Blockchain technology and tokenization capabilities enable the creation of various digital assets. Almost every year, new, different instruments appear. These digital assets include NFTs.
What is NFT?
The abbreviation NFT comes from the English non-fungible tokens, which can be translated as “non-fungible tokens”. Their peculiarity lies in the name - each such coin is unique.
You can understand the essence of the phenomenon thanks to a simple example. Citizen N borrowed 100 rubles from a friend. One of the conditions of the agreement is that the return must be made with the same bill. At the moment when the time comes to repay debts, he will be able to pay off with any banknote of the same denomination. At the same time, the borrower will not see the difference, because the transferred N 100 rubles and the debt received from him are equivalent. It turns out that currency is a fungible asset.
At the same time, if N borrows a baseball autographed by his favorite player from a friend, and returns a regular new ball instead, the owner of the little thing will be extremely unhappy. The reason is that the object is unique - exactly the same second is not on Earth. This is where its value lies. Accordingly, it is not interchangeable.
Illustration of an example with non-fungible assets
The same qualities can be transferred to digital assets. NFT tokens differ from cryptocurrency, in its classical sense, in 3 nuances:
1. Uniqueness.
2. Rarity.
3. Indivisibility.
The last point needs clarification. Most NFT tokens cannot be divided into parts in any way, shares cannot be separated - they can only be stored as a whole.
Why are NFT tokens needed?
With the help of NFT tokens, the developers solved the problem of ensuring the ownership of digital objects. Take a game, for example. When buying a new weapon for a character, the user could not be 100% sure that the new attribute will remain with him forever, unchanged.
The fact is that developers, taking advantage of their position, can make adjustments, change, replace, and even seize in-game items. Moreover, if the weapon was tokenized in the NFT format, the player can be sure that his ownership is confirmed, and nothing threatens the item.
All information about the owner and his tokens is fixed in the blockchain. It is impossible to replace the data or erase the information. This has become a reality thanks to the peculiarities of the technology.
Where are NFT tokens used?
The main sphere of application of such tokens has become the gaming industry. However, NFT can also be used in other areas. For example, in real estate, or in art (to confirm the unique ownership of the original object).
As of September 1, 2020, according to the Nonfungible platform, all NFT tokens on the market are distributed as follows:
41% - gaming industry;
29% - collectibles;
13% - real estate;
7% - collectible card games;
6% - domain names (yes, some are ready to retain ownership of unique domain names by all means);
4% - art (images, music and even videos can also be protected with copyright on the NFT)
How to make money on NFT tokens
The uniqueness of NFT tokens has opened up opportunities for their owners to earn extra money. For example, let's take the popular Ethereum game Cryptokitties (Cryptokitties, or Cryptokitties).
Its essence is as follows:
There are kittens in the game. Everyone is unique.
Players can buy kittens. To solve the problem of proving the uniqueness of cats, the developers used the NFT format. One cat is equal to one token. The chosen format confirms the uniqueness of the kitten and all rights of ownership by the player. Also, a game participant can be sure that neither the developers nor anyone else will be able to change his tokenized virtual asset (cat).
Depending on demand, the price of this or that kitten may rise or fall. When crossing pets, the player receives offspring. Each cat is also unique. At the same time, in some cases, new kittens can significantly exceed their parents in price.
For example, Cryptokitties' most expensive cat, as of November 15, 2020, was sold in September 2018. It cost the buyer 600 Ethereum (about $ 172 thousand at the time of purchase, and over $ 277 thousand at the time of writing).
However, a survey of analysts from Weiss Crypto Ratings showed that there are not so many people willing to spend that kind of money on crypto-cats.
Despite this, there are tons of high-priced virtual pets on the Cryptokitties site.
CryptoKitties is not the only game that has the ability to make money with NFT tokens. Other examples include CryptoCelebrities (the same principle as with cats, only celebrities instead of animals), and others. For example, in the blockchain game Gods Unchained, NFT tokens help verify ownership of virtual in-game items. The latter can be sold or exchanged.
Companies that take advantage of the power of NFT
The possibilities of the technical solution found a response among the participants of the crypto community. As a result, there was a need for tools for working with NFT. Many well-known companies have gone further and used non-fungible tokens in their projects. A few examples:
Samsung. The company's developers have created the Enjin cryptocurrency wallet for their smartphones, which has functionality for storing NFTs.
Formula 1. Representatives of the brand entered into an agreement with the developer of video games Animoca Brands to create a blockchain game F1® Delta Time, within which users can create an NFT collection. Tokens, among other things, can be used to confirm ownership of cars and other game items.
Nike. The company has tokenized the sneaker collection using NFT. Token holders can exchange them, sell them on the market and exchange them for real shoes.
Also, at one time, the capabilities of NFT were used by the teams of Louis Vuitton, NBA, Vodafone and other large companies.
The future of NFT tokens
There is a trend towards digitalization in the world. Against this background, it can be assumed that NFT tokens will continue to gain popularity not only among members of the crypto community, but also in business.
Many investors are confident that the hype around the non-fungible token market will grow in the future. As a result, NFTs may become DeFi 2.0.
Summing up
NFT technology has found a response among crypto community members and representatives of the business sector. As of the end of 2020, the market for non-fungible tokens has broad development prospects.
The presence of successful examples of the practical application of NFT suggests that the popularity of the tool will continue to grow in 2021 and beyond.
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