There’s always a new trend in crypto and this time it is NFTs or Non-Fungible Tokens. Here, we have disclosed everything about the Non Fungible Tokens that you need to understand.
If you want to know about NFTs, you should be aware of the basic terms like tokens and fungibility. Apart from this, there are some key concepts that you must understand before knowing the specifics of non-fungible tokens and the fundamental technology.
We have explained a lot about non-fungible tokens in detail with examples. To know about this, you should read the full article.
Non-Fungible Tokens – Explained in Detail
As Non-Fungible Tokens consist of three words – Tokens, Fungible, and Non-Fungible, you will get a better understanding of NFTs after knowing about these terms. All these terms have been mentioned below.
What are Tokens?
Basically, in non-fungible tokens, a token can be anything that is exchanged or traded. The tokens refer to a digital certificate stored on a secured distributed database called a blockchain.
Tokens don’t require to be actual money or a dollar but there will be a recognized value in it and so it can be traded. They can be anything, from an online world to the physical world. A token can also be the domain name of a website. It can be ornaments, clothing, drawings, or even characters in an online game.
To make it easier, think of the most popular mobile game, Pubg. You own a character and level up that character to the max. In fact, you also own various guns and unlock their skins and potentials. Now, your character or your gun, which you have upgraded while playing the game, can be considered as a token.
Essentially, all these collectibles or keepsakes are tokenized. This means they are given a cryptographic identification and put on the blockchain so that they are regarded as unique items and are not interchangeable with another token because each one will have its own value.
What is Fungible?
Now, coming to the second word – fungible, it means something that can be exchanged or substituted and will hold the same value. It is interchangeable like gold, dollar, bitcoin, etc.
For instance, you have $10 in your pocket and I also have $10. This means the value is the same for both of us. If we take another example of fungible tokens, let’s consider you are having 10,000 USDT and you want to exchange it. Now, if I will give you cash or bitcoin in place of that USDT, it will also work. Thus, fungible tokens are those whose value in-real remains the same and are available in large quantities.
What are Non-Fungible Tokens?
Non-fungible means an asset that can’t be substituted. It has unique attributes that make it different from something else in the same asset class like painting, video game skin, house, or a trademark.
Let’s understand non-fungible tokens with an example of the most popular television show – Pawn Stars which still broadcasts on the History TV 18 channel. There, some people find rare items that cost not more than $10 but because those items are rare and unique, they sell off those items for $200 and even more.
Apart from this, any collectible which is real, genuine, and is available in limited quantity in the world, its price gets higher. Now, if we put this on the blockchain or on the ethereum platform, it is known as non-fungible tokens.
Features of Non-Fungible Tokens
Non-Fungible Tokens have emerged a lot into the collectible world and because of this, collectors are now onto digital assets.
- Non-Fungible tokens’ actual value comes from their scarcity.
- Unlike fungible tokens, NFTs are transferable and can be bought or sold on special marketplaces.
- Non-Fungible Tokens are ideal for identity theft.
- Digital artists can turn their actual work into non-fungible tokens for copyright purposes.
- Academic qualifications, appearances, and medical records can be digitized to NFTs.
- Non-Fungible Tokens are popular in the gaming sector and can help drive in-game economies.
- NFTs allow buying virtual land.
- Non-Fungible Tokens are genuine and they have a permanent information tab that records their uniqueness.
Will Non-Fungible Tokens Work in Future
As we know that everything in the world is constantly growing day-by-day even it’s a blockchain world or anything else but still, it gets very hard to predict the future of anything. However, if we talk about the NFTs, it is assumed that NFT will increase rapidly during the upcoming few years because of their inherent collectible nature.
As of now, non-fungible tokens represent a better investment opportunity and show huge commercial potential, especially in the gaming sector. It is also possible that NFTs will solve problems in the area of digital identification.
Featured Image Credit: Decrypt.co