NFTs Explained: Non-fungible Tokens and the Crypto Craze

NFTs, also known as non-fungible tokens, are the most recent craze in crypto.

You may have noticed that any time you talk about crypto with friends or family lately, there is always some mention of NFTs. They’re different than just your average currency. They’re an entirely new asset class. This article will explain what non-fungible tokens are and how they work and also introduce some of the most famous NFTs out there.

WHAT ARE NON-FUNGIBLE TOKENS?

Non-Fungible Tokens (NFTs) are a type of crypto-asset created on the Ethereum blockchain as ERC721 tokens. These are tokens that are not interchangeable with each other, unlike most currencies that can be traded, bought, and sold. NFTs are meant to represent unique things, whether they’re physical items or digital art pieces. This means you can’t trade your “attributes” with someone else because each attribute is tied to a singular token. They’re set up with a different smart contract unique to each token. In this way, they are not fungible.

WHAT IS AN NFT?

NFT stands for Non-Fungible Token and it’s a term being used for digital tokens/objects/collectibles with verifiable scarcity built on the blockchain. For a real-world example of NFT’s, check out rare pipes or the CryptoKitties.

WHAT IS AN NFT ART?

NFT Art is an artistic expression that exists as a Non-Fungible Token on the Ethereum blockchain as an ERC721 smart contract token.

WHAT IS AN NFT COIN?

NFT Coin is a website that fully utilizes Non-Fungible Tokens (NFTs) to create an online gallery for digital art, also known as “Art Coins.” They use blockchain technology, and each piece shows how it can revolutionize the world.

The news continues to be dominated by talk of cryptocurrency, particularly the latest fad — non-fungible tokens (NFTs). Despite being just a year old, NFTs have already generated over $180 million in token sales. This is all thanks to the growing popularity of online games and digital collectibles.

Why are they suddenly taking the crypto world by storm?

Unlike Bitcoin and Ethereum tokens, the value of NFTs is not derived from their utility as a currency or store of value. Instead, they derive their unique value or scarcity (i.e., the factor they are exchanged) from some physical characteristic within the digital asset itself.

To underline this point: fungible tokens represent a comprehensive concept, where non-fungible tokens represent a much more specific subset of digital assets.

How Do NFTs Work?

The mechanics behind how NFTs work are: they utilize smart contracts to allow digital items to be assigned ownership and value; they establish rules for transferring ownership of NFTs, and they allow NFT owners to monetize their holdings.

NFTs can be broken into two categories:

Asset identity tokens: these are compatible with the ERC-721 standard, which is a non-fungible token standard that was proposed by Dieter Shirley in late 2017. These are used primarily in games and collectibles.

Game items that are unique in some way (e.g., their appearance, name, or rarity). For example, in games like CryptoKitties, each digital asset is unique because it has different physical traits; they are not interchangeable. They cannot be copied or duplicated at will by the owner (i.e., they are non-fungible).

Utility tokens: these represent fungible items and can be used as a currency for buying and selling other NFTs. Although it is possible to utilize all NFTs as fungible tokens, asset identity NFTs will always be unique by nature (i.e., there is no way to create more of them).

One key point is that NFTs can represent non-physical or physical assets. For example, an image file (a digital asset) could represent a non-fungible token on the blockchain. Alternatively, a car parked at an airport could be purchased and sold as an NFT. In either instance, the assets in question are fungible.

This is important to keep in mind because NFTs have a wide range of applications. They can represent anything from images and videos to physical items, money, and even collectibles.

The Future for NFTs

There is a wide range of applications for NFTs. They have already been used to create digital art, collectibles, and unique access tokens. As blockchain technology continues to grow, it is expected that NFTs will also grow in popularity.

In fact, many experts believe that the expression “tokenization” could become obsolete because all digital assets could be represented as non-fungible tokens. This has yet to come to fruition, but there are already many encouraging signs, such as greater interoperability between blockchains.

It is also worth noting that NFTs could serve as the foundation for many creative applications, such as time-restricted access to content. For example, someone could grant you access to their home for one hour by transferring ownership of an NFT. This means that non-fungible tokens are not only useful in the virtual world but also in the physical one, creating a variety of possibilities for developers and entrepreneurs.