In times of constant disputes over bitcoin and other cryptocurrencies, another type of digital asset is slowly rising and becoming more attractive. We are talking about NFT tokens, which experts believe will have a big impact on revolutionizing some industries such as art, video games and even real estate.
Non-convertible NFT tokens are characterized by the fact that each of them is unique and limited in number. They are a key element of the digital economy based on blockchain technology. They are used in the creation of games, digital identities, licenses, certificates, and even in the arts. They also allow for equity ownership of high-value items.
Due to the fact that NFTs are becoming easier to create, more and more are created every day. In this article, we will focus on what NFTs are, what they can be used for, and how a game called CryptoKitties influenced the Ethereum blockchain at the end of 2017.
What is a non-convertible NFT token?
The NFT non-convertible token is a type of cryptographic token based on blockchain technology, its advantage is its uniqueness. These can be either digital assets or token versions of real assets. As NFTs are not 1: 1 interchangeable (unlike, for example, bitcoin, where 1 BTC = 1 BTC), they can function as proof of authenticity and ownership within the digital realm.
What is fungibility?
Interchangeability means that the various units of assets are interchangeable and, in principle, cannot be distinguished from one another. An example would be fiat money, each unit is interchangeable with any other equivalent unit. For the fact that the ten dollar bill is interchangeable with any other original ten dollar bill. This is necessary for assets that are used as tender.
In terms of currency, this is a positive development as it allows for easy exchange. However, this is not a favorable feature for collectibles. In the event that we could create a digital asset similar to Bitcoin by adding a unique identifier to each of these units, we would make them different from each other. Basically, that’s what the NFT is.
How do NFT work?
There are different frameworks for creating and releasing an NFT. The most important of these is ERC-721, the standard for the emission and trading of illegible assets on the Ethereum blockchain.
ERC-721 tokens gained fame thanks to the CryptoKitties application, which gained popularity at the end of 2017. It is they that allow developers to easily create NFT tokens.
The newer version of the standard is ERC-1155. With its help, you can include both a convertible and non-convertible token in one contract, thus opening up a completely new range of possibilities. Standardizing the issuance of NFTs allows for a higher degree of interoperability, which ultimately benefits users. Essentially, this means that unique assets can be transferred relatively easily between different applications.
If you want to store NFT tokens, you can do so on Trust Wallet. Like other blockchain-based tokens, your NFT will exist at the same address. It’s also worth knowing that NFTs cannot be replicated or transferred without the consent of the owner – not even by the NFT manufacturer.
NFTs can be traded on open markets such as OpenSea. The value of each is unique, and these markets connect buyers and sellers. it is clear that NFTs are subject to price movements in response to supply and demand in the market.
The question is probably in the minds of many people, how can such things have value? As with any other valuable item, this value does not apply to the item itself, but rather is assigned by people who consider it valuable. As a result, value is a shared belief. It doesn’t matter if it’s fiat money, precious metals or a vehicle. These things have value because people believe they are. This way, every valuable item becomes valuable, so why not digital assets?
What can NFT be used for?
NFTs can be used by decentralized applications to issue unique digital items. These tokens can be either collectables, investment products, or something else.
Today, the dynamically developing gaming market is no surprise to anyone. Due to this, the use of the 2112222 blockchain for tokenization of assets in games is just another step in the development of this sector. There are also voices that the NFTs can ease or neutralize the common inflation problem.
While the video game market is booming and doing well, another interesting use for NFT is real-world asset tokenization. NFTs can represent fractions of real assets that can be stored and sold as tokens on the blockchain. This has a positive impact on the development of industries such as art, collecting and real estate.
Digital identity is also a sector that can derive from NFT properties. Storing identification data on a blockchain would increase the integrity of many people around the world. Fast data transfer could speed up many processes of the global economy.
History of CryptoKitties and Ethereum
The NFT got loud when the game CryptoKitties was released. The game, built on the basis of Ethereum, allowed players to collect, reproduce and exchange virtual cats. Each Cryptokitty has its own unique properties such as age, race or color, and its value may increase or decrease based on the market. CryptoKitties cannot be replicated and cannot be transferred without the user’s consent, even by the game developers. Users can interact with their CryptoKitties, being able to buy and sell them.
While this is a controversial topic, CryptoKitties is an early example of the use of things that are not currency but something that is used for relaxation and fun. Collectively, these virtual cats have transferred millions of dollars, and some of the rare units have been sold for hundreds of thousands of dollars each.
Popular projects using NFT
There are many more projects using NFT, let’s analyze some of the most popular:
Decentraland is a decentralized virtual world. Players can buy and exchange chunks of virtual land and other NFT elements in the game. A similar game running on NFT is Cryptovoxels.
This is a digital collector’s card game where cards are issued as blockchain-based NFT. Since each digital card is unique, players can keep or trade them as if they were physical cards.
My Crypto Heroes
A multiplayer role-playing game (RPG) in which players can level up historical heroes by completing tasks and battles. Heroes and in-game items are issued as tokens.
Digital collections broaden the horizons of blockchain technology. By transferring tangible assets to the digital world. NFTs have the potential to go beyond the blockchain realm and leave their mark on the wider economy. The application possibilities are enormous and it is quite likely that many developers will come up with new and exciting innovations for this promising technology.