NFTs : much Hyped, How do NFTs work?
First thing first, what the heck is NFT?
You’ve probably heard about the latest new digital craze: non-fungible tokens or NFTs. These unique digital codes rely on the same blockchain technology as cryptocurrencies like Ethereum, but with a big difference: NFTs are completely unique and establish ownership of digital assets. Without a doubt, they’ve become the hottest thing in crypto.
Before describing what a non-fungible token (NFT) is, let’s start with “fungibility.” It’s the ability of an asset to be exchanged with another similar asset without compromising its value. The fungibility of an asset defines the characteristics of the asset — like divisibility and value.
To give you an idea: 500 dollars have the same value as another $500 bill. When someone lends you a $500 statement, you don’t necessarily have to refund them with the same note, as another note with the same value is worth the same amount. That’s obvious.
In cryptocurrency, a BTC (Bitcoin) carries the same value as another BTC. Nevertheless, everything changes when we focus on Non-Fungible Tokens (NFT) — a non-fungible token comes with a distinct matter from another equal or similar NFT. An individual NFT has unique characteristics that dictate its peculiarity, hence “non-fungibles.” They are identical to rare and precious stones, works of art, and luxury things in general.
What’s an NFT?
NFTs are tokens that we can use to represent ownership of unique items. They let us tokenize things like art, collectibles, even real estate. They can only have one official owner at a time, and the blockchain secures them — no one can modify the record of ownership or copy/paste a new NFT into existence.
- NFTs are unique cryptographic tokens that exist on a blockchain and cannot be replicated.
- NFTs can be used to represent real-world items like artwork and real-estate.
- “Tokenizing” these real-world tangible assets allows them to be bought, sold, and traded more efficiently while reducing the probability of fraud.
- NFTs can also be used to represent individuals’ identities, property rights, and more.
NFTs Examples
Here are some examples of NFTs that exist today, to help you get the idea:
- A unique digital artwork
- A unique sneaker in a limited-run fashion line
- An in-game item
- An essay
- A digital collectible
- A domain name
How do NFTs work?
NFTs gives the ability to assign or claim ownership of any unique piece of digital data, trackable blockchain as a public ledger. An NFT is minted from digital objects to represent digital or non-digital assets. For example, an NFT could mean:
- Digital Art: GIFs, Collectibles, Music ,Videos
- Real-World Items: Deeds to a car, Tickets to a real-world event, Tokenized invoices, Legal documents, Signatures, Lots, and lots more options to get creative with!
An NFT can only have one owner at a time. Ownership is managed through the uniqueID and metadata that no other token can replicate. NFTs are minted through smart contracts that assign ownership and manage the transferability of the NFT’s. For you minting term is new, so here, The minting process follows the following steps that it goes through:
- Creating a new block
- Validating information
- Recording information into the blockchain
Applications
a. Gaming
Non-fungible tokens aren’t new in gaming as they are renowned for solving inherent problems. Popular games like Fortnite forbid the sale of rare characteristics and accessories like skins and weapons. Nevertheless, with non-fungible tokens, these traits can be easily transferred and used in various games. Consequently, NFTs can help in driving in-game economies.
b. Digital assets
Take Decentraland as an example where participants can purchase virtual land. Ethereum Name Service (ENS) is another example that resembles a home that applies non-fungible tokens for its ETH domain to assist in buying and selling.
c. Identity
Non-fungible tokens are ideal for combating identity theft. Medical records, academic documents, persons’ appearance are some of the things that are easily digitized to represent one’s Identity. Moreover, digital artists can convert their job into non-fungible tokens for copyright purposes. The application of NFT to assist in proving the Identity includes transforming physical game tickets into NFTs to help wipe out counterfeits.
d. Collectibles
NFTs are bringing a new dawn to the world of collectibles. As a result, traditional collectibles are now adopting digital assets.
How is an NFT different from a cryptocurrency?
NFT is generally built using the same core technology like cryptocurrency, such as Bitcoin: the blockchain. Since both cryptocurrencies and physical money are “fungible”, which means they are made to be equal in value, one Bitcoin is equal to another Bitcoin. Your one dollar is equal to my one dollar so that they can be traded or exchanged for one another no problem. However, NFTs are different. Since NFTs are “non-fungible”, each is unique, making it impossible to exchange for one another because they are not equal.
How to create an NFT
If you’re a budding digital artist, you might be interested in creating NFTs for your work. Luckily, there are several platforms available that can help you get started. On the whole, the process is fairly simple, and the various platforms will guide you through the process.
However, there are a few things you’ll need to know before you’ll get started:
- NFTs are based on and supported by a particular blockchain. The most popular one for non-fungible tokens is currently the Ethereum blockchain.
- You’ll need to have a cryptocurrency wallet, complete with cryptocurrency. The most widely used one is currently ether (ETH).
- You can create and sell your digital assets on an NFT marketplace. The OpenSea platform is a popular, Ethereum-based platform.
Furthermore you can read from here.
With that, I conclude this blog. I hope you enjoyed reading this blog and found it informative & interesting. Thanks!!
