- Non-Fungible Token(NFT) Basics For Absolute Beginners
What Is NFT ? How Does It Work ?
I am extremely fascinated by this new concept of NFT and often feels:
“ Digital assets like NFT’s are the new kind of wealth which is indivisible and can express any kind of emotions associated with both living and non living things ”
So today to give a wing to all my readers’ imaginations , I would like to detail out NFT, to help you all comprehend the same in a simplified and crisp manner.
We will cover this journey in these steps :
- What Is NFT All About ?
What Is Fungibility ?
Key NFT Attributes One Should Know
What Is So Special About NFT?
How Does NFT Works & Used ?
How To Transact NFT ?
NFT Use Case
Advantage & Disadvantage Of NFT
Top NFT Projects
Let’s kick start the journey by understanding:
To clearly understand the meaning of non-fungible token , we first need to decode what it means to be fungible,
By Definition :
- Fungibility is the ability of a good or asset to be readily interchanged for another asset of the same kind , without sacrificing its value.
Fungibility also defines an asset which can be divided but still retains the original value.
Money is a prime example of something fungible, where a $1 bill is easily convertible into four quarters or ten dimes, etc.
Bitcoin is a fungible token. You can send someone one Bitcoin and they can send one back, and you still have one Bitcoin.
Now that we have understood the concept of fungibility , its time to define
Non-Fungible token is a digital asset generated cryptographically containing identifiable info captured by the smart contracts . It makes use of blockchain technology to link with a unique digital asset that cannot be replicated.
We can also define NFT:
To be a digital asset which depicts these key attributes & these are the attributes which makes NFT special.
NFT finds its real value because of its scarce nature . NFT creators always set a limited supply of NFT being generated , to ensure its scarcity is maintained to preserve its value .
Unlike Bitcoin or any other crypto’s NFT are not divisible into smaller units. So if you want to buy any digital art , you can’t buy it in pieces, you have to buy it as a whole entity.
Unique: One Of Its Kind
Each NFT has got a unique identity and can’t be duplicated, the information associated with NFT is like a certificate of authenticity.
NFTs are tokens that can be used to represent ownership of unique items. They let us tokenize(Digitise) things like art, collectibles, even real estate. They can only have one official owner at a time and they’re secured by the blockchain network like Ethereum. The information stored in the blockchain network is unmodifiable(immutable ) thereby by ensuring the ownership remains intact
Now that we have understood the speciality of NFT’s , let’s deep dive further to understand how NFT actually works in the blockchain ecosystem and in the crypto world
To understand the working of NFT , one should know about
ERC-721 Token Standards :
ERC-721 is the standard associated with Ethereum blockchain , to loosely describe non-fungible tokens. Whenever a developer creates an NFT on the top of Ethereum network they apply this ERC-721 protocol to adhere to the Ethereum standards set aside for this unique, indivisible and scarce digital asset .
Ethereum has been the most popular smart contract (blockchain), supporting NFT standards , but now in 2021 we have multiple decentralized platforms Smart contracts like NEO, EOS and TRON, etc, which have NFT standards .
Smart Contract Is Key Here:
The underlying smart contract software , is used by the user to attached the attributes like
- Owner unique identity
The ability to secure the ownership of a digital asset and prove its uniqueness , has been one of the game changing technologies, and has been the reason for massive popularity NFT has garnered between 2020 and 2021 . It further cements the power of blockchain and enhances the belief of the user on the trustless security applied to the ownership, or exchange of almost any digital asset.
“Tokenizing” these real-world via NFT standards as a tangible assets allows them to be bought, sold, and traded with enhanced trust and minimised fraud
Non-fungible token has multiple use cases like
- Online Gaming
Online Gaming :
If you are one of those game fanatics who loves to purchase digital goods in the game to use as power-ups or as a prop to progress in the game , you would be happy to know that there are multiple multiplayer games which allow you to trade NFT’s . Video game stakeholders are utilising non-fungible tokens (NFTs) and other digital assets to incentivise players into spending even more time on the game by earning fiat money.
NFT has gained a lot of popularity because if you have some digital assets lying in one of the games you are not able to utilise this purchased good anywhere else, but NFT solves this issue , using it players can easily transfer their assets and use them in different games.
Non-fungible tokens are well poised to foster in-game economies to the next level
Digital art (an artistic work or practice )has been the maiden use case of NFT, which is created making use of digital technology (blockchain, smart contract)as part of the creative or presentation process. The Digital art purchase via fiat money though , doesn’t establish an actual ownership , but NFT has changed this dynamics because of its underlying blockchain technology that ensures the unique signature and ownership of NTfs whosoever owns it .
