While the crypto community has been fascinated by DeFi, non-fungible tokens (NFTs) have grown in popularity, slowly but surely.
Non-fungible tokens (NFTs) enable digital scarcity and provable ownership of unique and one-of-a-kind assets.
In this research article, we will introduce you to the non-fungible tokens and the different platforms on which you can use and trade them.
What is fungibility?
Before we delve into the intricacies of NOn-Fungible Tokens (NFT), it’s worth considering the difference between “fungible” and “non-fungible”.
A fungible element or token is for all intents and purposes interchangeable with another unit of the same.
For example, one Bitcoin is equal to another Bitcoin, just as one US dollar is equal to another US dollar.
If you lend a ami 10 note to your friend, you will not need it to repay the loan with the same bill 10 note – any bill 10 note
I’ll be fine.
Things that are not fungible, on the other hand, are not interchangeable with each other and have unique properties that can make them radically different from each other, even if they may look the same.
There are many examples of non-fungible objects in the real world, such as paintings, concert tickets, etc.
Although two paintings can look alike, they can have radically different levels of rarity.
Similarly, front-row tickets to a concert have much more value than back-row tickets.
What are non-fungible tokens
Non-fungible tokens, or NFTs, are indivisible and unique crypto assets. They can be used to represent both tangible and intangible elements.
Non-fungible tokens (NFTs) are indivisible and unique crypto assets, creating a digital rarity.
NFTs were initially launched on Ethereum, using the ERC-721 token standard, but are now available on a number of other blockchains.
They have many use cases, including digital collectibles, artwork, and in-game assets.
How do non-fungible tokens (NFTs) work?
what are non-fungible tokens
Tokens such as ERC-20 tokens based on Bitcoin and Ethereum are fungible. Ethereum’s non-fungible token standard, as used by platforms such as CryptoKitties and Decentraland, is ERC-721.
Non-fungible tokens can also be created on other smart contract enabled blockchains with non-fungible token tools and support.
Although Ethereum was the first to be widely used, NEO, EOS and TRON now have NFT standards.
Non-fungible tokens and their smart contracts allow for the addition of detailed attributes, such as owner identity, rich metadata, or secure file links.
The power of non-fungible tokens to immutably prove digital ownership is an important progression for an increasingly digital world.
They could see blockchain’s promise of trustless security applied to the ownership or exchange of almost any asset.
Just like the blockchain challenge to date, non-fungible tokens, their protocols, and smart contract technology are still under development.
Creating decentralized applications and platforms for managing and creating non-fungible tokens is still relatively complicated.
There is also the challenge of creating a standard. Blockchain development is fragmented, many developers are working on their own projects.
To be successful, unified protocols and interoperability may be required.
Features of non-fungible tokens
Non-fungible tokens are an extremely powerful type of token that allows a flexible way to represent non-fungible assets on a blockchain. Their main properties are:
Unique: Non-fungible tokens contain in their code information that describes the properties of each token that differentiate them from others. A digital work of art can contain information encoded on individual pixels, while elements of the token game can contain details that allow the game client to understand which element the player owns and its attributes.
Traceable: Each NFT has a record of chain transactions, since it was created, including every time it changed hands. This means that each token can be authentically verifiable, and not a counterfeit – obviously a very important thing for owners and potential buyers!
Rare: For non-fungible tokens to be attractive to buyers, they should be rare. This will ensure that assets remain desirable in the long run and that supply does not exceed demand.
Indivisible: NFTs generally cannot be traded as fractions of a whole. Just as one cannot buy half a concert ticket or a trading card, non-fungible tokens cannot be divided into smaller denominations.
Programmability: Like all traditional digital assets and tokens built on smart contract blockchains, NFTs are fully programmable. CryptoKitties and Axie Infinity have breeding mechanisms coded directly into their tokens. More so, functionality is possible.
In other words, NFTs combine the best traits of decentralized blockchain technology with non-fungible assets.
