While the concept of non-fungible tokens (NFTs) might be new to most people, it actually offers some interesting opportunities in today’s increasingly connected world. In this article, we’ll take an in-depth look at what NFTs are and how they work in order to help you decide whether or not they might be worth exploring further for your own projects or endeavors.
What Is a non fungible token (NFT)?
We’re getting closer to broad adoption of non fungible tokens (NFTs) in our day-to-day lives. In fact, within a decade or two we might not even need all those bank and credit cards that clutter up our pockets, purses and wallets. NFTs will take their place. So what exactly are they? Put simply, NFTs are one of three types of blockchain tokens: fungible tokens (FT), non fungible tokens (NFT), and currency/fiat tokens (CT). Let’s take a look at each one in turn… – Fungible – every unit has equal value
– Non Fungible – unique in design & value
– Currency / Fiat – backed by government policy; issued by a central authority, i.e., USD, EURO, CNY etc.)(If you don’t know what fiat means please google it)
What does non fungible mean?
If a token or asset can be easily exchanged for something else of equal value, it’s fungible. For example, US dollars are fungible because they can be exchanged for other bills or coins that have exactly the same value. Diamonds, however, are not fungible because each stone has unique characteristics—and cannot therefore be directly exchanged for another diamond. They must be evaluated and valued independently.
When used inconjunction with blockchain technology, non fungible tokens (NFTs) can represent and store an individual diamond—or anything else that cannot easily be substituted by another item of equivalent value—in a way that doesn’t require it to become liquid on a cryptocurrency exchange to trade with someone who wants to buy it in exchange for fiat currency.
NFTs allow diamonds to move from one owner to another without them losing their intrinsic value. NFTs also have use cases within supply chain management as well as digital rights management where recorded assets, such as music files or virtual land on a video game platform, need verification before trading can take place. A gaming app like Decentraland uses NFTs to allow players to own parcels of land; they pay real money for their plot and then receive full ownership after purchasing it using NFTs generated inside the game itself.
How do non fungible tokens differ from regular crypto assets?
One of crypto’s biggest strengths is also one of its most significant challenges: Decentralization. This means that each transaction that takes place in a blockchain requires consensus from every node on the network. When you consider how large many crypto networks are, and how transactions take place on-chain, it’s easy to see why transaction times can be slow. However, there’s an alternative that gives us all of blockchain’s benefits without having to sacrifice speed or scalability: Non fungible tokens (NFT).
In short, NFT work very differently than normal ERC20 tokens or cryptocurrencies. They offer us all of blockchain’s benefits in a fast and scalable manner by making each token unique. Take virtual collectibles like CryptoKitties as an example: Each cat has different traits and characteristics, which makes them unique not only for their owner but for everyone else who owns cats as well.
Moreover, these kitties don’t exist on just one Ethereum address either; they’re distributed among thousands of addresses, meaning if someone trades yours away you’ll always have access to it because its location is tracked through time immutably on-chain. It might sound complicated at first glance but once you understand how non fungible tokens work they make a lot more sense.
What are some of the biggest projects using non fungible tokens?
Funfair, Gods Unchained, CryptoKitties, and Decentraland are just a few examples of large crypto projects that have been built on non fungible tokens. When building a decentralized application (dApp), one of the first things you’ll need to decide is what type of token structure your project will use. If you are considering using non fungible tokens (NFTs) for your platform or project, then it’s important to know exactly what an NFT is. NFTs provide users with ownership rights by granting them tokenized assets rather than traditional currencies or digital tokens.
In short, NFTs can be seen as digital collectibles. Each token represents some unique digital good, such as artworks, clothing items, and so forth. You can sell these assets through marketplaces that allow you to trade peer-to-peer between other users. By assigning value to specific attributes of these goods—which may even be nonphysical like intellectual property—NFTs enable interoperability between different dApps from within a single system.
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