Introduction
Today we want to talk about uniqueness. The Mona Lisa is unique. So is Beethoven’s Fifth Symphony… In contrast, assets like banknotes or a mechanical part of a car are not unique and can be exchanged for their likes because they still have the same value and use. But these are physical assets. What if we had this exclusivity in digital assets? That’s what NFT art was created for!
If you look at the market, you can see that NFTs have grown significantly in the last year alone. According to DappRadar, NFT trading went from $100 million in 2020 to an incredible $22 billion in 2021. And the total value of the top 100 NFTs is currently $16.7 billion.
What is an NFT?
NFT stands for Non-Fungible Token. They originate from the world of cryptocurrencies. These assets are based on blockchain technology, a decentralized, distributed network that records all transactions made by users on a public, immutable ledger. Most NFTs use the Ethereum network. Ethereum, the world’s second-largest cryptocurrency by market cap, is designed to allow users to program their transactions using computer code. For example, you could specify that you want to send money over the Ethereum network and create conditions that the person can only receive their payment after a certain amount of time has passed or other conditions have been defined.
These conditions are known as smart contracts, a set of rules that dictate how NFTs work, including providing immutability and proof of ownership, and managing the transferability of the asset. The most common contract that writes these rules is a protocol called ERC721- which includes a unique identifier in the contract that is immutable and is permanently written to the blockchain once issued.
According to this contract, when you buy an NFT, a token with a unique identifier is transferred to your digital wallet. This token proves that your NFT is original and non-fungible, and its presence in your wallet is proof of ownership.
So with that in mind, an NFT is a unique (non-fungible) digital asset that uses a blockchain (token), so it can be governed by a set of rules.
There are still a lot of concepts that most of us don’t use in our daily lives, such as smart contracts, blockchains, tokens, etc., but the idea becomes a little more digestible when you compare NFTs to anything collectible like stamps. Coins or trading and gaming cards, which are often rare or limited, can be worth hundreds of thousands of dollars and are non-fungible.
In their current form, NFTs are digital collectibles, albeit with a stack of science and technology compared to your grandmother’s antique cutlery collection.
How do NFTs work?
NFTs are part of the Ethereum blockchain and, as a result, are tokens with additional information stored on them. Of course, NFT tokens can now be issued on other blockchain networks such as
• Binance Smart Chain (BSC)
• Flow Dapper
• Tron
• EOS
• Polkadot
• Tezos
• Cosmos
• Wax
. The information added to non-fungible tokens forms the core of the tokens and allows them to cover art, music, videos, and the like in various formats of photos, movies, and music. Since these cryptocurrencies retain value, they can be bought and sold, and like different types of artwork, this value is set by the market and the supply and demand mechanism.
Of course, considering the above, it cannot be said that there is only one digital version of an NFT artwork on the market. Just as original and copied paintings exist in the world and are bought and sold, the same is true for NFTs, which are not all as valuable as the original (genuine) NFT. Of course, we should also add that you cannot own a photo by downloading it because this photo does not carry any stored information that can be part of the Ethereum blockchain.
What is the difference between a fungible and a non-fungible token?
By reading the above, we know that NFT is a non-fungible token or token, but we have only defined it and perhaps to understand the true meaning, we need more explanations to understand the difference between a fungible and non-fungible token.
Blockchain technology has always been described with cryptocurrencies. If you are new to blockchain, you probably think that this technology is only suitable for the development of crypto assets, but in fact, the potential of using this technology goes beyond cryptocurrencies.
Currently, governments, companies and individuals can place various vital identifiers, certificates and data on the blockchain. Even students can have their academic degree in the form of a blockchain that is recognized all over the world. But what happened that allowed people to access such a special capability. To answer this question, we need to get acquainted with fungible and non-fungible tokens.
