As time passes, the world of digital assets continues to expand. At first, all of the hype was focused on Bitcoin and cryptocurrencies. However, as web3.0 technologies developed, new use cases began to attract the spotlight.
The most recent sector to catch the attention of the crypto-community is non-fungible tokens. In this post, we’ll discuss the meaning of an NFT and how NFTs work so that you can understand this relatively new technology and what kind of potential it offers.
What does NFT stands for?
NFT = Non-Fungile Token
In the most basic terms, an NFT is a type of crypto token that represents a digital asset that is unique or non-fungible.
Non-fungibility means that each token is one-of-a-kind and can’t be replaced. The uniqueness of each token is recorded on the blockchain via smart contracts. That record lives there forever and can be checked or tracked.
To put it simply, NFTs are like digital collector’s items. They can be used to represent a wide range of assets, from in-game items and digital art to NFT-based versions of traditional assets like real estate or bonds.
Difference between fungible and non-fungible tokens
The main difference between fungible and non-fungible tokens is that one is interchangeable and the second is unique (irreplaceable).
- A fungible token is a digital asset that is interchangeable with other tokens of the same type. This means that if I have one fungible token, I can trade it for another fungible token of the same value without losing any value on either side of the transaction. Fungible tokens are often used to represent real-world currencies like dollars or euros, but can also be used to represent other assets like cryptocurrency.
- A non-fungible token is a digital asset that is unique and can’t be replaced by another asset of the same type. This makes them perfect for representing unique items, such as collectibles, art pieces, or event tickets. Each individual token is assigned a specific identity that can be verified on the blockchain. This makes it possible to track and verify ownership of a non-fungible token without relying on a third party.
Another important difference is that each NFT can be looked at individually, while fungible tokens are all the same within a single token system.
On the other hand, non-fungible tokens all need to be considered separately. Their value isn’t determined by their token system. Instead, they are valued more subjectively based on the information that they contain, their functions, individual applications, and so on.
A brief history of NFTs
Let’s discover how this technology started.
The first NFT created
The man who first created an NFT is believed to be Kevin McCoy, an American artist. In 2014, he made the first NFT called “Quantum”.
Quantum is a pixelated image of an octagon, pulsing with colors and different shapes. It was originally minted on May 2nd, 2014 (learn what is NFT minting here) on the Namecoin blockchain and sold for $1.47m in June 2021 during Sotheby’s auction.
The first NFT art project
Curio Cards was the first NFT art project on the Ethereum blockchain. It was launched in February 2018 by artist Matt Hall and developer Mark Lottor.
The collection is featuring 30 unique series of cards from seven different artists.
The first NFT gaming project
CryptoKitties was the first NFT gaming project and one of the earliest use cases for NFTs in general. It was launched in December 2017 by Canadian studio Axiom Zen.
The NFT game is all about buying, selling, and breeding digital cats. Each CryptoKitty is one-of-a-kind and stored as an NFT on the Ethereum blockchain.
The first NFT Marketplace
In May 2018, the NFT marketplace Opensea was launched. It is an online marketplace that allows anyone to buy, sell, or auction NFTs.
This platform supports a wide range of NFTs, including the most popular projects such as CryptoPunks, BAYC, and more. Today, there are many marketplaces where you can purchase NFTs.
Different uses of NFTs
NFTs and blockchain have given creators, artists, and creative workers the ability to protect their work in the digital realm and monetize it more effectively. Instead of using middlemen to sell their work, they can do it directly with potential buyers. However, there are many other uses for NFTs.
Here are some of the most common applications.
- NFT artwork: NFTs can be used to represent any type of artwork, from digital paintings and sculptures to 3D models and GIFs. NFTs provide a method for artists to sell their work directly to buyers without going through a third party.
- Gaming NFT: NFTs can be used to represent in-game items, such as weapons, armor, and collectibles. They can also be used to represent virtual land and property. NFTs provide a way for gamers to own their game items and virtual property.
- NFT as a software: NFTs can be used to represent software licenses, such as for video games, applications, and plugins. NFTs provide a way for developers to sell their software directly to buyers.
- NFT cards or tickets: NFTs can be used to represent gift cards, loyalty points, event tickets, and other types of cards or tickets. NFTs provide a method for businesses to sell their products and services directly to buyers.
- NFT as physical assets: NFTs can be used to represent physical assets, such as properties, art, clothes, and jewellery. NFTs provide a way for companies to sell their products and services directly to buyers.
These are just some of the common uses of NFTs today, but there are many more new projects and applications currently being implemented.
» Learn more: How to buy your first NFT
How can I benefit from NFTs?
Now that we understand what NFTs are, let’s discover how you can benefit from them.
I’m an artist or creator
If you’re an artist or creator, NFTs can help you to sell your work directly to buyers without going through a third party. NFTs can also help you to protect your work from being copied or pirated.
I’m a buyer or collector
If If you’re a buyer or collector, NFTs can help you buy artwork and other digital assets directly from the creators. NFTs can also help you to keep track of your collection and prevent fraud.
I’m a gamer
If you’re a gamer, NFTs can help you to own your in-game items and virtual property. NFTs can also help you to trade your game items with other gamers.
» Learn more: NFT games guide for beginners
Conclusion
The NFT trend is here to stay, and it’s only picking up steam. The key to success is to get involved with the community and learn more about current developments because things are happening fast. Those who will be able to earn the most and establish themselves as leaders in the industry are the ones who find great opportunities early on.