An introduction to NFT tokens
What are Non-Fungible Tokens (NFTs)?
Tokens are as essential in the world of cryptocurrency as oxygen is for life. Tokens have various use cases including payments as well as other digital assets and property and they are highly valuable.
Cryptographic tokens have two flavors “Fungible” and “Non-Fungible” tokens. The majority of tokens in the cryptographic market are fungible, although Fungibility seems complicated but it’s very easy to understand the concept behind it.
It refers to the property, assets, or daily life things that are interchangeable and essentially indistinguishable from each other.
The term applies to real-world assets as well as digital assets and commodities. For instance, the dollar in our pocket which is a fiat currency is interchangeable with the genuine dollar of the same value, so they are indistinguishable (fungible).
Bitcoin in our crypto wallet is also a fungible asset that can be replaced by identical Bitcoins. The reason behind these fungible assets is the value of that asset which is the same for all assets, that’s why they are replaceable.
On the other hand, “Non-Fungible” means not interchangeable, these are special tokens to represent unique assets and collectible items. For instance, diamond is a precious gem available in different sizes, cuts, and grades, that’s why each diamond is treated as a unique gem with unique and not replaceable value.
In the blockchain network, the first noteworthy non-fungible token was used in the CryptoKitties phenomenon in November 2017 with the launch of ERC 721.
This is Ethereum’s standard for the creation of non-fungible tokens that opened up the way to store digital collectibles uniquely. CryptoKitties is the best example to create a digital asset with scarcity as well as value. CryptoKitties is a blockchain-based virtual game designed using ERC-721 where each token represented a uniquely coded ‘CryptoKitty’. The players can buy, sell, and breed new unique tokens with the aspects of their parents, but each token holds a unique CryptoKitty which is not replaceable with any other token. This game was made by Axiom Zen a blockchain company based in Vancouver and this was the first Dapp with this type of uniqueness.
CryptoKitties have a number of developed non-fungible tokens and associated services such as other collectibles and exchanges. Though the initial focus was heavily on enabling ownership of unique blockchain-based collections, non-fungible tokens can also be linked to real-world physical objects and collections where they can make a unique investment with specific permissions. Non-Fungible tokens with inherent uniqueness represent specific ownership in the digital world as well as real-world such as houses, cars, art, or potentially event identities.
Why are NFTs trending?
Non Fungible tokens (NFTs) are trending because of more digitization in every field. NFTs are providing a viable solution for tokenizing real-world ownership, physical property, and assets in the digital world. These tokens convert real-world assets to digitized assets properly and store them on a secure network. This digitization ultimately revolutionizes the legality, storage, and security of property and assets.
The customization capability of Non-fungible tokens is another driving factor of this trend as they can be securely customized in a way that other tokens can’t be. The non-fungible token holds all the data, can also have additional data assigned to it which could include standard options such as the name and the ownership.
NFTs are gaining popularity because of secure tradability. In traditional trading, there is a higher risk of fraud in transferring ownership of a physical or digital item but with the security of blockchain and the uniqueness of non-fungible tokens, trading anything via tokenization would be a much more efficient and simpler process.
Moreover, through digital collectibles and NFTs, new directions are opening up within the blockchain technology other than conventional financial transactions through fungible tokens. NFTs will become a vital part of the wider economy along with the blockchain ecosystem as the use cases of NFTs are vast with new and exciting innovations in this promising technology.
A Few Examples of NFT Projects
NFTs will play a key role in a new blockchain-powered digital economy with their uniqueness and authenticity. Here we have some example projects that are already using NFTs in their ecosystems.
KnownOrigin is a platform that uses the Ethereum network to authenticate, showcase, and sell rare digital artwork and collectibles of different artists (Selfmadeheroes, 2020). Previously, buying art was very difficult because only an art expert could identify the authenticity of an artwork. But, now KnownOrigin has made this authentication process easy where users can identify authentic owners of every artwork easily. This platform allows artists to tokenize their artwork uniquely and put them on the website as a list. The compliance of smart contracts and non-fungible tokens (ERC-721) makes this artist-driven platform smart, secure, and transparent for buying and selling limited-edition digital work with proven ownership. When an artwork is sold, the record of the buyer is also stored on the Ethereum network that ensures provenance and chain-of-custody for a sold art. KnownOrigin has 450 artists, 5917 editions, and 14484 digital artworks that are sold to date (KnownOrigin, n.d.).
