What is NFT? NFT stands for Non-Fungible Token. Non-Fungible means that it cannot be replaced. It is unique. NFTs are cryptographic assets with unique identification codes and metadata on a blockchain that distinguish them from each other.
NFTs cannot be exchanged like cryptocurrency. Cryptocurrencies can serve as a medium for commercial transactions because they are identical. But NFTs are unique.
What is a Token?
A token is a digital contract. It is a contract that is used to take your real-world item to the virtual world and link it with a blockchain. This ensures the security of your item or asset.
Evolvement of NFTs
NFTs evolved from the ERC-721 standard. This standard was developed by some of the same people responsible for the ERC-20 smart contract. ERC-721 defines the minimum interface for ownership details, security, and metadata.
These are required for the exchange and distribution of gaming tokens. Now the ERC-1155 takes the concept further by reducing NFTs and batching multiple types of non-fungible topics into a single contract.
So, we can easily understand that basically, NFTs are used to show ownership. If you have an NFT of any digital asset, maybe a JPEG, a video, or even music, it means that you own that asset. It is proof of your ownership of that asset.
Examples of NFTs
Some examples of NFTs are as follows:
- The most common example of NFTs is the crypto kitties. Crypto kitties were launched in November 2017. They are digital representations of cats with unique identifications on Ethereum’s blockchain.
- In addition to this, each kitty is unique and has a unique price in ether. They reproduce among themselves and produce new offspring. These offsprings have different attributes and valuations compared to their parents.
- Bored Ape Yacht Club is also an NFT. It has attracted people due to its high prices. In addition to this, the Bored Ape Yacht Club has a high celebrity following. Bored Ape Yacht Club is the collection of NFTs in the Ethereum Blockchain. the collection features the profile pictures of cartoon apes procedurally generated by an algorithm. Yuga Labs is the parent company of this collection.
Importance of NFTs (What is NFT)
NFTs are the evolution of the simple concept of cryptocurrencies. Modern finance systems have many trading systems and loan systems for different assets.
In addition, Real Estate, contracts, or artworks almost all are types of assets used in trading. By evolving digital representations of physical assets, NFTs are a step forward in the reinvention of this infrastructure.
Digital representations of the asset are unique when combined with the blockchain of smart contracts. They become a potent force for change.
Market Efficiency and NFTs (What is NFT)
The most obvious benefit of NFTs is market efficiency. The conversion of physical assets into digital representations streamlines the processes and removes intermediaries.
In addition to this, NFTs representing digital or physical artwork on a blockchain remove the need for agents and allow artists to directly connect with their audiences.
In addition to this, they can also improve business processes. For example, NFT for a wine bottle will make it easier for different actors in a supply chain to interact with it and help track its provenance, production, and sale throughout the entire process.
NFTs and Identity Management System.
Non-Fungible Tokens (NFTs) are also beneficial for identity management. Consider the case of physical passports that need to be produced at every entry and exit point.
By converting individual passports into NFTs, each with its own unique identifying characteristics, it is possible to streamline the entry and exit processes for jurisdictions.
Expanding this use case, NFTs can serve identity management purposes within the digital realm as well.