What Is NFT? Non-Fungible Tokens Guide For Dummies. Bitcoin was created by Satoshi Nakamoto in 2009. He probably had no idea that people would one day buy CryptoKitties, Punks, Hashmasks, famous music, and other digital items. All of these things, though, used a brand-new Ethereum standard to find unique assets on its blockchain. It’s called ERC-721, which makes it possible to create and send non-fungible coins. This article talks about the following questions about tokens that can’t be changed:
What is a non-fungible token (NFT)?
Non-Fungible Tokens (NFT) Guide: An NFT is a digital token representing a particular asset in the cryptographic world. It can stand in for digital support like an image, a physical one like a house or automobile, or even an intangible one like a song. A purchase can be proven legitimately owned and authenticated if precisely defined. You could reasonably ask why we require non-fungible tokens for this purpose. Tokens built to the ERC-20 standard have the issue of being divisible and interchangeable.
We don’t need this feature for keeping tabs on individual assets. This would let you distribute your digital image or physical car by splitting it into unique tokens. Non-fungible tokens are useless if more than one may be used to represent the same asset; this defeats their purpose. Furthermore, if we can duplicate permits, defining them uniquely becomes impossible.
Non-Fungible Tokens (NFT) Guide: This is why the issue of token interchangeability can be resolved using non-fungible tokens. Tokens built on the ERC-20 standard are entirely compatible with one another. Once again, this is an issue that ERC-721 addresses. Consequently, since each NFT token follows a separate asset, they cannot be traded for one another. Let’s examine a fungibility example to help illustrate the concept. Most important for Bitcoin and other digital currencies is their fungibility. Since it makes no difference which Bitcoin you possess, this facilitates unrestricted Bitcoin trading between users.
When applied to digital assets, however, fungibility means that they can be traded freely between users without restrictions, and ownership of the item cannot be proven because it can be exchanged for anything else. If we need to track individual assets accurately, it presents a challenge. As a result, there is a need for tokens that can’t be used like cash.
What are the Characteristics of Non-Fungible Tokens?
Consequently, we have previously gone through the significance of the non-fungibility requirement for NFTs. Let’s look at the three characteristics that make non-fungible tokens (NFTs) desirable: uniqueness, rarity, and indivisibility.
Uniqueness
We have previously gone over the significance of being one of a kind. By giving metadata that describes an asset and differentiates it from other investments, NFTs make it possible for you to provide that asset with a wholly unique definition.
One example is the venture Decentraland, which offers digital parcels of land for sale. The information comprises virtual coordinates and the qualities of the land, such as the proportion of the land covered by grass and what buildings are on the ground. This allows each piece of land to be defined uniquely.
Rarity
NFTs are attractive due to their rarity, also known as scarcity. Token developers can flexibly define the token’s boundaries with a typical ERC20 token. Assume you require a supply of 1,000,000 tokens. That is feasible. Do you need extra permits? Increase the overall supply within your smart contract (various algorithms have different rules for this ability or completely forbid it). It is not possible to develop new assets indefinitely with NFTs. Rarity ensures that each item may only be defined once on the blockchain, making NFTs desirable among collectors.
Someone else cannot register the same asset again, making assets scarce. In other words, NFTs have value if people are willing to pay for them. To return to the Decentraland example, you may own a piece of land in a game and trade it the same way you would a real piece of land.
Indivisibility
Finally, NFTs cannot be separated. You can, for example, own one entire Bitcoin. If you don’t have enough money to purchase a whole bitcoin, you can split it into smaller amounts and buy 1/10 of it. Bitcoin’s denominated units are known as satoshis. To elaborate, you don’t want to allow people to buy 10% of a rail ticket. In other words, if Bitcoin had non-fungible properties, you could only buy a whole bitcoin.
How do Non-Fungible Tokens work?
As was previously noted, Ethereum is the platform that pioneered the ERC-721 standard, which enables developers to specify bespoke assets. It was completed on the 24th of January, 2018, and describes the functions Ethereum contracts must do to conform with the standard. Nevertheless, the ERC721 metadata contract is more fascinating than anything else because this is where the true magic happens.
The NFT that we want to define can be given either a name or a symbol that we provide. In addition, we are required to show a URI that directs to a JSON file that elaborates on the exceptional characteristics of the NFT. To further define the NFT, we keep track of properties in a JSON file, another form of data notation. These properties include the NFT’s name, description, and picture URL.
Why do we need non-fungible tokens?
Non-Fungible Tokens (NFT) Guide: NFTs are practical for online economies. Micro-economies can be found just about anywhere, including the gaming sector. Look at the success of games like Counter-Strike: Global Offensive, League of Legends, and Fortnite: Battle Royale. These games have player-to-player economies wherein players buy and sell virtual items. When players win a match, they are often rewarded with virtual objects like new cosmetics for their character or weapon decals.
