Everything You Need To Know About Non-Fungible Tokens (NFTs)
Everything You Need To Know About Non-Fungible Tokens (NFTs)
July 18, 2020
Everything You Need To Know About Non-Fungible Tokens (NFTs)
Everything You Need To Know About Non-Fungible Tokens (NFTs)
July 18, 2020

Non-Fungible Tokens or NFTs and its various applications in the realm of art, gaming, even real-estate makes it to be the next big thing in blockchain technology.

Utility tokens, security tokens, cryptocurrencies and their classifications keeps evolving with newer technologies and better modifications.

As people are getting themselves familiar with Bitcoin and other cryptocurrencies, there is another classification of digital asset that is slowly starting to get its momentum.

Non-Fungible Tokens is one such example of this evolving fast-paced blockchain industry.

But ever wondered what are actually NFTs? How do they work? What exactly are they used for and What are some of the best NFT projects?

In this guide, we will explore all things on NFT!! on what exactly they are, how do they work, and its various applications within blockchain technology.

What Does Non-Fungible Mean?

In order to understand fully on NFTS, one needs to have the basics cleared up on the difference between “fungible” and “non-fungible”.

Fungible, in case of a token means something which is easily replaceable and interchangeable.

Fungible, for example could include a 1$ dollar bill that you currently have.

In this case, it doesn’t actually matter whether you will not receive the “exact” bill if you lend it to someone.

Non-fungible is the opposite spectrum here, in a way that even if a certain product seems or looks identical, each will have unique information making it almost impossible to be replaced.

A plane ticket is a perfect example of a non-fungible asset. Even though they look or seem similar, each ticket contains unique information different from the other tickets such as the name, seat numbers, destination, etc.

Before we explore NFTs further, two terminologies needs to be understood properly before we dive into the rest of the article:

  • Smart Contracts: Smart contract is a set of automated executable protocols intended to facilitate and enforce the negotiation of a contract.
  • Token: Tokens are tradable assets or utility on a blockchain whose specific properties are designed accordingly to its usage.

What Can Non-Fungible Tokens Be Used For?

The most well-known form of non-fungible tokens are collectibles on blockchain.

One of the earliest pioneers of non-fungible is the well-known CryptoKitties, a blockchain platform where players can breed and collect digital cats.

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A cat owner will know that cats are not replaceable as their personality and appearance makes them unique.

CryptoKitties ideated the same concept with digital cats with each cat’s genetic material stored on the blockchain platform.

The cats could be bought and sold through Ethereum ranging up to $12,000.

Similar games such as fantasy titles too followed the same suit where fighters are collected for battles.

How Are NFTs Made/Created?

Different standards exist for non-fungible tokens, the first one being ERC-721, similar to the common ERC-20 tokens.

ERC-721 tokens are driven by smart contract code embedding the unique details making them rare or desirable. This metadata could then be stored on the blockchain both or off.

Other standards take NFTs one step ahead. For example, ERC-1155 tokens are used to develop fungible and non‑fungible tokens.

The crucial difference can lie between a sword which every player uses and a rare sword where only a few can people own.

Credit: Unsplash

What Is So Special About NFTs?

The unique attributes of NFTs are their linkage to a specific asset is what makes Non-Fungible tokens so special and unique. Ownership of digital items to the ownership of physical assets can be proved.

Other tokens being fungible are identical and have the same attributes and value after they are exchanged.

Pros of Non-Fungible Tokens

  • A new form of revenue streams could be unlocked through arts, games, sports, etc.
  • NFTs can introduce people to the world of cryptocurrencies in an easier way.
  • Could transform attitude towards ownership.

Cons Of Non-Fungible Tokens

  • Building dapps for non-fungible tokens could be tricky.
  • Simplification is needed for people who are not familiar with blockchain.
  • Players can face loss if the market collapses for an asset that they brought in the hope for higher profits.

NFT Use Cases

Let’s dig a deeper to understand in what ways Non-fungible tokens can be used for:

Art

Digital artists often face copyright issues blocking them for potential earnings. With NFTs, artist can showcase his artwork in the virtual space.

