Recently, there have been a number of instances where digital art is being sold for massive sums. How will buying NFT tokens will make you the sole owner of the digital artwork? What is the essence of this rapidly growing technology? Let’s find out the answers to these burning questions!
Supported by blockchain ledger technology, NFT is a unique, non-fungible asset. Digital encrypted assets, non-homogeneous tokens are unique, non-replicable, and scarce.
With time, the scope of NFT use cases has grown wider and wider, including digital art, domain names, collectibles, games, and so on. NFT is created/minted on the blockchain, such as Bitcoin, Ethereum, which can be used to determine the ownership of various assets. It helps you get the answers like where they come from, who is the owner, etc.
“According to recent data, excluding wash trades and obsolete items, the total market cap of the NFT market is around US$338,035,012, with an annual growth rate of 299%.”
NFTs can be very expensive, with prices reaching millions of dollars. It is perfectly normal when in your curious mind, the question pops up, how to evaluate the value of NFT relatively objectively? However, before finding the answer to this question, let us briefly discuss the development history of NFT.
A Brief History of NFT
NFT originated somewhere around 2012-2013, when small denominations of colored bitcoins – “Colored Coins” appeared. They represent various assets for different purposes, including collectibles, access tokens, etc.
In 2014, on the basis of colored coins, the peer-to-peer financial platform Counterparty was established to issue semi-non-homogeneous and non-homogeneous tokens. The Counterpartys’ founder understood that Bitcoin is not able to support the formation of transaction functions and powerful asset creation.
Since 2015, memes and transaction cards have become notorious. In addition, different electronic games have also made digital assets stored on blockchain technology popular, including swords, arts, and even digital real estate plots.
In 2017, Crypto Kitties made its inception and entered people’s field of vision. This is an electronic game focused on reproducible, collectible, and crypto cats. The USPs of Crypto Kitties include its unique features, 100% owned by the buyer, and it can’t be copied, taken, or destroyed.
From 2021, NFT started gaining momentum and began to penetrate the mainstream economy in some unconventional ways. With the consistent advancement of the foundation and underlying building in this field, NFTs are all set to become the new face of the digital economy.
Features of NFT
Standardization: NFts feature some standardized functions such as ownership, transfer, etc. All the non-fungible tokens have these same functions. Any programmer can use this feature and various NFT libraries to create their own NFT.
Versatility: NFTs are universal, which means any application that wants to use NFT can use it. Since the blockchain is unrestricted and publicly accessible, anyone can read the smart contract that deploys the NFT.
Fluidity: The crypto assets liquidity market is enormous. Everyone is free to exchange them for cash or other cryptocurrencies based on their needs. This provides NFT with high liquidity.
Immutability: Blockchain is notorious for its immutability. Most often, it is implemented through smart contracts. And, this is the reason it is immutable, that is, users cannot make changes to their NFT and make another one. Once registered, the ownership of NFTs gets permanently recorded in the blockchain unless the previous owner decides to transfer it to some new user.
Programmable: NFTs are implemented using smart contracts. NFT tokens also contain other complex functions, and they can be easily enhanced.
NFT (non-fungible token) Standard
ERC721: It was first created by CryptoKitties and is the first standard that represents non-fungible digital assets. It is an easily inheritable Solidity smart contract standard. People interested in NFTs can easily inherit them from the OpenZeppelin library and utilize them to develop NFT-based projects.
ERC1155: Enjin first proposed it. It allows people to realize semi-fungible tokens. In addition, it also allows unique asset types, not unique assets. These assets are often connected to the ID. For example, one ID can have 15 assets named “Guns”, and another ID can have 40 assets named “Roses”.
Metadata: It is used to represent the unique features of a single token. Take the dongle as an example, each one of them has a unique color, shape, name, etc. Generally, metadata is expressed in JSON form.
On the chain: In such cases, each NFTs is connected to its own metadata and stored in the blockchain. The most significant disadvantage is Ethereum limited storage.
Off-chain: In this instance, the metadata is kept in a centralized system (such as AWS) or a decentralized network (such as IPFS). Also, they are linked to their respective NFTs through the tokenURI parameter in the smart contract.
The Scope Of Use Of NFT
Collection: By means of CryptoKitties, NFT made its appearance in the field of collectibles. NFT became a conventional choice in many collectibles areas, such as various art forms, with the increasing notoriety of crypto cat games.
Game: To win in-game rewards, players tend to spend a lot of their time, but these rewards are limited to the game only. However, with the help of blockchain-based NFT, developers became able to integrate those rewards with various other games.
Certificate: NFTs can be easily utilized to recognize various certificates issued to individuals. Most often, NFT-based certificates are inviolable. These certificates are directly embedded in the blockchain, so they are not easy to tamper with.
Nowadays, more and more NFT standards have developed in the field of encryption, with various functions. However, the NFT implementation scope is still limited to the developer’s imagination.
Conclusion
Today, NFTs have transformed the lives of digital creators. They can now create digital artforms or other things with the same property as real things- non-fungibility. These non-fungible tokens have the ability to solve the problem of digital assets ownership and also make them safer to store.
They have recently been used in various games, which has transformed the gameplay and made them more transparent. In addition, it also provides them with more opportunities to control objects.
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