Cryptograph is a digital platform to showcase the unique digital artwork (famous drawings, paintings, or diagrams) created by world icons, famous personalities, and digital artists (Cryptograph White Paper, n.d.). This platform is built on the Ethereum blockchain and all Cryptograph data, ownership records, and transactions are secured by the audited smart contract ecosystem. All Cryptographs are ERC-721 tokens (non-fungible) and are created to support some charitable causes in which its creators want to donate. When a cryptograph is sold, the money is automatically transferred to that charity cause. Each cryptograph has information about its charity cause and everyone can see it. In the Blockchain space, we have heard recently that Paris Hilton a famous media personality and businesswoman has sold the digital painting of her cat for 40 ETH through the charity digital art site Cryptograph (Paris Hilton Drew a Cat and It Somehow Sold for $17,000 in ETH, n.d.). Seth Green and Ashley Greene also have posted their work on the website to auction off using Ethereum. The platform is raising money for charitable causes having a positive impact on the world at the same time.
Sorare (Sorare • Global Fantasy Football, n.d.) is a fantasy football trading card game to enjoy the real performance of players in real matches via trading the cards of real players. The platform is built on Ethereum Blockchain where all the cards are NFTs. The ownership of every card can be verified because the Meta description of each asset is available on the public ledger which can be seen by all users. Users trade their authentic and scarce digital cards to manage their team to win prizes. The platform currently has 96 official clubs including Premier League, Bundesliga, and Serie A, more clubs and leagues are being added all the time. The game is becoming popular day by day and trading cards over $1 million worth are sold out across 50 countries. The company recently received over $4 million worth in the form of seed funding to scale up the platform to accelerate the growth.
- Handshake Domains
Handshake (Handshake, n.d.) is a decentralized and permissionless naming and certificate authority to provide proof of ownership of domains without the control of any central authorities. Handshake is an experimental setup to explore the necessary tools to build a more decentralized Internet where the website domains once established, will never be blocked by a central authority. This platform builds domain names on blockchain because everyone in the world should be able to use the internet without being censored or blocked. Blockchain domain registries are smart contracts where domains are NFTs stored by users. All the domains are bought on nameBase.io (Namebase | The Easiest Way to Buy, Sell, and Use Handshake, n.d.) and then stored on Handshake blockchain network. In this way, buyer’s details will be stored on the Blockchain, without the need for a centralized party to hold this information. This trend of decentralized web is going popular between investors as the project received over $10 million in funding from different excited investors to make the decentralized web a reality as quickly as possible.
These are the few examples of Projects where NFTs are being used. Decentraland, Gods Unchained, My Crypto Heroes are the popular gaming projects that are using NFTs and crypto collectibles. Many other projects are planning to adopt this token standard to represent their digital and real assets more securely and transparently.
In 2020, Decentralized Finance (DeFi) and Non-Fungible Tokens (NFTs) are the emerging terminologies in the Blockchain industry. The non-fungible tokens’ (NFTs) environment continues to grow as NFT sales have grown exponentially over $1 million in volume in the first week of September 2020 (“NFT Economy Grows Exponential,” 2020). People are more aware of the uniqueness of NFTs and their related benefits in the virtual and real world.
In short, a new universe of NFT with digital collectibles, unique art pieces, in-game items, and is being created as a virtual universe. The non-fungible token economy has a bright future ahead with a more collaborative and inclusive community.
Cryptograph White Paper. (n.d.). Google Docs. Retrieved September 29, 2020, from https://docs.google.com/document/d/1R5ZClrAp5zRRtdKFH9QQ3IZkbsCp6ynMNvIHCD-ZEg4/edit?usp=sharing&usp=embed_facebook
Handshake. (n.d.). Retrieved September 29, 2020, from https://handshake.org
KnownOrigin. (n.d.). Retrieved September 29, 2020, from https://knownorigin.io/
Namebase | The easiest way to buy, sell, and use Handshake. (n.d.). Retrieved September 29, 2020, from https://www.namebase.io/
NFT Economy Grows Exponential: $1M in Non-Fungible Token Sales Last Week. (2020, September 13). Bitcoin News. https://news.bitcoin.com/nft-economy-grows-exponential-1m-in-non-fungible-token-sales-last-week/
Paris Hilton Drew a Cat and it Somehow Sold for $17,000 in ETH. (n.d.). Cointelegraph. Retrieved September 29, 2020, from https://cointelegraph.com/news/paris-hilton-drew-a-cat-and-it-somehow-sold-for-17-000-in-eth
Selfmadeheroes), D. moore (aka. (2020, July 13). What you need to know about KnownOrigin. Medium. https://medium.com/knownorigin/what-you-need-to-know-about-knownorigin-io-495a7aa256b
Sorare • Global Fantasy football. (n.d.). Retrieved September 29, 2020, from https://sorare.com/