Through blockchain, he/she will have his proof of ownership and anyone can buy his artwork through NFTs and even portion out a residual profit from future sales. This in turn creates a recurring revenue stream in itself.

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Collectibles

Various types of collectibles can be created with NFTs as seen in the case of CryptoKitties. You can also buy tokenized versions of sports stars or celebrities. Moreover, traditional collector’s items such as coins, stamps, and even baseball cards are brought through tokens.  

Gaming

Gamers can earn profits by selling assets such as rare weapons, something that are not currently available on traditional gaming. Moreover, gamers can also use their coveted items in other games too thanks to Non-fungible tokens.

Virtual Assets

Decentraland offers anyone to buy virtual pieces of land- a newer form of virtual assets. Moreover, Ethereum Name services offering ETH domains has turned each of these kind of domain names into non-fungible tokens where anyone can buy and sell. Unstoppable Domains too has done the same for .crypto addresses

Real-world Assets

Although, it is still early for real-world assets to be tokenized, however, reports suggest that works are currently going to make it a success. Tokenizing real-world assets like property could be also possible through NFTs.

Best-Known NFT Projects!

There are various projects already using NFTs as collectible and tradable items. Here is a rundown on some of the most popular NFT projects:

The popularity and success of these NFT projects are determined by a number of factors such as:

  • Number of users
  • USD value of assets brought and sold

My Crypto Heroes

My Crypto Heroes is a multiplayer role-playing game built on top of the Ethereum blockchain. The game offers non-fungible tokens through historical heroes to take part in battles and quests. Extensions are also provided to enhance their performance. In-games assets are also issued as tokens on top of Ethereum blockchain.

Gods Unchained

Gods Unchained
Credits: Gods Unchained Blog

Gods Unchained is a digital collectible card game where cards are issued as non-fungible tokens that can be brought and sold freely. As each digital card is unique, its players can own and trade similar to like that of physical cards.

CryptoKitties

CryptoKitties
Credits: CryptoKitties

CryptoKitties had been pioneer to take NFTs mainstream. Digital cats are bred on the Ethereum blockchain each have their own unique attributes that make them distinctive and special. The digital cats can also be bred and produced to produce offspring, some of them which will be rarer than the others.

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Decentraland

Decentraland
Credits: VRRoom

Decentraland allows players to buy parcels of virtual lands and other in-game NFT items, some of the areas being more valuable than others. Owners can monetize the virtual land parcels with art, opening up shops, etc, and sell it to earn a profit.

Binance Collectibles

Binance Collectibles
Credits: Enjin

Binance Collectibles are Non-fungible tokens that are issued in collaboration by Binance and Enjin on special occasions.

Crypto Stamps

Crypto Stamps
Credit: Crypto Stamps

Crypto Stamps is issued by the Austrian Postal Service. They connect the digital world to the real-world as these stamps are used to transport mail just like any other stamp. However, they can also be saved as digital images on the Ethereum blockchain, making them to be a tradable digital collectible.

Blockchains Supporting NFTs

The most popular of all blockchain to use NFTs has to be Ethereum, yet there are also several other blockchain that supports NFTs such as:

Checklist On Other NFT Projects

If you want to explore more on other projects utilizing Non-fungible tokens, check out the checklist below on blockchain companies utilizing this innovative technology:-

Digital art

NFT Minting Platforms

Virtual World

Trading card games

Whats’s Next?

More and more blockchain companies are getting into NFTs especially in the gaming world. In the future, we will continue seeing further improvements in the NFTs landscape.

A straightforward user interface will be crucial for unlocking mainstream adoption making it appealing for non-mainstream users.

NFTs potential can be applied beyond gaming and towards copyright and intellectual property rights, ticketing, etc.

Moreover, its further application could be applied in certification such as qualifications, licensing and warranties, and even birth and death certificates.

Its use cases are vast, and it’s quite likely that many developers will come definitely come up with newer innovations for this promising technology.

Non-Fungible tokens have the potential to be a vital part in not just the blockchain ecosystem, but also the wider economy.


Cover Image: Unsplash

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Jafrin Ahmed

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