Bitcoin is the technology that brought us trustless digital security. Digital scarcity became possible with the advent of blockchain technology. Blockchain technology is being used to connect the real world and the digital world. Similar concepts are used in non-fungible tokens (NFTs). It is a type of cryptographic token that depicts, represents, or refers to a unique asset. Assets can be tokenized or complete digital assets. The NFT's value depends on its rarity, scarcity, quality, and most importantly rarity.
Non-fungible NFTs means they cannot be replicated. Every NFT can only be used once and are unique. NFT owners can be traced on blockchain. This ensures that data is reliable and indestructible. NFTs can now be traded on the blockchain as a stand-in digital asset.
NFTs have emerged as a crucial building block of Blockchain-enabled economics. Its popularity is increasing every quarter. It was $13.7million during the first half 2021 and now it is $2.5 billion. A buyer purchased an NFT on February 8th 20, 2021 that included nine plots Genesis land in AxieInfinity Virtual World. It was valued at $1.5million at the date of purchase. It was the most famous digital land deal. In the coming years virtual economies will be the norm in an advanced digital world.
What are Nonfungible Tokens?
- What it is: Non-fungible tokens are crypto assets that are indivisible and uniquely unique. It is an intangible item digitally such as a video/image or in-game product.
- What it's not: NFTs don't interchange. Each NFT is a distinct digital asset that can either be purchased or sold on an online marketplace.
The intrinsic property of being interchangeable makes the difference between non-fungibility and fungibility. Fungibility describes a property of a commodity/asset whose individual units may be interchangeable, and therefore essentially indistinguishable. Fiat currencies and gold can be considered fungible products because each unit can be exchanged with another equivalent unit. Exemplary five-dollar bills can be exchanged for genuine five-dollar notes. It is a desirable property of currency that allows free exchange. Fungibility is a negative property, but it can be beneficial for collectible objects. It doesn’t allow anyone to trace back the product’s past.
Bitcoins can be exchanged for other tokens. One bitcoin can be exchanged by another user; however, it will still be one Bitcoin. However, depending upon the exchange date, Bitcoin's value may differ. A portion of Bitcoin measured as Satoshi can be exchanged because fungible tokens are divisible.
The non-fungible tokens are made of identifying data stored in Smart Contracts. This information makes NFTs irreplaceable and distinguishable from other tokens. It is possible to understand the indivisibility (or inability) of NFTs as the inability or willingness to share or transfer a certain portion of your concert-ticket ticket. The fractional amount of the ticket is worthless, and cannot be redeemed.
CryptoKitties was among the first NFTs. Each Blockchain-based CryptoKitty will be unique. You can send a CryptoKitty to someone and receive one in exchange.
What are the characteristics of an NFT?
Unique: NFTs possess the most distinctive characteristic, uniqueness. Smart Contracts linked to every unit keep permanent identification information. It is a certificate that certifies authenticity.
Indivisible: NFTs must not be separated into smaller units. It is impossible to divide digital art or a football match ticket into smaller units, for example. Either buy the entire lot or nothing.
NFTs may be rare: NFTs' rarity or scarcity is what determines their value. Even though developers could create many NFTs, their creations are usually limited to increase their rarity.
What are NFT Standards?
There are specific token standards designed to support NFTs, including:
ERC-721 standard
It was created as the first standard for representing digital assets that are not fungible. It is an inherited Solidity Smart Contract standard. Open Zeppelin lets developers create compliant contracts.
ERC-1155 standard
The ERC-1155 specification brings semi-fungibility into NFT. It also offers a superset from the ERC-721 specification, i.e. ERC-721 assets might be built using ERC-1155.
To read more - https://www.leewayhertz.com/nft-non-fungible-token/
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