Some Notable Example:
The Figma CEO Dylan Field, owned a digital avatar entitled “CryptoPunk #7804” sold it for US$7.5 million to an anonymous investor, as well as a second avatar “Ape, Fedora #6965” was sold for US$1.5 million in February 2021.
A Virtual Land NFT (a digital asset in the form of Land ). In Decentraland project, user can own Assets like land, in the virtual form to trade it later
NFT can be used to club digital assets to form collections, like WWF stars cards, Cricket star cards or Disney character cards . These ncollections are called Collectibles
In February 2021, a LeBron James slam dunk NFT card on the NBA Top Shot platform sold for $208,000. In May 2021 NBA Top Shot reached 1 million users
Not So User Friendly (Tech wise):
The Decentralized networks are not easy to adopt and use for everyone. So getting started with NFT development is not so straight forward , developer has to
- Manage user authenticity
Managing & verifying the sell and purchase details and strong the required info required one to be familiar with blockchain technology. So yes NFT is hard to start with but lucrative to maintain in terms of commercial value
Security Risk :
If you lose your private key used to buy NFT you will lose your ownership and will find it difficult to prove your identity. The risk of losing this password is real, and can have precarious outcome so you need to take all the measures to preserve your private keys
It can be hacked :
NFTs are sold on online marketplaces, which means scammers might begin taking advantage of casual buyers who are not educated and well prepared to use all the security measures.
Larger Adoption Of NFT Is Still A Challenge :
NFT tech required huge infrastructure support and it is still not as mainstream tech among users in terms of popularity and adoption. There are very few people who understand the underlying tech and its value. We need the same level of sophistication in blockchain for NFT’ to truly capture the imagination of the world at scale .
CryptoKitties: A popular Gaming platform built on top of Ethereum:
In this platform you can start your digital Cat Collection. Not only this , with the digital kitties you create ,
- You can feed and breed them
You can adopt kitties of all colours and shapes.
You can create Collections of your favourite cats and share them with our breeding community.
Each cat is one-of-a-kind and 100% owned by you; it cannot be replicated, taken away, or destroyed.
It has seen a huge growth & bull run since its much hyped launch in 2017 and still continues to be one of an NFT bastion.
What All Can You DO On CryptoKitties Platform?
- Buy & sell cats with their NFT community
Crack puzzles alongside other players
Create collections & earn rewards
Chase limited edition Fancy cats
Breed adorable cats & unlock rare traits
Play games in the KittyVerse
Decentraland: First Ever Virtual World
This is one more popular NFT platform which allows user to, Create, explore and trade the virtual land and own it on Decentraland’s, decentralized world
As a participant you can
- Create scenes,
Buy and sell on the Decentraland digital marketplace
Create challenges and more…
Users get the simple Builder tool, to h build their own virtual world and compete to win lucrative incentives .
Its is a Decentralised naming for wallets, websites, & more.
This is another crazy use case of NFT. It is a domain name service project that took birth in mid-2017.
The .ETH domain names are NFTs which uses Ethereum’s ERC-721 standards and are tradable on any NFT marketplaces.
This is an NFT marketplace dedicated to selling digital collectibles of moments from NBA history. It hosts ‘packs’ of memorable moments from games, a certain shot or score. The clip can last around 5 seconds. The NBA issues a certain number of editions for each pack and they will not create more, that number is final.
So if you are a crazy fan of NBA then NBA Top Shot is probably interesting for you.
As of date, As per nft-stats.com, Top selling NFT projects in last 30 days are :
Source : nft-stats.com
As per NonFungible.com
- More than $2 billion was spent on non-fungible tokens, or NFTs, during the first quarter of 2021 which is a jump of about 2,100% from Q4 2020
The NFT market’s big Q1 comes after $93 million worth of NFTs were sold between October and December of last year.
This non-fungible tech has grown exponentially since 2020 and has seen large-scale adoption from celebrated sportsmen, artists and elite investors like Mark cuban and Gary Vaynerchuk.
Mark Cuban is very fascinated by NFT prospect, and has created an online gallery for people to their display digital art, with the name lazy.com
The lazy way to show off your NFTs.lazy.com
In may Gary Vaynerchuk announced that he’s launching his first NFT collection, “VeeFriends,” a series of 10,255 character tokens available for purchase via the cryptocurrency ethereum.
So I feel:
NFT has definitely established itself as a one of its kind tech to inspire the creative imagination of one & all. They are not free from the security breaches, scalability issues , hyped prices etc.. but this challenge remains for all the promising projects associated with the blockchain world.
Crypto which has revolutionised the investment world and has given new hope to the masses are also battling their way out . So I feel NFT is here to stay and grow due to its inherent nature of being inclusive and storing the value of being unique and indivisible.
- Date of publication:
- Fri, 06/11/2021 - 06:13
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