What are NFT’s (Non-Fungible Tokens)?

Non-fungible tokens (NFT’s) are one of its kind of tokens that possess the ability to transform digital works of art and other collectables into verifiable assets which can then be easily traded on the blockchain. In other words, non-fungible tokens are digital assets backed by identifying information that can be easily recorded in the smart contract. In this article, you will be learning all about NFTs and their presence in the financial industry.

Understanding non-fungible tokens | What are NFT’s?

Non-fungible tokens are unique and cannot be traded or exchanged at equivalency. This makes them different from cryptocurrencies which are identical in nature and can be used for normal trade transactions. NFTs are used to represent real-life items such as artwork and real estate. It also helps to make it safe for trading purposes eliminating the risks of fraud. Interestingly NFTs can also be used to represent people’s identities, property rights and more.

The unique nature of NFTs makes them irreplaceable from another token along with being indivisible unlike other types of cryptocurrencies and even banknotes for that matter.

What makes NFT’s so special? | What are NFT’s?

Due to their unique attributes, NFT’s are special as they are linked to a specific asset. This makes it possible to use it for ownership of digital items along with ownership of physical assets. On the other hand, fungible tokens are identical, having the same attributes and value when being exchanged.

In simple terms, non-fungible tokens are a gateway for anything to be represented digitally for example pictures, music, videos etc. All this can be done efficiently and effectively without the need for any central authority.

Once an NFT is created it can be traced whenever needed. Another important attribute about NFT is that it cannot be duplicated. However, the original creator of NFT can be anyone and this cannot be traced or authenticated. This has led to the concern that original work can be copied or reproduced without the knowledge of its genuine owner.

A major factor that has aided NFT to become big in the world of modern art is the Ethereum blockchain enabling artists, gaming companies and content creators to use tokens to purchase digital art. These digitally curated assets are generating record-breaking revenues and are gaining attention forcing people to learn its operations to reap maximum benefits.

Some popular examples of NFT | What are NFT’s?

CryptoKitties rose to popularity in the year 2017, making it possible to trade digital kittens, modify them with different characteristics turning them into collectables that can be further used for trading. This further hiked the interests of major art dealers of the industry thus leading towards more development in this area.

NBA Top Shot is another famous NFT that allows users to trade virtual clips of the league’s biggest stars.

Another recent example of Beeple who set up a record at Christie’s for a whopping $69 million making him one of the top three current most valuable living artists globally is a clear indication of how emerging artists are using this avenue to gain fame.

The art sold is called “Everydays: The First 5,000 Days”, was sold for US$ 69,346,250 and you can see it below:

Use cases for NFT | What are NFT’s?

Although NFT is the next big thing in the future, the infrastructure required for its wide adoption is still under process. The following are the use cases for NFT which have begun to emerge.

• Real estate ownership

With the help of a smart contract, it is now possible to use NFT to complete transfers of houses, land and other tokenized property. These smart contracts are accessible to seller, buyer, real estate agent, authorities and legal representative.

It is also possible to store historical property transactions on blockchain keeping in mind local laws and jurisdictions.

• Event Ticketing

Since the year 2018 event tickets were being sold using NFT technology

• Supply chain

NFTs are being considered to be used for tracking items to facilitate and maintain blockchain supply management. The only limitation being the lack of standardized metadata options being readily available. Moreover, the number of metadata which can be stored on-chain and off-chain also remains questionable because of the number of possible data entry points required for a typical supply chain. There is a dearth for finding additional scalability solutions in order to fully utilize the potential of NFTs for the supply chain.

• Credential verification

This is an interesting use case for NFTs. Using NFTs it is now possible to eliminate the need for using paper documents for identification purposes. Instead, non-fungible tokens can be used to represent a certain individual which will also prove to be beneficial for know your customer (KYC) checks.

How to buy NFT tokens? | What are NFT’s?

The NFT tokens can be easily purchased on the following NFT market places as Rarible, Open Sea and Enjin market place. But there are numerous other marketplaces in existence as well.

Why are NFTs important? | What are NFT’s?

It can be easily called the evolution of cryptocurrencies. This is because the modern finance system uses sophisticated trading and loans systems for different categories of assets from real estate to artwork. Digital representation has proved to be detrimental in the reinvention of this infrastructure.

Moreover, the major benefit of using NFT lies in its market efficiency. It eliminates the unnecessary involvement of intermediaries and helps to streamline processes. They are also an excellent tool for identity management. With its unique identification characteristics, it is now easier to determine entry and exit jurisdictions in a clear manner.

Furthermore, NFT’s have paved the way for developing new markets and avenues for investment.

Conclusion | What are NFT’s?

Currently, much of the focus with regards to NFTs is with regards to artwork, gaming and crypto collectables. Many brands are also on way to licensing content for NFT. However, the potential is much more increased for applying NFTs for copyrights and intellectual copyrights ticketing and purchase and sale of video games.

The future application of NFT can be huge. For instance, they can also be used for certification of qualifications, software licensing, warranties along birth and death certificates. The smart contract of NFT makes it easier to identify and store individual information in a digital wallet which makes it a revolutionizing technology.