Thursday, 30th June 2022
<To guardian.ng
Search
Breaking News:

What is NFT? – Understanding Non-Fungible Tokens

By Sponsored
20 May 2022   |   2:26 pm
NFTs are increasingly becoming popular in the cyber world. Here's all you need to know about NFTs.

(FILES) This file photo taken in London on December 30, 2021 shows a PsychoKitty NFT (Non-Fungible Token) created by psychedelic artist Ugonzo displayed on a phone and a NFT logo displayed on a computer screen from a Crypto.com NFT marketplace. – Temporary depression or bursting bubble? The market for certified digital objects (“NFT”), which has been booming since it burst onto the scene last year, has just come to a sudden halt and now needs to clean up its act if it is to attract the general public and survive, according to specialists. Non-fungible tokens or NFTs are cryptographic assets stored on a blockchain with unique identification metadata that distinguish them from each other. (Photo by Justin TALLIS / AFP) /

NFTs are increasingly becoming popular in the cyber world. Here’s all you need to know about NFTs.

Throughout history, people have collected rare and high-value assets such as art, jewelry, and music. However, identifying those assets’ ownership and authenticity has mainly been through paper-based and centralized systems, which are highly inefficient and leave lots of room for fraud. NFTs offer a unique way to revolutionize digital assets’ identification, ownership, and transfer. 

The Key Characteristics of Non-Fungible Tokens 

Non-fungible tokens are virtual assets on a blockchain, with unique metadata and identification codes that distinguish each from the other. Unlike cryptocurrencies, which users can easily trade on platforms like NFT Era, people can’t exchange NTFs for other assets. Alternatively, fungible tokens such as virtual coins are identical, and people can use them as payment mediums. 

Non-fungible tokens have shifted the crypto paradigm, making each token unique and irreplaceable. That also means one NFT cannot be equal to the other in value. However, NFTs are extensible, meaning artists and creators can combine two different NFTs to create a unique NFT. 

Non-fungible tokens are built and held on the blockchain. Hence, people can only identify them cryptographically. They are also very unique and rare, impacting their high-value proposition. NFTs have cryptographic signatures native to the blockchain upon which they are created and issued. The individual signatures enable users to quickly determine the origins and current owners of the particular assets tied to those NFTs.

 

How to Create NFTs 

Artists, content developers, or license holders create non-fungible tokens through a process known as minting. The process entails signing a blockchain transaction and outlining the basic token details. The data is then broadcast to the blockchain to generate a smart contract, creating the token and assigning it to its owner. 

Each token has a unique identifier, or token ID, stored in the contract. That makes it easy to verify the ownership of the token and reassign it to a new owner whenever the original owner needs to transfer the assets. 

Non-Fungible Tokens Use Cases 

The distinct construction of NFTs enables them to support a wide range of use cases. They can represent various physical, digital, and metaphysical assets. The blockchain is the basis of non-fungible tokens, and it also eliminates intermediaries from involvement in transactions, connecting artists and creators with their audiences directly. The blockchain also simplifies transactions and efficiently enables content developers and artists to efficiently attract and reach new global markets. 

NFTs’ creation mainly represents digital art, virtual collectibles, and pieces of content such as audio, video, and event tickets. The first major ground-breaking NFT use case was a digital collage artwork created by artist Beeple in 2021. The NFTs sold for a record $69 million, becoming the most expensive piece of digital art. 

The current NFT market mainly centers on collectibles, including digital art, sports cards, and rare valuables. The NBA Top Shot is among the most popular platforms for NFT collectors. It offers non-fungible tokenized NBA moments in digital cards. 

Why NFTs are Important 

Experts describe NFTs as simple concepts of cryptocurrencies that facilitate digital representations of physical assets, revolutionizing the modern financial infrastructure. One of their primary benefits is enhancing market efficiency. Converting physical assets into digital assets streamlines the process of their identification, ownership, and transfer by eliminating intermediaries. That enables artists, creatives, and content developers to connect with their audiences directly. NFTs also improve business processes and democratize investing. They allow different actors along the supply chain to interact with them and track the assets’ provenance, creation, and transfers. 

Like crypto, NFT is a relatively new concept. However, non-fungible tokens have an immense potential to transform various core business processes and create new markets and investment streams for artists, content developers, and investors worldwide. 

In this article