All You Need to Know About NFTs

All You Need to Know About NFTs

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crypto art

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For the first time in human history, we have a technology that enables actual ownership of unique digital goods, which is a big deal. It deeply empowers the concept of uniqueness, identity, and ownership of assets amidst a rapidly digitizing society. It becomes increasingly hard to understand the actual request of bits spread across the cloud.

Non-Fungible Token(NFT)

A non-fungible token (NFT) is a particular type of cryptographic token representing something unique; non-fungible tickets are not mutually interchangeable. This is in variance to cryptocurrencies like bitcoin and many networks or utility tokens that are fungible. NFT differs from popular cryptocurrencies such as Bitcoin (BTC), Monero (XMR), and Ether (ETH), which are fungible; for example, you can exchange one Bitcoin for any other Bitcoin.

Non-Fungible Token

Beeple’s Everydays – The first 5000 days at Christies sold for $69.3 million (Image credit: Christie’s)

However, One could not exchange one NFT for another that runs on a blockchain network. The difference between bitcoin and other tokens is that each NFT is unique and cannot be replicated. Each one accrues value independently. Crypto investors say NFTs derive their value from how scarce they are. They are stored in digital wallets as collectors’ items. Beyond art and sports, people have also found uses for NFTs in virtual real estate and gaming. 

It is this uniqueness that makes NFTs so valuable, and theoretically, scarce. Pretty much all collectibles can be considered non-fungible tokens because of their identity and non-interchangeability.

Characteristics of Non-Fungible Token(NFT)

  1. Rare – The value of NFTs comes from their unavailability. Although NFT developers can create any non-fungible tokens, they often limit the tokens to increase rarity.
  2. Indestructible – NFT data gets stored on the Blockchain via smart contracts; each token cannot be destroyed, removed, or replicated.
  3. Verifiable – The need for third-party verification is not required. NFT stores historical ownership data on the blockchain item, such as digital artwork that can be traced back to the original creator.
  4. Unique- NFTs are fully secured and genuine because they have a strong information tab that explains their uniqueness.

Importance of NFT Tokens

Total of $174 million spent on NFTs, since November 2017. NFTs have become widely accepted by crypto users and companies alike because they revolutionized the gaming and collectibles space.

Because of the advent of blockchain technology, gamers and collectors can become the immutable owners of in-game items and other unique assets and make money from them. Players can also create and monetize structures like theme parks and casinos in virtual worlds, such as Decentraland and Sandbox. They can also sell individual digitals items they accumulate during gameplay, such as weapons, equipment, accessories, cosmetics, and in-game currency, on a secondary market.

Importance of NFT for a Buyer

NFT helps in providing secure certificate ownership over a digital object, protecting the good’s value. In Today’s world, as everything is digital, it is relatively easy to duplicate and forge anything without having an entire ownership record such as NFT; the good is essentially worthless.

Importance of NFT for a Seller

NFTs not only help in selling something but also help in earning tomorrow. Artists have suffered to reap their hard work rewards and not getting appreciated enough and paid for their past work. 

Thus, being able to sell artwork in digital form directly to the global audience buyers without the hustle of using an auction house or gallery allows them to keep a significant portion of the profits that they make from sales.

NFTs can efficiently be coded to allow the original creator to collect money each time the token trades hands, usually for between 2.5% to 10% of the

sale price. Royalties can also be programmed into digital artwork so that the creator receives a percentage of sale profits each time the artwork is being sold to a new owner. The ability to set up a recurring revenue stream appeals to any famous person looking to extend their fame’s earning potential.

For example, Grimes sold around $6 million worth of digital artworks after putting them up for auction as NFTs. These include images and a short video set of music.

Use Cases Of NFT

1) Gaming Industry  

The gaming industry and non-fungible tokens are a perfect match. Virtual economies have existed in games for an extended period of time and are a mainstay in games such as Fortnite and World of Warcraft. Envision being able to check a detailed history of the sword or magic shield you have just bought.

Gaming Industry  

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Gaming accounts that have been preeminent through a game can be a hot commodity for those who don’t want to put the time in to unlock incentives features—making it quite a big underground market of these accounts, which goes largely unregulated.

NFTs can provide proof of ownership for every item within blockchain-supported games. In addition, blockchain gaming also allows open trade of rare items for fiat money safely and securely. By utilizing gaming skills, NFT provides a compelling solution for digital ownership of unique or rare-in-game items.

2) Identification/Certification

NFTs are a great use case for identification and certification, or licenses and qualifications registered on the Blockchain, as non-fungible assets hold unique information about particular goods or assets.

Identification information and attributes of every human being are unique, consisting of medical history, personal profile, education, and address details, making it easier for a person to control one’s data.

A new system introduced is trustless and ultimately reduces friction as the areas that employ certificates are poised with massive overhead, low efficiency, and even fraud. NFTs are a perfect example for competing for identification fraud. Moreover, digital creators can turn their products into NFTs for copyright ideas. NFT’s use to verify identity involves turning physical game tickets into non-fungible tokens to avoid counterfeits.

3) Digital Assets

Members buying virtual land are made accessible because of Decentraland. One of the examples with which most people are familiar is ENS(Ethereum Name Service). 

ENS, which uses NFTs. And, ETH domains can quickly help to buy and sell.

4) ART

The Legacy arts industry is opening on to adopting Blockchain Technology by tokenizing real-world assets and artworks. This comes with a combination of IoT and Blockchain, offering people the ability to scan code on the sticker placed on the back of a painting and register as the piece’s owner on the Blockchain. Thus, the user can then see the entire history of the artwork, including all the previous ownership and prices of the painting sold.

For Digital artists, maintaining copyright over their work is a bit complicated. Through NFTs, someone can easily buy a creation and showcase it in a virtual space knowing assets complete history information. With the help of NFT, artists can receive a more significant cut-off payment for their work, removing third-party fees and helping the artist receive royalty as well in the future.

5) Collectibles

NFTs have brought in a new character in the collectible world. Cryptokitties being one such example. It is an online game where users can collect, breed, and sell virtual cats and kittens. Each cat has its genetic identification, just like a human’s DNA, created by the ‘Genetic Algorithm’ or GA.

When the app first launched, it saw so much traffic within the first three months that CryptoKitties created congestion on the Ethereum network back in December 2017, with large numbers of users wanting to buy and sell their kittens.

Therefore, NFTs help from clarity thanks to their recording on a public ledger, adding a security layer to collectible assets that people appear to be attracted to.

Wrapping Up

Currently, despite an uptick in usage and development, the adoption of NFTs is still relatively slow. NFTs’ benefits to gaming, CryptoKitties to the painting, digital assets, digital identity, art, and other use cases are undeniable.

The gaming industry seems well-supplied for such a transition, which would appear to be a natural one. Therefore, expect to see new platforms edge out the current batch of top NFT projects in 2021.

To know more about its application, you can connect with the experts at SoluLab, a leading blockchain app development company.

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