In the cryptocurrency world, a new concept has been emerged and has blown the mind of many crypto investors. Do you have any idea about it? Well, we are talking about the Non Fungible Tokens (NFTs) that have blown the internet like fire in the forest. Though it becomes the internet session after bitcoin and Ethereum in the cryptocurrency world, a lot of people have no idea what NFTs are. If you too have no idea, you must read this blog to know what is NFTs and why it matters in the crypto world.
Non Fungible Tokens (NFTs)- A Brief Overview
The meaning of Non-fungible tokens is hidden in its name i.e. something that is not fungible. In economics, the term fungible assets mean something with units that can be easily interchanged. For example Bitcoin or fiat currencies like INR, USD, etc. You can swap $58000 for 1 BTC or Rs 100 for two Rs 50 notes and it will have the same value.
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However, if something is non-fungible, it simply means that has some unique properties so it can’t be interchanged. For instance, the heritage Taj Mahal and painting like Mona Lisa is one of its own kind. You can take photos, buy a print, or create a replica but you can take the original one.
NFTs are that kind of asset in the digital world that can be bought and sold like other items but have no tangible form of their own. This distinctive characteristic of NFT has the potential for several use cases. But, before exploring this, let’s understand the technology that works behind the non-fungible tokens.
Technology Behind NFTs
Like cryptocurrencies like bitcoin, NFTs are also based on blockchain technology. It evolved from the ERC-721 standard. Developed by the minds behind the ERC-20 smart contracts, ERC-721 provides the utmost level of security by defining minimum interface- security, ownership details, and metadata required for the exchange and distribution of gaming tokens.
Just like cryptocurrencies like bitcoin, NFTs also comprise the ownership details for easy identification and transfer between token holders. The only difference is that in NFTs owners can also add metadata or attributes pertaining to the asset in NFTs. For instance, tokens of paintings can be classified as fair trade.
Why are Non-Fungible Tokens (NFTs) Important?
The simple answer to this question is because it has the potential to change the way our world works. It is an evolution over the relatively simple concept of digital currencies like Bitcoin.
In a traditional financial system, people trade or take a loan for different asset types, ranging from real estate, physical assets lending contracts to artworks. By enable digital representation of these assets, NFTs are for sure a step forward in the reinvention of this infrastructure.
There is no denying that the idea of digital representations of physical assets is not novel. But, with the combination of the smart contracting features, it can change the way businesses and transactions of good will be done in the future.
Perhaps, the most important advantage of NFTs is market efficiency. The conversion of physical assets into digital ones will not only streamline the processes but will also remove intermediaries. By using NFTs, businesses and artists can connect directly with their audiences and make transactions in a seamless manner.
What are the Use Cases of NEFTs?
There are many potential areas where Non-fungible tokens can be used. Some of them are as follow:
- Artworks: Artists can now use the NFTs to sell their creations virtually. Though they can do that earlier as well through online portals now it also gives buyers satisfaction that they are going to buy an original piece of artwork or dealing with the authorized member. Now not only they can buy but can also see at how much price it has been sold earlier. In this way, NFTs will bring transparency while buying and selling any asset online.
- Collectibles: The introduction of NFTs has also brought a new character to the collectible world. Traditional professionals are now onto digital assets. In the coming future, this new digital asset class is surely going to redefine the industry.
- Gaming: Gaming is another industry that will be empowered by the introduction of non-fungible tokens. NFTs have solved many internal difficulties of the gaming industry. For example, popular games today like PUBG and Fortnite ban the purchase of rare features and items like weapons. With NFTs, these tools can be easily sold and purchased.
Hope now you have a good understanding of the non-fungible token. Follow our blog to keep yourself updated about the current happenings of the cryptocurrency market.
