In the domain of blockchain and cryptocurrency, tokens are the preliminary concept. There are a plethora of tokens with unique features and applications, and Non-fungible tokens or NFTs are one of them. In the past year, the influence and rage of NFTs have skyrocketed, with many hailing the token as ‘the future of blockchain.’
Brief Guide about Non-Fungible Tokens for Blockchain
To begin with, an NFT is a digital asset that embodies real-world objects such as art, music, games, etc. People buy and sell NFTs online, mostly with cryptocurrency. Moreover, NFTs are typically coded with the same underlying software as many cryptos. The inception of NFTs can be traced back to 2014, but they have recently started gaining traction as the most sought-after media to buy and sell digital artwork. So, without any more waiting, let us learn more about the various aspects of non-fungible tokens for blockchain.
What are Non-fungible Tokens?
In the blockchain network, non-fungible tokens (NFTs) are one-of-a-kind digital tokens. The value of NFTs is determined by what a person is willing to pay. Thus, the prices for NFTs depend upon demand. Witek Radomski – the co-founder of Enjin Coin in June 2017, created the first non-fungible token. The code for the coin was released to the public in August 2017. Two terms that define NFTs are ‘non-interchangeability’ and ‘distinguishable.’ Real-life examples that are akin to a non-interchangeable and distinguishable NFT include a limited-edition concert card or a plane ticket, as you cannot exchange your ticket with someone else. The underlying premise of an NFT is that it acts as a virtual token that verifies the authenticity and ownership of an asset. For instance, if you own a virtual property such as a piece of art or even a selfie, you can create a non-fungible token to tokenize the same as ‘your’ artwork. Thus, the NFT you own is non-interchangeable as it is unique, and you become its quintessential proprietor. It is noteworthy to remember that the NFT is stored on the blockchain as your property.
Non-fungible Tokens and the Creation of Digital Scarcity
NFTs are oriented on the creation of ‘digital scarcity.’ They are, indeed, the ideal example of how a token can be utilized to usher in scarcity and thereby create value. Therefore, we can understand NFTs as a type of token that produces digital scarcity and is verifiable without any centralized organization authenticating it. NFTs co-opt blockchain to remain digitally scarce in a decentralized way. The phenomenon of ‘digital scarcity’ stands in stark contrast to other digital creations that are almost always in infinite supply. Hypothetically speaking, cutting off the supply should raise the value of an asset, provided that it is in demand.
However, many NFTs are mostly digital creations that already exist in some form, such as an iconic video clip, a photograph, etc. For example, world-renowned digital artist Mike Winkelmann sold his artworks for a whopping USD 69.3 million at Christie’s. However, the pertinent question is that people can view individual images and even an entire collage of images free of cost, so why are they willing to spend millions purchasing easily downloadable things? The answer is that non-fungible tokens for blockchain allow the buyer to buy the original item, and it contains a built-in authentication that serves as proof of ownership. In hindsight, collectors prize the property’s ‘digital bragging rights’ more often than the digital item itself.
Non-fungible Token and Cryptocurrency: Similarities and Differences
To begin with, non-fungible tokens for blockchain are generally built using the same kind of programming as cryptocurrencies like Bitcoin or Ethereum. However, this is precisely where the similarity ends. Physical money and cryptocurrencies are ‘fungible,’ implying that they can be traded for one another. They are also equal value; one dollar is equal to another dollar, and one Bitcoin always equals another Bitcoin. The fungibility of cryptocurrency makes it a dependable trajectory of conducting transactions on the blockchain. On the contrary, NFTs are different, as each token comprises a unique digital signature that makes exchange impossible. For example, one NBA top-shot clip is not equal to Mike Winklemann’s daily artwork by the virtue that they are both NFTs.
