Summary

• NFT is a unique digital asset that represents the ownership of a specific item, such as a virtual concert ticket or a rare piece of art.

• NFTs are stored on the blockchain and therefore cannot be easily edited, counterfeited or copied. They can serve as publicly verifiable proof of ownership in a blockchain decentralized database.

• NFT provides new monetization opportunities for creators. As such, they can drive innovation and support the development of creative industries.

"Not the same What does "qualitative" mean?

The term "non-fungible" refers to the irreplaceability of an item. A non-fungible item cannot be directly exchanged for another item of the same value because the two items have different properties. This means that non-fungible items cannot be traded on a standardized scale because their value is derived from their uniqueness and the subjective value assigned by buyers.

Qualified assets such as currency are easy to exchange because of their unity. In contrast, non-fungible assets are unique and irreplaceable and may appeal to collectors looking to acquire truly unique items.

What is a non-fungible token (NFT)?

NFTs are cryptographic tokens hosted on the blockchain that can be used to represent digital assets. Thanks to their non-fungible properties, NFTs can serve as digital assets that represent ownership of unique items such as artwork, video game items, trading cards, virtual real estate, and other digital goods.

In recent years, NFT has become increasingly popular. Relying on NFT, creators can monetize their digital works, and collectors can also hold unique digital assets.

How do non-fungible tokens (NFTs) work?

NFT is powered by blockchain technology, which provides a decentralized ledger that records transactions and ownership details. Thanks to the high transparency and non-tamperability of NFT, people can clearly trace the ownership history of NFT. This can be used to verify the authenticity and legitimacy of the NFT as it changes hands over time.

Another underlying technology used by NFT is smart contracts, which are essentially automatically executed programs. By automating and enforcing relevant conditions, smart contracts can create, manage and transfer NFTs without the involvement of intermediaries.

A key aspect of NFT is the implementation of token standards. These standards define corresponding rules and functions for the creation, management and transfer of NFTs, ensuring interoperability and consistency between different platforms. For example, the most widely used NFT token standards currently are ERC-721 on Ethereum and BEP-721 on BNB Chain.

The process of creating NFTs is often called minting. Relying on smart contracts, Minting can convert digital files into digital assets on the blockchain. When a user purchases an NFT, what they actually gain is ownership of the unique identifier (or token ID) associated with that specific digital asset. Therefore, the code owner has the exclusive rights to use, display, and interact with the asset.

Use of non-fungible tokens (NFT)

NFT Concepts of ownership and value in the digital realm have begun to be redefined, opening up new opportunities for both creators and consumers. The following are some common NFT applications:

NFT art

NFT art provides artists with a new way to monetize their works. By tokenizing artwork, creators can sell unique digital copies, preserving the originality and scarcity of each work. In addition, with NFT art, collectors can display and trade their works in virtual galleries and even lend their works to others.

NFT games

NFT games can NFTs serve as digital collectibles, such as in-game items and characters. Additionally, NFTs can be used to represent virtual real estate that players can trade. This is expected to create a gaming ecosystem in which players can monetize their in-game achievements and assets and create a secondary market.

NFT pledge

With NFT staking, users can stake their NFTs as collateral to earn returns. Some decentralized finance (DeFi) platforms already make this possible, whereby NFT holders are able to earn interest income while retaining ownership of their NFTs.

NFT Ticket

NFT can be used for ticket management. For example, event organizers could issue NFTs as tickets, providing immutable proof of ownership and attendance. Additionally, owners can transfer and resell NFT tickets without involving third parties. NFT tickets can also come with exclusive benefits, such as access to VIP areas, access to exclusive merchandise or special digital content.

Popular NFT examples

"Cryptopunks"

CryptoPunks is one of the earliest and most iconic NFT projects. Launched in 2017, it consists of 10,000 unique, algorithmically generated 8-bit pixel art characters. Each CryptoPunk character has different characteristics and attributes, making them attractive to collectors.

Some celebrities even use these characters as their social media avatars. The success of the project laid the foundation for a new era of digital art and collectibles.

Bored Ape Yacht Club

Bored Ape The Yacht Club (BAYC) collection consists of 10,000 unique hand-drawn cartoon ape characters, each with its own unique characteristics. These digital artworks serve as collectibles, giving their owners access to exclusive events and virtual spaces. As a result, these NFTs blur the lines between digital art and experiential products.

Decentraland

Decentraland It is a virtual reality (VR) platform built on the Ethereum blockchain. It has a decentralized NFT market that allows users to trade virtual land parcels and various in-game items. Decentraland is currently leading the field of virtual real estate and metaverse.

Common misunderstandings about NFT

NFT does not have any risks

As mentioned above, NFT inherits the security of its underlying blockchain. Nonetheless, they still carry risks of fraud and scams, such as phishing or hackers exploiting smart contract vulnerabilities. In addition, NFT also carries the risk of counterfeiting and unauthorized copying of copyrighted materials.

Another aspect that needs to be considered is the long-term value of NFT. Although the prices of some NFTs have reached astronomical levels, the market can be highly volatile and speculative. As with all investments, the long-term stability of NFTs is not guaranteed.

At the same time, the security of NFTs may be affected by the blockchain on which they are minted. Because some blockchains may have more developed ecosystems and stronger security than others, the security of NFTs tends to vary.

NFT is the same as cryptocurrency

Although NFTs and cryptocurrencies are both digital assets using blockchain technology, but they have different uses and characteristics. Cryptocurrencies are often designed to facilitate transactions. They are fungible, meaning that each unit is convertible into another unit of the same currency. For example, you can exchange one Bitcoin for another without any difference in value.

In contrast, NFT is a unique digital asset. They have non-fungible characteristics, that is, each NFT is unique and cannot be directly exchanged for another NFT one-to-one. In short, the value of NFTs stems from their uniqueness and scarcity.

Conclusion

NFTs are unique blockchain-based digital assets that can be used to establish ownership and verify the authenticity of the items they represent. NFTs are growing in popularity because they are versatile, providing creators with new ways to monetize their creations and giving collectors the opportunity to own and display unique assets.

However, NFT may also be accompanied by risks such as fraud and market fluctuations. Although they share some similarities with cryptocurrencies, they offer unique digital opportunities due to their non-fungible nature.

Extended reading

• What exactly is NFT artist Beeple? Who is it? Why the fame?

• What are dynamic NFTs and how do they change?

• 7 things you need to know about NFTs

• What is a token standard?

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