Bitcoin was created with the intention to introduce the concept of trustless, digital scarcity. With the advent of blockchain technology, bringing digital scarcity to real-world assets became possible by mapping them to digital assets. Non-Fungible Tokens (NFTs) are an expansion of the idea of bringing programmable digital scarcity in real-time assets. NFTs often called crypto-collectibles are cryptographic assets on the blockchain network with unique metadata and identification codes, making each token unique and limitless.
Non Fungible Tokens have a variety of use cases in the blockchain space including but not limited to digital identity, licensing, gaming, and artworks. NFTs have become the significant building block in the blockchain-powered digital economy as they allow for fractional ownership of any asset minted as NFTs. The amount of NFTs minted daily has grown exponentially since the creation of a game called CryptoKitties. This article helps you get a clear overview of what exactly is an NFT and why it is important.
What are Non-Fungible Tokens?
A non-Fungible Token is a kind of crypto token on a blockchain network that represents an entirely digital asset or tokenized version of the real-world asset. Unlike regular cryptocurrencies, NFTs are not interchangeable with each other, and as a result of which they are used as proof of ownership and authenticity in the virtual realm.
Fungibility is the ability of any asset to be essentially indistinguishable from each other and whose individual units are interchangeable. Fiat currencies are interchangeable, as a $100 bill is equivalent to any genuine $100 bill. When the assets are fungible, they can be used as a proper medium of exchange and store of value. On the other hand, NFTs being non-fungible has totally different use cases.
In short, NFTs are very much like any other crypto asset, but with a unique identifier to each unit, making them different from one another.
Value of NFT
How does a piece of art or music or any in-game asset have value when tokenized? Like any other valuable item, the value is not inherent to the object itself, rather given by people themselves. It does not matter if it is gold or USD, or land. These things have their value because believe they do. Exactly, this is how NFTs acquire their value based on their market demand or emotions.
These NFTs with unique value can be traded in open marketplaces like Opensea. NFT marketplaces connect the creators with buyers who are fond of digital collectibles. As NFTs are prone to a price change in response to market supply and demand, they are considered one of the financial instruments with the potential to offer great returns.
Significance of NFT
NFTs play a great role in revolutionizing the gaming industry. The integration of NFTs with games allows the players to enjoy complete control over their in-game assets and trade them at the global marketplace. The use of NFTs has the potential to mitigate inflation problems associated with conventional games.
Another interesting and already flourishing use case of NFTs is the tokenization of real-world assets that facilitates fractional ownership. By making the real-time assets tradeable on the blockchain, the assets acquire well-needed liquidity.
The properties of NFTs are also proven to be useful in the digital identity sector. NFTs offer enhanced privacy and data integrity by storing ownership and identification data on the blockchain.
Getting Started With NFTs
It is so easy to enter into the NFT space. There are a number of platforms and NFT exchanges on Ethereum and Binance Smart Chain that allow anyone to create their own NFTs in a simple way. Once you have something to mint into NFTs and some crypto to pay the minting fee, you can have your own NFT.
An enthusiastic writer on the crypto and blockchain niche. Content strategist and whitepaper writer who has worked with a ton of leading projects in the cryptocurrency space. My passion to draft content will never get old.
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