Unlike ordinary digital assets that are issued and regulated by centralized entities, which can be withdrawn from you at any time, it is possible to truly own and control your own NFTs.
Review of non-fungible tokens
Non-fungible tokens combine the best traits of decentralized blockchain technology with non-fungible assets to create unique, proven rare and authentic tokens using blockchain technology.
NFTs are applicable in a wide range of use cases, including:
tokenizing real-world assets.
They also allow a flexible way to store, control and protect information related to one’s identity.
Non-fungible tokens have a long history, since 2012 with the introduction of colorful coins built on the Bitcoin network. On Ethereum, the first NFT was CryptoPunks in 2017, followed soon after by CryptoKitties, the most successful and well-known NFT project of all time.
During the Ethereum boom of late 2017 and early 2018, NFT activity in CryptoKitties led to a huge spike in activity. However, when the market collapsed in 2018, interest in NFTs was also affected and stagnated until the end of 2020, when NFTs experienced a resurgence.
Despite its advantages, NFT adoption is still low compared to the tens of millions of people who own cryptocurrencies around the world.
Barriers to mass adoption of NFTs are inaccessibility, new technology, volatile transaction fees, difficulty connecting real-world assets to NFTs, and regulation.
Are non-fungible tokens a good investment?
Non-fungible tokens are a good investment because they have unique attributes; they are usually tied to a specific asset.
They can be used to prove ownership of digital objects such as game skins up to ownership of physical assets.
Other tokens are fungible, just like coins or banknotes. Fungible tokens are identical, they have the same attributes and value when traded.
Louis Thomas spoke about the real value of non-fungible tokens (NFTs).
Use cases for non-fungible tokens
As you can imagine, NFTs can be extremely powerful because they can represent literally any asset, digital or real. Here are some uses of NFT:
Collectibles: With CryptoKitties and CryptoPunks, we’ve seen that NFTs can be used to create a new type of incredibly desirable digital collectibles. More traditional collectibles such as baseball cards and stamps are also symbolized.
Games: In-game exchangeable items are also a potential use case for NFTs. So far, we’ve seen most implementations revolve around turn-based battle games or collectible card games like Axie Infinity or Gods Unchained. With NFTs, however, games such as Fortnite or CS: GO with dynamic item savings could one day support the chain item trade!
Arts: With the launch of the Rare art market and its yield farming incentive program, exchangeable digital art has become a hot topic. NFTs allow artists to monetize their works of art and protect their copyrights. NFTs also allow artists to receive royalties whenever their creations change hands.
Virtual assets: Ethereum name service and unstoppable domains have transformed domain names .eth and .crypto into NFT, which can then be traded. Real estate in the virtual worlds Decentraland and Cryptovoxels have also been tokenized in NFT.
Real World Assests: One of the goals initially envisioned for NFTs was to tokenize real world assets that can then be traded. OpenLaw created a system for exchanging real estate using the ERC-721 token standard, and Nike last year also patented a system for tokenizing shoes.
Identity: With NFTs, users would be better able to protect and control their personal information, such as medical history, birth certificates, etc.
Full list of non-fungible tokens
Aku: The Moon God Open edition by Micah Johnson
Ethereum name service (ENS)
Somnium by Lefty over there
Startrail Record Register
Guardians of the chain THE
Blocks of elements
Codex files (CR)
rooms by Baeige
Zed Tokens (ZT)
For a complete list of non-fungible tokens, click here on Etherscan.
In conclusion, while we have seen promising signs of life in the NFT space, there is still a long way to go before this new application of blockchain technology reaches mass adoption.
The technology has certainly come a long way since its inception in 2012, but it will undoubtedly take a little longer before it is proven that NFTs are more than just an ultra-niche sector for early adopters.
As non-fungible tokes (NFTs) continue to find applications in various DeFi sectors, we look forward to the moment when NFTs will serve as collateral for loans on DeFi platforms.
How great it will be when a land, house or virtual work of art serves as collateral to get a loan from a DeFi platform.