In this case, players are eager to part their cash in exchange for a slick new skin. However, players do not own these assets, and the game frequently retains the ability to set the price for in-game purchases or make changes to a specific skin, which might result in a steep reduction in its price. This has been a problem with CS: GO skins in the past. To prevent this, “NFTs are a great use case for gaming economies so that digital assets can’t be altered, the scarcity can be controlled, and gamers can trade these digital assets.”
NFTs also help the decentralized identity movement since they may be used to prove ownership of real-world assets like a house or car in a way that doesn’t require confidence from the buyer or seller.
Which projects are actively using NFTs?
Many projects have introduced NFTs. Let’s take a look at some of the most prominent projects that make use of this technology.
CryptoKitties
Because CryptoKitties was the first use case of NFTs to be covered by mainstream media, it is impossible to avoid discussing this topic. Its concept is very similar to that of the mobile game Pokemon Go. You can collect digital crypto cats, each with its features, as an alternative to collecting Pokemon, each with its characteristics. It is possible to develop new cats and, as a result, learn about new features through breeding cats.
Decentraland
Decentraland is the virtual reality world on our list, and it’s one in which you may own a piece of digital real estate. The game allows you to construct objects on top of your land and better develop the land itself. Your NFT’s metadata is where these specifics are kept safe and secure. The most essential aspect of the game is that it enables players to exchange virtual land with one another to build expansive virtual communities.
Gods Unchained
Do you remember playing card games with your pals, such as Yu-Gi-Oh, and exchanging cards with each other? Some collectors have even resorted to selling cards on sites like eBay and other online markets to round out their collections. As can be seen, trading and collecting trading cards back in the day was challenging. Collectors of trading cards had to contend with several unanswered questions, including:
- What if I pay for a card and don’t receive it?
- What if the card I just bought online is counterfeit?
- How do I prove ownership of a card after buying it?
Gods Unchained has developed a collectible card game in which players receive cards as non-fictional prizes. As a result, all of the issues mentioned above can be resolved because ownership of cards can be transferred digitally, and the legitimacy of each card can be independently verified. In addition, you can instantly trade ownership of cards using a standard Ethereum transaction.
NBA Top Shots
Built on the FLOW blockchain, NBA Top Shots is undoubtedly one of the most widely used non-fungible tokens (NFTs) platforms. It’s an innovative concept in which critical events from different NBA games are recorded and re-created as non-fantasy tokens (NFTs). There is a wide variety of tickets, each with its unique rarity. For example, the number of NFTs minted from certain moments can range from a few to thousands. As a result, the value of some of them is rocketing upward, and investors are flooding the market to purchase them. More curiously, the platform has rapidly risen to become one of the most publicized ones, and each pack drop attracts thousands of people eager to join and on the waiting list.
OpenSea Marketplace for NFTs
Lastly, bringing up the OpenSea marketplace is essential, enabling any non-fungible token to be auctioned off on the platform. OpenSea functions as a decentralized marketplace in which all transactions are handled using smart contracts. It allows you to trade over two hundred types of non-fungible tokens (NFTs), such as CryptoKitties, SuperRare paintings, Gods Unchained cards, and Ethereum domain names.
How to Buy NFTs?
The process of acquiring an NFT on OpenSea will be examined. It would be best if you had an ERC-721 compatible wallet, such as MetaMask, to utilize either. The platform’s browsing interface looks like this. Non-Fungible Tokens (NFT) Guide: You can see the most popular collections, which change frequently, on the left side of the page. The remaining time till the auction closes is displayed under each NFT. We’ll use the first NFT that appears, the Wrapped MoonCat, as an example.
Here is what the dedicated NFT purchase page looks like. All the data you need is right in front of you. Below, you’ll find the NFT’s current price(s), trading history(if any), creator(s), and description(s). Two paths can be taken now. The first option is to purchase the NFT at the market price. It’s 0.0009999 ETH in this scenario. However, you must “make an offer” by clicking the button below to participate in the auction. If your bid is accepted, the ETH you offered will be deducted from your account, and the NFT will be sent to you.
NFTs and Beyond
So, how did NFTs come to be valuable? It’s the same as asking why a picture is worth 1,000 euros. Why would you pay $1,000 for a painting that might not even be real when you can honestly own a digital image you know you can show? Ultimately, an NFT is only worth as much as someone is ready to pay. This is true for all collectibles. Non-Fungible Tokens (NFT) Guide: The object doesn’t have value in and of itself; people who think it’s essential give it value. What we all agree on is that value is critical. It’s also interesting to see how some NFTs’ deal has gone through the roof. For example, Beeple’s “The First 5,000 Days” NFT sold for $69 million.
Conclusion
As a result of their capacity to serve as evidence of the owner’s identity and the item’s validity for both digital and physical goods, non-fungible tokens (NFTs) have amassed a significant amount of attention and enthusiasm in recent years. Additionally, NFTs enable users to transfer ownership, eliminating the possibility of fraud trustlessly.