Uses of Non-fungal Tokens for Blockchain
Blockchain technology and NFTs allow artists and content creators with a unique potential to monetize their work. For instance, artists no longer rely on auctions or galleries to sell their creations. Instead, they can directly sell it to interested parties via non-fungal tokens for blockchain, thereby providing room to keep more profits. Consequently, artists can also program in royalties to receive a percentage share of the sales whenever their creation is sold to a new owner. In addition to artworks, some other examples of NFTs are –
- Gaming – One of the first uses associated with NFTs is gaming. A game called CryptoKitties based on blockchain ushered in the concept of NFTs to the world. The game is premised on the Ethereum blockchain and ERC-721 standard token. Players have to collect, buy, breed, and sell digital kitties, each infused with their genetic characteristics and features stored on the blockchain. The CryptoKitties game became so popular that it amassed sales of over USD 12 million in a year. Likewise, another popular game based on NFTs and blockchain is Decentraland. Non-fungible tokens for blockchain created novel possibilities for the gaming industry. It currently allows people to own, buy, and sell their game characters.
- Collectibles – It is one of the most common examples of NFTs wherein a token is used to keep digital assets to a person’s name. In a layperson’s language, NFTs offer absolute ownership to all things that can be collected, ranging from games to homeownership, and likewise.
- Licensing – NFTs have also been used for software licensing. Experts suggest that creating NFT based licenses can reduce piracy and allow people to sell their licenses in an open market for consistent profit. As such, users do not have to opt for yearly subscriptions. Instead, they can use software against the purchased license, and after the use, they can sell it to someone else. Simultaneously, software developers can also benefit from NFT based permits to create smart contracts that will enable profit share on resale.
A Brief Overview of Buying, Selling and Creating Non-Fungible Tokens
- Creating NFTs – To create or ‘mint’ an NFT, all you need is an image, video, or audio and a pre-funded crypto wallet that can be used with your selected blockchain, such as Ethereum. After that, you can construct your NFT using many of the same sites where you would buy NFTs, such as Mintable.com or OpenSea.i.o. It is noteworthy to remember that all the NFT marketplaces function in somewhat distinct ways, but the procedure is straightforward. All a person has to do is visit the site, on the create button and follow the instructions. Steps such as uploading a file, deciding to mind a single NFT or many NFTs, and setting up a sale price are all part of the process. While minting, most marketplaces charge a small gas fee.
- Buying NFTs – It is possible to buy NFTs from various marketplaces but simultaneously, it is essential to remember that each marketplace has its own set of crypto wallet requirements. A large portion of the NFFT marketplace operates similarly to an auction house. You big, wait and see if you are the winner of the NFT of your choice. Some sites also come with a ‘buy now’ option to purchase NFTs for a stipulated price. It is possible to buy NFTs from various marketplaces, but it is essential to remember that each marketplace comes with its own specific crypto wallet requirements.
- Selling NFTs – There are two approaches to selling non-fungible tokens for blockchain. You can sell an NFT by minting a token first or owning an NFT.
Popular NFT Marketplaces
- OpenSea.io – It is a peer-to-peer platform that promotes itself as a purveyor of ‘rare digital items and collectibles.’ A user has to create an account and browse through the NFT collections.
- Rarible – It is a democratic and open marketplace that allows artists and creators to issue and sell NFTs. Rarible issues RARI tokens that enable holders to weigh in on features like fees and community rules.
- Foundation – To post their NFTs on Foundation, artists, and creators must receive an invitation or ‘upvotes.’ The community at Foundation is represented by exclusivity and cost of entry.
Should You Purchase NFTs?
Just because you can purchase NFTs does not necessarily imply that you should, as NFTs come with risks and uncertainties. There is not a lot of history associated with non-fungible tokens for blockchain for us to come to a sane judgment. However, as NFTs are new, it may be worth investing small amounts and trying it now. Moreover, it is vital to emphasize that investing in NFTs is a primarily personal decision. If you have the money and are eyeing a specific artwork, then NFTs are worth it.
In conclusion, with the future being more blockchain-friendly, the importance of NFTs might increase. As such, now is the ideal time to be more vigilant about non-fungible tokens.