTs mean Cryptokitties are distinguishable from each other, which makes them eligible for scarcity, collectability, and an enjoyable virtual reality experience.
Rare Art Pieces
The third use case for NFTs is to collect rare, unique digital art. Again, Cryptokitties was one of the first major implementations for NFTs. The concept is simple: an owner creates a unique Cryptokitty and then registers it on a registry as its own asset. The user can now buy, sell, or trade this asset, making it a rare art piece.
If you’re looking to sell your digital art pieces on social media effectively, check out this Social Horse Power review.
Idempotence for Fractional Ownership
Since fractional ownership deals usually involve multiple tokens (which have different values), there’s a lot of potential for confusion and issues. An idempotent NFT works like a gift card—you have to purchase one token per share, then you can trade or sell those tokens in any combination. This simple rule makes fractional ownership much easier to manage, especially when using ERC-721.
Unique Proofs of Existence
NFTs have a variety of use cases, especially when backed by unique digital assets. One such case is using them to prove ownership or the existence of an otherwise intangible asset. Imagine creating a digital painting—with a timestamp and everything—and you want to prove it exists without making it publicly available. You can do so with NFTs by registering your specific painting on a blockchain and issuing tokens representing that piece.
Indulge in Selfies!
As we said, you can use NFTs to represent all sorts of digital goods. Take selfies, for example. Yes, selfies! Imagine buying a selfie from your favorite celebrity or getting paid to take a selfie and post it on social media. In our opinion, that would be something worth photographing! Then, what if you could track how many views and likes each selfie received? That would be a great way to quantify the popularity of an image.
One way to increase your presence and audience engagements on social media is by using an efficient tool. Read this Echobox review for more information.
Non-fungible tokens (NFTs) are digital assets that are unique, irreplaceable, and can’t be duplicated. NFTs can be a part of an ERC-721 token, which gives them certain benefits over typical ERC-20 tokens, such as:
The Power of Digital Collectibles
The power of NFTs is that they allow you to own digital collectibles. For example, anyone collecting Pokémon cards or baseball cards will know how exciting it can be to own a digital version of their favorite physical item. NFTs also offer a new way to collect, display, and trade your favorite items on the blockchain.
Enabling True Ownership
While fungible tokens represent some form of ownership, non-fungible tokens take it a step further by enabling true ownership. For example, each unit of a digital baseball card is distinct and can’t be substituted for another—ownership is truly present. Additionally, NFTs are collectibles with inherent value to their owner—you don’t need to own every version or copy of a non-fungible token to make use of it.
Hybrid Games Built with NFTs
If a game is hybrid, it can be both an asset and an ERC-721 non-fungible token. This means you can own these unique in-game items and then use them to play games. Hybrid games are a great way to start getting familiar with NFTs before integrating them into your entire business model.
One of the many great benefits of NFTs is that they provide you with a way to do true ownership and scarcity that’s hard to do in traditional games (or even other crypto games). In addition, NFTs allow for transparency about what’s real and what isn’t, as well as support for monetization strategies outside of advertising. Overall, non-fungible tokens are quickly becoming an important part of the blockchain gaming industry.
Gaming Platforms Built on Top of Blockchain
Blockchain is a digital ledger that’s programmable for recording virtually anything. And gaming platforms built on top of blockchain aren’t just limited to casino games. Players can buy, sell, and trade unique in-game items. That’s where non-fungible tokens come into play.
ICO Fundraising Based on ERC-721 Token
ERC-20 tokens are fungible, meaning you can easily exchange them for other assets or currencies. This makes them easier to value, but it also means they’re likely to be more volatile. NFTs are non-fungible, meaning each one is unique and less likely to fluctuate in value so quickly.
Other NFT Benefits:
- Their unique design makes them a perfect medium of exchange in gaming and virtual reality ecosystems.
- They’re essential to representing ownership over any physical or digital item.
- People can easily pass NFTs between parties without going through an intermediary like PayPal or Amazon. For example, artists selling music on Bandcamp could create limited edition collector’s items that couldn’t be sold by anyone but them (and also couldn’t be stolen).
- Furthermore, when new artists were added to Bandcamp, they could release a tokenized version of their album as well—even if they weren’t signed to Bandcamp—and let fans own their musical legacy forever.
In today’s modern world, security and privacy are becoming more important than ever before. Luckily, there are new technologies like blockchain networks that help protect your identity without making it public knowledge.
At this point, you might be asking: what is NFT and example of it? Here are some examples of NFTs that you can scan through to get an idea of what they look like and how they work.
One of the most popular examples of NFTs is Cryptokitties. It’s a game that’s easy to understand and lets you trade crypto kitties, which are NFTs. You can breed kitties or buy them from other players.
Since each kitty has its own unique set of attributes—for example, one cat might have rare purple fur—you can take pride in your collection and watch it grow. Axiom Zen launched the game in 2017, raising $12 million from top VC firms Andreessen Horowitz and Union Square Ventures, among others.
In Crypto Celebrities, users collect digital representations of celebrities and other famous figures, which they then buy, sell, or trade. On some exchanges, you can use these figures to bet on eSports events. If you want to know why blockchain is so hot right now, take a look at Crypto Celebrities.
This project aims to create a cryptocurrency designed for gaming, so you can use it in tabletop games or virtual reality casinos. For example, if you owned Magic Cryptocurrency, you could exchange it with someone else who wants to play a round of blackjack in your favorite VR casino. This is one of the best examples of a non-fungible token. And NFTs are like blockchain collectibles—or crypto assets that have value because they’re unique and rare.
Cryptocurrency isn’t really a new idea, but blockchain certainly is. And one token that has taken advantage of blockchain technology is CryptoPunks. Launched in 2017, CryptoPunks takes cryptocurrency to a whole new level by mining digital collectibles from within an Ethereum wallet. These collectibles are issued in limited quantities and exist on their own network. Once created and traded, these tokens can’t be copied or reversed.
First Blood Token 2.0
In late 2017, First Blood announced plans to launch a tokenized version of its in-house ERC-20 utility token. The rebranded First Blood Token (1ST) will be used on an updated platform with new capabilities and features. Although it remains to be seen how broadly NFTs like 1ST can be adopted, it’s easy to see why developers are drawn to them.
How to Buy NFT
There are many ways to buy and acquire non-fungible tokens, depending on what you’re looking for. If you’re an investor and simply want exposure to NFTs, it makes sense to use a platform like OpenSea that only features highly liquid tokens. On platforms like that, you buy and sell based on market prices.
Incorporate NFT Into Your Business Now
In the blockchain world, developers always try and test new things as they seek to find innovative ways to apply blockchain technology to different industries and sectors. If you want to incorporate NFTs into your business, it’s not too late. Just be keen with your research on what is NFT, learn how to use them properly, and take inspiration from the examples listed in this article.
Want to indulge yourself more in the NFT world? Read this blog post: “Top NFT Creators: 20 Best NFT Artists to Watch Out For in 2021.”