What is a token?
A token refers to a tangible representation of a sense, fact, or quality that people encounter in their daily lives. For example, a hotel key is proof or representation of payment for a room, or your ID card indicates your employment with a company. Also, a person’s driver’s license indicates that he or she has passed a driving test and is qualified to drive. Similarly, a token can be described as a specific entity in the crypto space.
This token can have value, voting rights, shares, or anything else and is not limited to a specific role, but can be assigned different roles. A token can represent a specific feature or asset of a company, and it is possible for the company to issue tokens to its investors in public auctions.
What is the importance of a token?
Now the question arises as to what is the role and importance of tokens and why should we first be familiar with tokens to get acquainted with NFTs. As mentioned, tokens are not limited to a specific role and have many uses, some of which we will mention below.
• Tokens act as a gateway to enter blockchain applications and services.
• Tokens play a role in verifying the eligibility of individuals in some voting rights.
• Tokens can play an important role in the user experience. For example, with the help of users' tokens in an Internet browser, various services can be provided to them.
• One of the important roles of tokens is the exchange of assets (values). In fact, tokens have been used in blockchain to convert value.
• In addition to all the above uses, tokens can represent ownership of a specific product, and it is this use that shows the difference between fungible tokens and non-fungible tokens.
What is the basis for the difference between tokens?
There is no doubt that blockchain is a suitable technology for managing digital assets of various types because it has high security. Also, tokens that are unique and can store data and information instead of value are preferred over other tokens. This type of token, known as non-fungible tokens, is defined in Ethereum with the ERC-721 standard. As a result, it is well known that fungible tokens and non-fungible tokens such as NFT focus on storing information.
In economic definitions, a fungible asset refers to its ability to be exchanged for other assets or goods of the same value. The most common example of a fungible asset is money and fiat currency. For example, a 50,000 Tomans note is worth the same to each person. Gold is another example of a fungible asset because an ounce of gold in one country will have the same value in another country. But as mentioned at the beginning of the text, NFTs are non-fungible tokens and cannot be exchanged for other tokens and receive their value from the commodity assigned to them.
Fungible tokens, as their name suggests, are easily exchanged for each other. In fact, both tokens of the fungible tokens of a digital currency project have the same conditions and therefore their exchange can be easily done. The feature of fungibility in tokens used for payment is very important because one of the main features of money is fungibility. You can exchange any ten thousand tomans banknote for another ten thousand tomans banknote printed on a different date and this exchange has no effect on the value of your assets, but it is not possible to do this with two works of art.
In contrast, non-fungible tokens have a “Unique Value Proposition” (UVP), and each has a unique identifier to distinguish it from other tokens. This unique feature makes NFTs rare and valuable due to their high demand. In addition, NFTs can be used to transfer ownership in addition to trading.
How do you buy an NFT?
NFTs can be purchased through various platforms, each with a different purchasing method. However, to buy an NFT from any platform, you need a cryptocurrency wallet specific to that platform, and this wallet must be topped up with cryptocurrencies accepted by the platform through cryptocurrency exchanges. Due to the high demand for NFTs, they are sold at various events and auctions, and buyers must register for the event and top up their wallets in advance. In these auctions, each NFT is sold at the highest price offered by users. Below is a list of NFT seller sites.
• Nifty Gateway
• Foundation
• VIV3
• BakerySwap
• Axie
• Rarible
• NFT ShowRoom
• OpenSea
• SuperRare
In addition, NFTs have recently been used for in-app purchases in games. These assets are bought and sold by players. For example, swords of a specific character in the game, different skins, or avatars are all considered to be among these assets.
How is an NFT created?
So far we have been introduced to NFT and its uses. Now the question arises how to create an NFT and participate in its sale. It is good to know that the creator of the image below sold it for $3,600.
Simply put, it is possible for anyone to create a work of art and sell it by converting it into an NFT on the blockchain. You can even take a percentage as a commission.
Consider that you will receive this commission by reselling it. Like buying NFTs, you need a wallet full of cryptocurrency to create them, which makes it difficult to create.
The hidden costs of this work are astronomical, as sites charge a “transaction fee” (Gas Fee) for each sale. You also need to consider blockchain network fees, conversion rates, and their volatility. Taking all of this into account, you may come to the conclusion that the fees paid will be much higher than the money received from selling the NFT. Of course, keep in mind that the commission percentage of some sites is different from others, and you can estimate the cost with a little research.
