What are Non Fungible Tokens and why are they trending?
Who has never heard of Cryptokitties? Or maybe about CryptoPunk and its record sales of $750,000? As you may have understood, today we’re going to talk about the NFT for “Non-fungible Token”.
First of all, what is an NFT?
A non-fungible token is a token with unique characteristics, and whose value may be different from one token to another. But it still has common attributes among all goods of the same type.
Pokémon Trading Cards, if tokenized, would be NFTs. Indeed, although all cards are made of cardboard, some are rarer than others or have more attributes such as shine for example.
What about Bitcoin?
One could be tempted to say that BTC is fungible, since one can exchange one BTC for another, it will always have the same value but that would not be entirely true. Indeed, transactions are traceable on the bitcoin blockchain and therefore a BTC may have had a different path from another one, even if they have the same value. One could say that Bitcoin is half-fungible.
Anonymous cryptos, on the other hand, work like a €1 coin, a token will be perfectly identical to another, because there is no possibility of retracing and are therefore 100% fungible.
A few examples
NFTs create exciting monetization opportunities for brands and collectors, as they are provably authentic, safe to trade, and can include all different types of artwork and branding opportunities.
Cryptokitties
As we said in the introduction, the main example that comes to mind when it comes to NFTs is undoubtedly Cryptokitties.
It is a game that consists of collecting CryptoKitties and therefore allows players to buy and sell and also to breed different types of virtual chats. It uses the Ethereum blockchain, and virtual chats are traded in exchange for ETH.
SuperRare
SuperRare is a social network built on blockchain technology for artists and collectors. Creators go there to create their digital works that will then be auctioned.
Cryptopunks
It is also a game of collecting punks, images in 24*24 pixels. They are generated by algorithm and no two are identical. It’s a game that works in a similar way to Cryptokitties. I added it to this list because this game has recently made headlines with the largest transaction, 750000$, for an NFT.
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What are the possible applications for NFTs?
The main application we think of directly is the world of gaming. You all probably know Word of Warcraft, so using NFT tokens would allow you to resell your equipment and make it more exclusive.
The world of music and art could also benefit from this technology, which would certify the ownership, or rather the recognition of the artist. Real estate could also find a use, for example by tokenizing plots of property.
Conclusion
The use of NFT tokens has not yet become the norm, but there is no doubt about the future application of this technology. So, are NFTs the next rising star in the world of crypto? Or a fad that will fade eventually? Since we don’t practise prediction, unfortunately, we cannot answer that question with a simple “yes” or “no”. Only time will tell.
Should you invest in NFTs? Again, that is a question that only the individual can answer. As with all investments, one needs to do his own due diligence and have a clear understanding of the project before diving in. This applies to assets such as the “king” — Bitcoin!
Stay safe and happy trading!
