What Are Non-Fungible Tokens (NFTs)?
An NFT is a tokenised crypto asset representing something unique and collectible using blockchain technology. NFTs are valued for their authenticity and rarity.
Understanding NFTS
Cryptocurrencies such as Bitcoin (BTC) are fungible. This means that every one unit of BTC is exactly the same as another unit of BTC. This function allows BTC to be exchanged with another BTC with no need for further considerations. One BTC has the same value as any other BTC. It applies the same to traditional fiat currency too. The $10 dollar bill that you hold has the same exact value equivalent to the $10 dollar bill that I hold. In the event that you borrow a $10 dollar bill from me, there is no need for you to return me the exact same note. You can return me a different $10 dollar bill, as another of its kind holds the same value.
On the other hand, a Non-Fungible Token (NFT) is different from another NFT, as it has its unique string of code that cannot be replicated. This is why NFTs are commonly used as digital proof-of-ownership of underlying assets. We can use a simple analogy of a shiny Pokémon card to explain the nuances of an NFT. There is no value to the Pokémon card until it is proven that it is authentic and one-of-a-kind. You may print an identical shiny Charizard out the same way you can simply save an image of a .jpeg file, but it doesn’t represent actual ownership or authenticity. Authenticity is the crux of NFTs. Next, we cover the basics of NFTs based on common misconceptions and frequently asked questions.
Main Characteristics of NFTs
There are three main characteristics of NFTs. The first characteristic is NFTs are rare. The value of NFTs stems from their scarcity. Even though it is true that NFT developers can create any amount of non-fungible tokens, the number of tokens is usually limited to increase rarity. The second characteristic is most NFTs are indivisible. This is especially true pertaining to a digital art piece or a piece of in-game equipment. You can’t simply buy 1/10 of the art piece or a fraction of the magical sword. You either purchase the entirety of it, or you purchase none of it at all. The third characteristic is NFTs are unique. Every NFT comes with a permanent information tab that records its uniqueness. Even in the case that there are 100 identical-looking digital art pieces being minted as NFTs, the #1 in the series makes it more valuable than the other units. Along with its uniqueness, we can better verify its certificate of authenticity too.
Determining The Value of an NFT
For crypto art, some of the factors we can consider are who created the art piece, the artistic value of the art piece, and how in-demand it might be from other collectors. If an NFT is part of an exclusive series, chances are specific numbers tend to be more valuable than others. As aforementioned, #1 has more value as compared to #537. When it comes to game-based NFTs, there is a possibility of financial incentives. In the scenario that the game developers are providing you with an extra $200 in staking rewards, the NFT that you own will be worth at least $200 without taking into account its artistic value or specific functions in the game. Some of the biggest marketplaces now include OpenSea, Rarible and Nifty Gateway.
Popular Use Case: Gaming
NFTs are popular in the gaming sector, as these tokens are the solution to some of the biggest inherent problems of online gaming. Currently, top games such as Fortnite prohibit the sale of rare traits and accessories such as exclusive equipment gear or cosmetic skins. But, with the advent of NFTs, these technological features can be easily integrated into games where players begin to own and trade their in-game items with seamless transactions from one platform to another. Tokens for video games do not simply represent art, it is also a combination of collectibility and utility for players. In the case of Axie Infinity, each Axie pet has a set of abilities for battling. These abilities also affect the pet’s value when it is traded. In the case of CryptoKitty, its desirable breeding attributes, which influence its rare looks and utility in the game, affect its price too.
Takeaways
Even though it is undeniable that digital collectibles are here to stay, blockchain technology is still relatively new. The necessary infrastructure needs to be in place to develop a smooth experience for users and subsequently enable mass adoption. Until blockchain is as mainstream as us referring to what the Internet is, there is still much room for NFT to grow. As time lapses on, the value proposition of NFTs will be much easier to grasp with more people joining the crypto community. We can expect to see new platforms edge out the current batch of NFT projects in 2021, and it will be interesting to see how NFTs would weave in as our digital status symbol in the near future.
New to BitKan? Here are some crypto gifts for you!
1. Win Daily Crypto Rewards
2. Get a $100 BitKan Sign-Up Gift
3. Earn $100 For Every Friend You Refer
Benefits of BitKan Cryptocurrency Exchange:
- Receive the most recent daily news within the community
- Trade 1200+ coins across 8 exchanges with 1 BitKan account
- Use custom price alert and portfolio tracker at your fingertips
- Start a Spot, Futures, Automated Bot Trade, BitKan Earn & more
- Served 10+ million users in 170 countries with 9 years of experience
- Discover the latest events, coins & enjoy the best prices on Web & APP
- 8 Partner Exchanges Include Binance, OKX, Bitfinex, Gate.io, Huobi, MEXC, Poloniex, and Bit.com.
- Based in Singapore and Japan, BitKan holds the Digital Asset Exchange License from the Financial Services Agency of Japan.
Follow Us:
