A non-fungible token (NFT) refers to any token that is unique in nature and irreplaceable. They are commonly used by artists. Many museums use non-fungible tokens in their art exhibits. A token is a unit used to represent digital value. They are created and distributed using blockchain technology. Tokens can be used to buy goods and services or transferred between users. Fungible means that you can’t tell one bitcoin from the other, so anyone could accept any bitcoin in a payment intended for another person. A non-fungible token is different because each digital asset is unique and can’t be substituted. This makes an NFT easy to distinguish from other assets and therefore very easy to track. For example, non-fungible tokens could be used to store assets like tickets or collectibles.
Non-fungible tokens are included in Ethereum smart contracts, which will allow users to transfer ownership of non-fungible items. This means that you can now transfer ownership of unique digital assets between different parties without having to establish trust through complex legal contracts. NFTs have already been making exciting new customer experiences real, including programs with massive global brands like Nike, Louis Vuitton, and the NBA getting in on the action. In a brilliant move, the NBA is selling basketball highlights to its fans as Non-Fungible Tokens. During just the final week of February, the sales were $150 million in NBA clips, including an epic game-winning shot by LeBron James which sold for $208,000 (a new record).
How Are Non-Fungible Tokens (NFTs) Used?
When using a non-fungible token, users can trade and transfer them to the other party. They’re essentially digital assets that bring new value to the blockchain and even online gaming. They’re unique and can’t be substituted. And they’re more than just digital trading cards because you can also use them as rewards in games and as tournament prizes. Fungible tokens are divisible and replaceable by other identical tokens. Let’s consider it to be cash. Each dollar is the same as the next, so they’re fungible. On the flip side, non-fungible tokens are unique assets like collectibles or works of art that are divisible into smaller pieces but don’t have equivalent values. Non-Fungible Tokens are a way of representing digital items, in the same way as you could represent a token as being a real-world item. These NFTs can represent collectibles, unique contracts and derivatives, and much more.
NFT tokens are used for non-fungible assets. Because there is an uncountable amount of these assets, not all tokens can be fungible. Most NFTs make use of the Ethereum blockchain with the help of either ERC-721 or ERC-1155 tokens. They’re stored in smart contracts and are tamper-proof. Therefore, you are in total control over your assets. These contracts are subsequently used as payment methods for goods and services in the network. The ERC-721 token works like a limited edition collectable. Each one is unique, non-divisible, and assignable (meaning you can sign the token to give it away or trade it with another). Each time it is traded, it’s recorded on the blockchain. These kinds of tokens are mainly used for gaming purposes.
NFT Use Cases
- Art/Media/Entertainment: The use of non-fungible tokens opens a new way to trade and transact assets, such as precious stones or art pieces. Programmable art is a unique niche within the non-fungible token industry. While collectibles are still a prominent use case, programmable art provides a further degree of updates. When a painting or sculpture needs to be modified, it can be done so with the proper tokens without changing the original item. This is important because it gives the artwork a degree of versatility that makes it more useful than non-fungible tokens en masse. Using the blockchain could display an item’s entire history. This is done by putting every transaction an item goes through on the blockchain for review and revision.
- Collectibles: NFTs have unique identities and can be transferred without risk of loss, making them very useful in real-world situations. Although NFTs didn’t have many use cases until now, an online collectible called “CryptoKitties” has proved that they were worth the hype. Users can buy and sell two digital cats, either male and female, to each other with crypto tokens (non-fungible tokens) while breeding new kittens. It’s all controlled by smart contracts. Each CryptoKitties features a specific trait, such as fur pattern or eye colour. The result carries its own identity and the genetic algorithm.
- Sports: Sports face major problems such as counterfeit merchandise. The blockchain is serving as the perfect solution to these issues. For example, new technology has allowed crypto platform owners to issue tickets without allowing counterfeiting to happen. This shows that NFTs have positively impacted the sports industry on a consumer level. Consumers no longer have to worry about getting ripped off by scalpers or buying fraudulent tickets or products.
- Fashion: Sometimes, it’s hard to verify the origin of an item. Consumers can attempt to use QR codes on price tags to recognize their items digitally. But what if they can’t read the QR code? A non-fungible token is a digital asset that has a long-term uniqueness and identity which cannot be divided into smaller assets. So with non-fungible items possessing these unique identifiers, consumers can easily scan on any device and connect with businesses when they encounter items they want to buy. Thus, an asset’s origin could be traced chronologically. Consumers can also get to know who previously owned their assets. Also, this ease will make consumers happy and help improve business.
- Licenses and Certifications: NFTs prove useful in recording licensing and certifications. An NFT can take the form of a certificate or license. It makes record tracking and validation easier, and record storage simpler too. Therefore no more tedious checking is required by users to verify the legitimacy of certificates and licenses. It further reduces dependency on paper documents.
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