The cryptocurrency industry is fast, innovative, and filled with exciting developments and new projects. Even if you’re a crypto veteran, sometimes it’s hard to keep up with progress — let alone for an outsider looking in. If you’ve been following the blockchain news cycle lately, you might have heard about non-fungible tokens (NFTs) and their growth.
We live in a digital society in which expression, creativity, moments, and even social networks are shaped by technology. During the first six months of 2021, despite speculation of a bubble, according to Reuters, NFT sales volume surged to $2.5 billion.
While still considered a relatively new concept in the crypto sphere, NFTs are poised to take off this year. To help you comprehend it better, we’ve put together a guide on non-fungible tokens (NFTs).
First, we’ll take a look at precisely what non-fungible tokens are and how they’re different from fungible tokens. We’ll finish by looking at the impact that non-fungible tokens will have on blockchain technology in general.
What are Non-Fungible Tokens?
Non-Fungible Tokens (NFTs) are a type of crypto token that represents a unique asset or identity. NFTs can represent physical and digital assets, such as crypto-collectables, property, and even people. As a token that represents a digital or physical asset, a non-fungible token shares a set of defining characteristics and attributes:
They store value differently
Their value is locked in a particular asset, and it highly depends on the market and its uniqueness. Two NFS cannot be compared as the estimate of value differs from one NFS to another.
They are indivisible
You cannot divide an NFT into smaller tokens, and you need to purchase the whole NFT for owning an item.
They have fluid ownership
While only one person can own a NFT, it’s possible that token creators offer multiple tokens as a representation of a single NFT. For example, when it comes to owning a physical asset like a holiday resort, multiple parties can have NFTs that allow them to use it as part of their agreements in the NFT contract.
They are authentic
Non-fungible tokens serve as representations of real-world assets, and they should be authentic. Because they are stored on blockchain, it’s easier to verify authenticity and track as they have unique identifiers.
Fungible vs Non-Fungible Tokens
What both types of tokens have in common is the fact that they are digital assets. Cryptocurrencies like Bitcoin or Ethereum are fungible tokens and have been attributed monetary values.
Non-Fungible Tokens have no monetary value, but they are valued by how unique they are – similarly to a work of art, which is why they can’t be swapped out one for another without a specific legal agreement because of copyright issues.
How to create and sell your Non-Fungible Tokens
It’s not as hard as you may think to create your own NFT. The first step should be to choose your digital asset. For example – the file can be text, music, or video, and it’s best if it’s unique.
As soon as you decide what to sell, you need to select which blockchain you will use. In the NFT space, Ethereum is the most widely used network, mainly because the biggest platforms support it.
Ether is necessary for listing your NFT on a marketplace. This is because it costs money to list it. There are a few marketplaces where you can just add a few details about the NFT and list it – for example, OpenSea, which is a free listing marketplace. There are also others that require a crypto fee to list your NFT, like Foundation, Rarible, or CryptoPunks. Once the NFT is listed, you have your own token.
Like eBay, people can bid in an auction on your token, or you can opt for a fixed price on the selling page while mentioning any royalties that are due to you from the first sale or any subsequent ones.
How Will the Rise of Non-Fungible Tokens Affect Blockchain?
Non-fungible tokens (NFTs) are a relatively new and exciting type of digital asset that run on smart contracts on blockchains. No third party needs to hold NFTs and store them, which means no more fees are needed, and transactions can be made directly between users very quickly and cheaply.
NFTs are a massive win for blockchain technology projects in general, mainly because it means their developers can start making use of blockchain tech for all kinds of projects that were previously time and resource-intensive to do.
With their unlimited capacity of unlocking value, in the growing area of decentralized finance (DeFi), NFTs can serve as collateral for loans. This will help with bypassing issues of liquidity in the market, which is typical for traditional art currently being used as collateral.
This approach could breathe life into loans for projects that have otherwise been stuck in the development phase, traditionally having to wait for the approval of more than one-third party to get off the ground (banks, governments, credit card companies).
Conclusion
Non-fungible tokens are a hot topic in the blockchain community right now, and there’s a good reason for that. They have the potential to make blockchain technology even more versatile than it is now, opening new opportunities for businesses created on the blockchain. This is especially true for creators who can more directly monetise their output and potentially even benefit from future sales.
While still relatively new, non-fungible tokens have already proven their potential and value to the cryptocurrency community. As more and more projects begin to adopt them beyond art, sports, music, and collectibles, we expect their popularity will continue to rise — and that they’ll become a permanent fixture in the cryptocurrency landscape for years to come.
