An Introduction to NFTs
Want your art to forever be credited to you? And not just art, but domains, your own video game character or a gadget of the character, ornaments, clothing, anything! How fascinating it would be to have these collectibles being traded as tokens, to have some perceived value for your art! That’s exactly what NFTs do.
An NFT is a non-fungible token.
When you buy Bitcoin — are you ever concerned with which particular Bitcoin you purchase? Each individual coin is uniform, replaceable and holds the same value. Let’s put it another way — the first BTC mined is exactly equal to the 18 millionth BTC mined.
An NFT is different, a special kind of crypto-token where every token is unique. Each NFT has its own characteristics that sets it apart from another.
Think of it this way, 1 BTC = 1 BTC. But, 1 NFT = ?
Tell me more!
In reality, the collectibles are tokenized. They are given a cryptographic identity (yes, with hash values and all that).
NFTs represent unique items and are not directly interchangeable with another token. That’s what I mean by:
1 BTC = 1 BTC but 1 NFT =/= 1 NFT.
Your NFT can have a greater/lesser value than another NFT. They can be traded at different prices.
If you collect items, you already know what that means. For someone who collects football jerseys of a certain player would know the value of each jersey for different reasons. It may be from a world cup final, champions league final, a derby, etc. Each jersey holds a different value.
What makes my token unique?
For rupees or dollars, it doesn’t matter where it comes from, the history of it, whereas for your NFT it matters. What makes an NFT unique can be for different reasons.
How rare is the collectible (Is it from 1 out of 5 or 1 out of 100)? Is it an original or is it a duplicate? Is it one of a kind? The creator’s reputation The quality of the NFT
All these factors give your NFT its value. Also, they need to be verified. That’s where blockchain technology comes in.
By tokenizing the item (giving it a cryptographic identity), it provides authenticity and trust. That leaves out any potential counterfeit. Any little change you make with your NFT needs to be signed. That transaction is recorded. That’s where the history of the collectible matters.
You can see the entire history of the collectible.
Controversies? Of course!
Suppose there’s an artwork up for sale as an NFT.
Just with any art it can be traded, people can take a screenshot of its work and then save a copy of it. Although it won’t be the original artwork, chances are it will look practically identical to the original. Beauty really lies in the eyes of the beholder.
You know how bitcoin solves the problem of double spending? Some tend to believe that the NFTs introduced it again. The holder can make a copy of the original digital token and put that up.
Here’s a little trivia…
There are companies that not only provide the marketplace to sell or buy NFTs, but also provide applications to store them. Let’s say, your instagram and facebook page being a virtual photo album. Yes, you can sell them as well!
It’s not just art or collectibles, it can be a VIRTUAL PIECE OF LAND as well. Companies are buying large amounts of virtual real estate properties, because there’s an expected crypto real estate boom. You can sell, buy, and rent these properties. Oh, the times we live in!
NFTs live on the Ethereum blockchain, no wonder the gas prices are high and it takes a while for the transactions to go through. So there are signs of weakness when it comes to scaling, unless there are other solutions.
Let us know what other use cases you can think of for NFTs?
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