The digital space and the internet are becoming more interesting. We now have cryptocurrency as a mode for online payment and transactions, and then lurking around the digital collector’s spectrum are the Non-Fungible Tokens or NFTs. Unlike cryptocurrencies, NFTs have unique values and assets allocated in them from certain people, like an expensive and ‘one-of-a-kind’ thumbprint—to put it simply. But what is it exactly? Find out as we delve deeper into what NFTs are.
What are Non-Fungible Tokens
The term fungible refers to the interchangeability of tokens with equal value, meaning that two parties can swap tokens without gaining or losing anything as long as it is of equal value—like exchanging five PHP 20 for one PHP 100 bill. For this case, non-fungible refers to a token that cannot be replaced, divided, or merged. NFTs were created to represent ownership over digital or physical assets in a wide range of unique tangible and intangible items—ranging from collectible Pokemon cards to virtual real estate or even paintings.
The majority of NFT tokens were built using Ethereum token standard ERC-721, proposed by Dieter Shirley. The standard was designed to create interchangeable tokens that are unique and non-expendable. In addition, the objective is to develop unique tokens whose values are given by their rarity—the rarer it is, the more expensive, which is more appealing to collectors in the digital market.
The first application based on NFTs dates back to 2017 from the virtual online game called CryptoKitties. The game took up more than 70% of the transaction capacity of the Etherum network, and ownership of a cat was sold for over USD 100,000—absolutely insane. From there, similar digital collectibles like virtual cards or unique art have been created. Note that NFTs can facilitate the tokenization of real-world assets like software licenses, luxury goods, and even cars.
Importance of NFTs
NFTs popularity has been gaining momentum lately towards the crypto users and company demographic; since November 2017, a total of USD 174 million was spent on NFTs, according to coindesk. The main benefit of owning a digital collectible is because each NFT contains distinguishing information—no one NFT is the same as the other, hence making the circulation of fake collectibles pointless.
The Token is also verifiable. Storing ownership on the blockchain allows digital items to be easily traced back to the original creator without the need for third-party verification. Since NFT data is stored on the blockchain via smart contracts, each token cannot be destroyed and removed. Ownership of these tokens is immutable, which means gamers and collectors are in actual possession of their NFTs and not the companies that created them.
How do NFTs work?
Most NFTs are part of the Ethereum blockchain. Like Dogecoin or Bitcoin, Blockchain technology is a structure that stores transaction records. It uses cryptography to chain blocks into a list of records. The transaction records of a chain of blocks are then stored in a structure called a Merkle tree.
But how do NFTs actually circulate? Well, artists, for example, can directly sell their art to consumers as an NFT without going through auction houses or galleries. Certain royalties can then be sorted, so the artists can receive a percentage of sales whenever their art is sold again and again.
It is honestly weird how much money people would spend for certain things, just like how Twitter’s founder Jack Dorsey promoted his NFT of the first-ever tweet for USD 2.5 million or how the animated GIF of Nyan Cat can go for USD 500,000—crazy, but I love it.
Where can I buy NFTs?
If you want to take a shot at buying NFTs, you must have your own digital wallet to store said NFTs and cryptocurrencies. In terms of what kind of cryptocurrency will depend on who you are buying the NFT from. There are several NFT Marketplaces you can choose from, such as opensea.io, Foundation, and Myth Market. So if you are looking for a unique item you want to keep, like a Pepe Trading card, something I would get honestly, check out these markets.
And there you have it; feel free to share your thoughts on this in the comments below.