WHAT DOES NFTs MEAN?
Introduction
Today, more than 200 writers are on the same journey of consistency, hosted by Triple C for the next 29 days.
I take this as an opportunity to remain consistent in sharing the knowledge I gain on my crypto journey.
If you are reading this today, stay tuned for the next 29 days. I have prepared a content calendar for the asked questions in crypto.
The first question on the calendar is about NFTs.
NFTs (Non-fungible tokens) – what does it mean? How are NFTs different from cryptocurrencies? How do NFTs work? And what are NFTs used for?
In this article, I answered the above questions in the most straightforward way a 12-year-old will understand NFTs.
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What Are NFTs?
Non-fungible tokens (NFTs) act as proof of ownership in the blockchain network. They bring scarcity to the digital world. They represent items like artworks, images, music, videos, or anything that can be a token
NFTs are created with the same underlying software as many cryptocurrencies. They are traded in an open marketplace that engages buyers and sellers. It is worth noting that their values differ.
How Are NFTs Different From Cryptocurrencies?
The difference is that NFTs are not exchangeable, while cryptocurrencies are.
For example, cryptocurrencies are fungible(exchangeable) because they act as a medium of exchange. A thousand dollars worth of $WKD is equal to another $WKD worth of one thousand dollars.
For example, a Nifty Island Pistol is not the same as a Headsbybnxn NFT because they are both NFTs. (A Headsbybnxn NFT is not necessarily equal to another Headsbybnxn NFT).
How Do NFTs Work?
NFTs are created from digital items they represent, which are tangible or intangible. They are like physical collectibles, but digital. Instead of hanging your newly bought piece of art on the wall, you get a digital file.
Facilitating the issuance of NFTs, many frameworks have been created. The most prominent is ERC-721, which enables the trading of non-fungible assets. And a newer version ERC-1155 permits a single contract to include the trading of fungible and non-fungible assets on the Ethereum blockchain. They can also be developed on other blockchains like the Polygon network.
The likeness of NFTs has provided a higher level of compatibility to build on each other’s features and use cases. Meaning that digital tokens are transferable between applications with relative ease.
What Are NFTs Used For?
NFTs (non-fungible tokens) have the potential to become the key components of a new blockchain-backed digital economy. They are used in several sectors like video games, fine arts, digital identity, licensing, and certificates.
The ability to transfer and manage assets without the need for participants to know or trust each other or need an intermediary could reduce tensions in trade and the universal economy. Storing ownership and identity on the blockchain would also improve data quality and privacy.
For example, digital artists no longer need an auction house to sell their art the usual way. Rather, they sell direct to their customers as NFTs. Undoubtedly, the invention has made buying and selling digital items relatively easy and lucrative.
Conclusions
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