Cryptocurrency or popularly referred to as crypto is a real-time extension of blockchain technology that is becoming quite famous in the digital currency world due to various reasons.
Amidst various controversies followed to its name, cryptocurrency is still the talk of the town with its highly unstable value in the market. People though wary of its unpredictable value still get intrigued with its highly secure nature and it’s coming into the mainstream market among other things. Even Elon Musk has been seen tweeting about its benefits which has garnered a lot of attention from his fans.
But in recent months, a new player has been seen to be entering the blockchain arena i.e., NFT.
Have you heard about Lindsay Lohan’s new song that has been made solely using NFT technology or what about rock band Kings of Leon, who have released their new album ‘When You See Yourself’ as a non-fungible token (NFT) in March?
These are only some of the famous examples of NFT that have brought it into the limelight. But the main question of the day is what are NFTs and what do they mean for us in the future?
Here’s a short rundown to explain NFT and what’s the hype all about.
What is NFT?
Non-Fungible Token, does this explain it? No, then let’s dive a little deeper into this.
Non-fungible means that it’s unique/distinct and can’t be replaced with something else. For example, let’s say a bitcoin is fungible i.e., we can trade one for another bitcoin, and you’ll have the same thing. However, a one-of-a-kind trading card is non-fungible.
In simple terms, Non-fungible tokens are cryptographic tokens that represent something unique and cannot be replaced. They are under the class of cryptocurrency assets in which each item, or token, is entirely different. And, though this makes them useless as a currency, this feature makes them quite useful for other things.
Let’s understand this with a few examples.
CryptoKitties is a virtual game that allows players to adopt, raise and trade virtual cats, that first got introduced in 2017 using the NFT. It was the first blockchain technology game with its unique and irreplaceable nature.
CryptoKitties is one-of-a-kind and 100% owned by the user who bought it and cannot be replicated, stolen, or destroyed.
But this game was just a starting and NFT today has shown great potential since last year.
Another famous example is a more recent one of this year only.
In Feb 2021, Christies, founded in 1766 had become the first major auction house to declare their plans to sell a purely digital piece of art i.e., an NFT created by digital artist Mike Winkelmann, or popularly known as Beeple.
The artwork got sold for $69 million on 11 March making it the third most expensive artwork by a living artist.
How does NFT Work?
If we are talking from a high-level digital point of view, most NFTs comes from the Ethereum blockchain. Ethereum is a cryptocurrency, like bitcoin or dogecoin, but its blockchain also supports NFTs, thus storing extra information that makes them work differently from, like, an ETH coin. It is also worth mentioning that other blockchains can implement their versions of NFTs.
Like Dogecoin isn’t exactly an NFT. But has launched a GIF of dogecoin that is certainly an NFT.
Why is it so Popular?
NFT has become the trend of recent times with its unique feature of being the only distinct entity in the entire world. With the ongoing craze going on for NFT items, one of the main benefits of owning a digital collectible versus a physical collectible like a Pokemon card or rare coin is that each NFT contains distinct information that makes it both unique from any other NFT and easily verifiable. This makes the formation and circulation of fake collectibles in the market pointless since each item can be traced back to the original issuer.
Another unique feature that has made NFTs so popular is the fact that the complete data of NFT is stored securely in Blockchain meaning that the tokens can never be removed, destroyed, or replicated no matter what.
How can NFT be Used?
Though we have across many examples of NFTs as they made the news, there’s still a lot of future scope for this technology to go further. Some of these possibilities are:
Gaming: Many games have their virtual currency within their ecosystem that helps users make their progress easier. The unique feature of NFTs will enable players to easily trade in-game collectibles with proper validation and security.
Digital Assets: Digital assets like house plans, mock-ups, themes, and domains, are a perfect match to use NFTs. Also, digital real estate in games like Decentral Land is gaining popularity these days as they allow players to purchase and develop a set of spaces in a virtual world. With the addition of NFT, we can make sure original creators can be traced back to these items.
Identification and Certification: Things representing identity can be digitized such as medical records and certificates as we can make use of NFTs to prevent identity theft. Digital artists can also use it to convert their artworks and develop unique copyright for them. It also helps in differentiating fakes from the original.
Digital Collectibles: Since NFTs are rare, they find their major use in collectibles and art. And once we add a token, the authenticity and ownership of a collectible or artwork can be easily verified. Additionally, it allows an artist to prevent their work from being misused or pirated. NFT has already started to make its name in the cards and merchandise market.