NFT 101 – Understanding The Basics
What is NFT?
NFTs or Non-Fungible Tokens are very different from most cryptocurrencies like Bitcoin. These were not much important until recently. NFTs have become very popular in 2021. The meaning of non-fungible Tokens is easy. If something is fungible that means it is easy to replace it with something similar. For a simple example, if you give someone a 20 dollars note, you won’t mind if you do not get the same 20 dollar note.
But it is not the case with Non- Fungible things or assets. Every non-fungible token has its own identity. They are like airplane tickets, they all look similar but they have different information. These non-fungible tokens bring a scarce trend to the blockchain. NFTs are collectibles but in digitalized form. NFTs are unique and cannot be altered, replaced, or destroyed. The data storage process is similar to Bitcoin, stored in a blockchain.
Cryptokitties is one of the earliest examples of NFTs. These NFTs gave a chance to collect digital cats to the NFT enthusiasts. It is believed at present that NFTs can bring a revolution in the gaming and art world. Following this, recently we witness many digital artworks that were sold at a very high price in auctions across the world.
NFTs have the potential to change the gaming experience of players. The NFTs can generate rare and precious game accessories that can be move between titles. NFTs can be bought and sold at secondary marketplaces.
History of NFTs
It is to be noticed that the colored coins were the first NFTs to come into the light, these colored coins were related to bitcoin in the starting.
These colored coins could represent the assets in the real world on the blockchain network. Ownership of any asset could be proved with the help of these colored coins. These colored coins have a multitude of usage from real estate, coupons, subscriptions to the company shares, etc. This could be considered as a revolution in the field of bitcoin. From there on NFTs have kept the attention of many crypto enthusiasts as NFTs provide a sense of ownership.
How Do NFT tokens Work?
The NFTs are commonly Ethereum Blockchain network-based- but as the users are increasing on this platform, many other digital assets are being created on the other rival platforms.
As the NFTs have their value and identity, this makes them rare and valuable. The developers related to NFTs have to make sure that the balance and scarcity remain throughout the platforms.
NFTs can also be divided according to the level of rarity. It means that only the most desired NFhese NFTs can also include various applications.
These tokens also have a crucial role in the gaming world as many crypto games get sold in packs.
NFTs are different from cryptocurrencies like bitcoin and ether. These tokens can not be divided into smaller parts. It’s easier to send Bitcoin to a person but it’s impossible to send a portion of NFT.
Crypto enthusiasts also believe that with the help of NFTs, the music sector can be revived. Many musicians like kings of Leon are launching their album in the form of NFTs. The rarity of an NFT decides its price. NFTs have become omniscient. As one NFT can be owned by one person at a time, these NFTs also contain information like the signature of an artist most important aspect of NFTs in the fact that the blockchain network helps in the authentication of an asset with a detailed history of ownership
These NFTs are coded with a specific software called smart contracts, this software supervises all the activities related to NFTs like verification of ownership and NFT transfer. These non-fungible tokens can also be programmed beyond the ownership and transferring process.
Under the smart contracts software, the programmed amount can be allocated for any sale to the owner, with its help, the owner can benefit from the secondary market.
So to say, when someone creates or mints an NFT, He/ she is writing smart contract codes. These codes rule the quality of an NFT. These specific qualities of a specific NFT are added to the blockchain network where it is managed. NFTs can be managed by many blockchains. A point to notice is, a particular NFT works with a particular blockchain, so using blockchain for the NFTs can make it commercially beneficial
Any physical work can be linked with these NFTs or NFTs can stay digital. This flexible nature of NFTs makes it very interesting. It can have wider monetization areas with a large revenue generation and also artistic appeal that can change the way art and music are seen.
One of the most noticeable features of NFTs is that they make it easier to trace the authenticity of a digital asset. This makes it easier to trust the product and buy or trade it. As mentioned earlier, the transaction process is kept safe in the blockchain ledger which can not be tempered. ( Although there are few things that can not be perfect as it sounds)
The plus point of NFTs is that they can not be divided. It has certain advantages. The value is decided if you own a whole NFT. This can help in proving the ownership rights. However, with the change in time, moves are being made towards making NFTs divisible so the ownership of an NFT can be shared
Advantages of NFTs
- Ownership – The main advantage of NFTs is the right and proof of ownership. As we already know that NFTs are based on a blockchain network, they cannot be altered or tampered with. These NFTs can not be divided into fractions and can not have multiple owners at the same time.
- Genuine product – With the help of these distinct NFTs, the user can easily avail of any authentic product or work in digital format. This provides a solution when it comes to the authenticity of a digital asset or piece of art.
- Transferability – With the help of NFTs, it is easy to trade. It provides a bandwidth range of choices. This can also bring revolution in the gaming market. These NFTs can be sold by the owner to the buyer on fulfilling some specific conditions.
- Revenue generation – At present, the application of NFTs has increased drastically. NFTs have made an impact on content creators and artists. With the help of NFTs artists can generate revenue without worrying about auctions and other formalities. NFTs can also help in countering the fake artworks
The benefits and points of NFTs have made them popular in 2021. These Non- fungible tokens can bring a revolution in the field of the digital market and cryptocurrencies.
The easy and authentic method has made them one of the selling Markets for artists, musicians, and content creators. NFTs have bright prospects in the marketplace, both real and virtual ad they can be linked with physical items.
But although they have very appealing aspects, we must also be aware of their limitations. these NFTs are not regulated and are not uniform. NFTs have many drawbacks and the universal approach of their infrastructure makes it prone to many faults.
But with the increase in NFTs popularity, many organizations are working for the better performance of these non-fungible tokens. We can hope for its better functioning in the future.