Non-fungible token (NFT)
- Not shareable
- Not replaceable
- ERC-721 protocol
Non-fungible tokens or abbreviated (NFT-Tokens) are cryptographic tokens on a blockchain that cannot be exchanged or copied, where each item or token is completely rare and represents a unique asset. Think, for example, of festival tickets. There are of course several tickets for sale for the same festival, but your ticket contains your name, seat number and a unique code, which makes your ticket unique. You would not be admitted to the festival with someone else's ticket.
Because the Non-fungible tokens are not interchangeable, they can be used as proof of authenticity and ownership within the crypto world. The NFT concept can be seen as a new concept of ownership. Today tickets are already sold through NFTs, an advantage of this is that they cannot be counterfeited and resold with high fees.
The most popular blockchain enabling NFT technology is the Ethereum blockchain. The NFT tokens conform to a standard called: ERC 721 standard proctocol. This protocol allows the tokens to be unique and cannot be shared. The protocol allows investors to get hold of these tokens in a simple way.
- Not unique
- ERC-20 protocol
When something is fungible, it means it is easily replaceable. An example is the euro or dollar, which is perfectly interchangeable with any other euro or dollar. These are not unique items, there are more copies of the same item. Just like physical money, cryptocurrencies are replaceable, meaning they can be traded or exchanged for each other. For example, a Bitcoin is always equal in value to another Bitcoin.
Fungible tokens use ERC20 standard protocol on the Ethereum network / blockchain. ERC20 is actually a technical specification, if a token applies these specifications it belongs to an ERC20 token.
The protocol has basic functions that every token needs to be traded. Developing and maintaining a blockchain technology is very expensive, which is why these tokens are active on the Ethereum blockchain. A major advantage of the ERC20 protocol is that a trading platform can easily add new tokens to the network to make them tradable on their platform. An example of an ERC20 are sablecoins, security tokens and utility tokens.
What are they used for?
Because NFTs are unique and cannot be copied, they often serve as collectibles or collector's items. NFTs are used for things like digital artworks, sports pictures, fashion items, gifs and purchases in the game industry where players can buy rare weapons or skins to enhance the gaming experience. NFTs are also used for serious business, including verification of educational credentials or medical history and tangible property.
Meanwhile, well-known major companies and brands such as McDonalds, Louis Vuitton, Warner Music and NBA also offer digital goods based on the NFT concept.
NFT' in the art world
In recent weeks, a serious hype has arisen around art and non-fungible token. The number of artists using these tokens has risen sharply since the beginning of 2021. By using non-fungible tokens, artists can continue their work even though auction houses and museums are closed due to the corona pandemic. This allows them to trade their work digitally without losing their intellectual property.
Owning an NFT is like owning a unique code that only you own and this code can be sold and traded in a similar way to a physical work of art that can increase in value over time. Many people see NFTs as a good investment from which they can earn a lot of money in the future.
The most expensive digital artwork is called “Everyday's First 5000 days” by American artist Beeple (Mike Winkelmann) the artwork has been auctioned for more than sixty million dollars. It's a collage of all the 13 images Beeple took every day for the past XNUMX years. According to the auction house Christie's, it is the most expensive NFT to date.
Cryptopunks are non-fungible tokens that were first launched on the market in June 2017 by the company Larva Labs. CryptoPunks were released for Cryptokitties, the project was said to be the start of the so-called 'CryptoArt' movement.
It is a collection of only ten thousand unique characters so there are CryptoPunks with different attributes they mainly have human features but there are also zombies, monkeys and foreign creatures such as aliens. For example, there are CryptoPunks (punk-like characters) with different glasses, hats, hairstyles, skin tones, piercings, etc.… At first they were offered for free, but a few years later the price of some CryptoPunks is rising in the (tens) thousands of euros.
A lot of blockchain-based games have already been released on the market, the best-known and most expensive example are Cryptokitties† In this game, people can own a digital cat that one can collect, breed and trade. Each kitten is unique and has its own attributes, which makes some kittens very popular. These digital cats can buy with with Ethereum. In 2018, a Cryptokitty called “Dragon” was sold for 600 ETH, which was equivalent to USD 170.000 at the time.
Decentraland is an open-source virtual reality platform that uses the Ethreum network. It is a virtual estate game where players can create, own and exchange their own land on a virtual piece of land. The better your country is, the more money you can get for it, so people can exchange and sell land.
The land owners have full control over the content published on the land. The game is owned by the player and not the creators of Decentraland. One can buy a country with Decentraland cryptocurrency called “MANA”.
Where can I buy NFT tokens?
NFTs can be bought on different platforms, which one you choose depends on what you want to buy (for example if you want to buy baseball cards it is best to go to a site like digital trading cards but there are also other marketplaces that sell more general pieces). To buy an NFT you need a wallet that is specific to the platform.
Due to the high demand for many types of NFT, they are often released as "drops" (much like unique sneakers that often go on sale at different times).
Here is a list of websites where you can buy NFTs:
- Async art
- Axie Marketplace
- Enjin Marketplace
- Known Origin
- Myth Market
- NFT Showroom
- Nifty gateway
- Super Rare
In this article, you learned what non-fungible tokens (NFT) are. Since NFTs are a relatively new investment, there is still a lot to learn about them. In addition, it is difficult to put a price tag on them, which can make NFTs a very risky investment. With digital art, for example, the value depends on how much someone is willing to pay for it.
NFTs are certainly an interesting new type of investment because non-fungible tokens offer much more possibilities than normal tokens; with NFTs, items can be made rare so they can bring in a lot of money in the future. If you are interested in investing in NFTs, make sure you do your homework before investing in the NFT market.