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What is NFT?

Non-fungible tokens, also known as NFTs, are crypto units; they are cryptographic assets on blockchain with exclusive identification codes and metadata that separate them from each other. Unlike cryptocurrencies as you look at both the Fungible tokens and cryptocurrencies, you cannot trade or exchange them at an equivalent value for anything in the online market. You cannot differentiate a cryptocurrency from another. They are precisely the same and are a means for commercial transactions. The only difference is the equivalency value.

Major Information

  • NFTs are unique in structure and identification that every cryptographic token is different, and it exists on the blockchain. No NFTs can have the same identification mark that prevents them from replicas.
  • NFTs usually represent tangible worldly objects like artwork, land and building properties.
  • “Tokenizing” makes tangible assets salable, purchasable and tradable. Tokenizing is more efficient, and it also reduces the chances of duplicity and fraud.
  • People create their own NFTs and use them to represent identities, property rights, and more.

NFT is potentially powerful and valuable in many ways. The discrete structure of each NFT is applicable for representing tangible assets like real estate properties and artwork on a digital ground. The primary concern of removing intermediaries from financial transactions is also there. But as these NFTs are based on blockchains, NFTs can also connect artists with audiences or identity management side-by-side, removing intermediaries. NFTs can simplify transactions, remove intermediaries, and create new markets too.

  • Beeple NFTs made the sales achievement of over $69 million In early March last year.
  • It was a record to sell the art pieces online and at very high prices.
  • Beeples made its first 5000 days work collage composition and sold it as an NFT.

Mostly the current market of NFTs is revolving around collectibles, such as digital artwork, sports cards, and rarities. Perhaps NBA Top Shot is the most famous space. You can collect non-fungible tokenized NBA moments easily in a digital card form.

Some of these cards have sold for millions of dollars. Not to mention the recent activity on Twitter from the CEO, Jack Dorsey, he tweeted a tokenized version of the first tweet ever written where he wrote “just setting up my twttr.” and you know what the NFT version of this first-ever tweet has burned the record and been bid up to $2.5 million.

Understanding the NFTs

Like tangible and physical currency, cryptocurrencies are fungible, i.e., they can be traded or exchanged, one for another. For example, one Bitcoin is always equal in value to another Bitcoin. Similarly, a single unit of Ether is always similar to another unit. This fungibility characteristic makes cryptocurrencies suitable for use as a secure medium of transaction in the digital economy.

NFTs are unique and irreplaceable tokens, making it impossible for one non-fungible token to be equal. This has completely changed the cryptocurrency ecosystem. They are digital representations of assets linked to digital passports because each token contains a unique, non-transferable identity to distinguish it from other tokens. They are also extensible, meaning you can combine one NFT with another to “breed” a third, unique NFT.

Just like Bitcoin, NFTs also contain ownership details for easy identification and transfer between token holders. Owners can also add metadata or attributes about the asset in NFTs. For example, tokens representing coffee beans can be classified as fair trade. Or artists can sign their digital artwork with their signature in the metadata.

NFTs evolved from the ERC-721 standard. Developed by some of the same people responsible for the ERC-20 smart contract, ERC-721 defines the minimum interface – ownership details, security, and metadata – required to exchange and distribute gaming tokens. The ERC-1155 standard takes the concept further by reducing the transaction and storage costs necessary for NFTs and batching multiple types of non-fungible tokens into a single contract.

Perhaps the most famous use case for NFTs is that of crypto kitties. Launched in November 2017, crypto kitties are digital representations of cats with unique identifications on Ethereum’s blockchain. Each kitty is special and has a price in Ether. They reproduce among themselves and produce new offspring, which have different attributes and valuations than their parents. Within a few short weeks of being launched, crypto kitties racked up a fan base that spent $20 million worth of ether purchasing, feeding, and nurturing them. Some enthusiasts even spent upwards of $100,000 on the effort.

While the crypto kitties use case may sound trivial, succeeding ones have more serious business implications. For example, NFTs have been used in private equity transactions as well as real estate deals. One of the implications of enabling multiple types of tokens in a contract is providing escrow for different kinds of NFTs, from artwork to real estate, into a single financial transaction.

Importance of Non-Fungible Tokens

Once the cryptocurrency launched, nobody knew that it would be all over the digital market, and people were not expecting so much. But the response was different from what we presumed. Now Non-fungible tokens are an evolution of the concept of cryptocurrencies. Modern financial systems consist of sophisticated trading and loan systems for other asset types, ranging from real estate to lending contracts to artwork. By enabling digital representations of physical assets, NFTs are a step forward in the reinvention of this infrastructure.

The concept of digital assets is not new, nor is the use of unique identification. However, both the ideas’ combined benefits can make a tamper-resistant blockchain of intelligent contracts, and they become a potent force for change.

The growth of a physical asset into a digital streamline method, and removing intermediaries is the main focus of NFT. NFTs representing digital or physical artwork on a blockchain eradicates the need for a middleman and allows artists to connect directly with their audiences. They can also improve business processes. For example, an NFT for a wine bottle will make it easier for different factors in a supply chain to interact with it and help track its origin, composition, and marketing throughout the entire process.

Non-fungible tokens are also excellent for identification management. If you can imagine the digital NFT Passport that should be available at every entry and exit point. By converting individual passports into NFTs, each with its unique identifying characteristics, it is possible to streamline jurisdictions’ entry and exit processes. Expanding this use case, NFTs can be used for identity management within the digital realm as well.

It is much easier to divide a digital real estate asset among multiple owners with NFT tokenization than a physical one. That tokenization ethic need not be constrained to real estate, like other assets, such as artwork. Thus, a painting need not always have a single owner.

It can have different owners. Each owner purchases the digital token of painting at different prices, which are not equal to each other, making a high rise in the worth and price of the art piece. The NFT tokenization thus makes revenues through these arrangements.

NFTs are a potential substitution in the creation of new markets and forms of property purchase. We all know that the piece of real estate propels out into different divisions, containing various features and types. Each piece of land is unique, has a different price, and has an NFT endorsement depending on its parts. Real estate trading, a complex and bureaucratic affair, can be simplified by incorporating relevant metadata into each unique NFT.

Decentraland is a virtual reality platform on Ethereum’s blockchain, and it has already implemented this concept. As NFTs become more decently integrated within financial infrastructure, they may execute the exact purport of tokenized pieces of land, differing in value and location, in the concrete world.

Next step:

Where and How to Buy NFT?

Buying and selling process of NFT is not very complex, but every process has pre and post requirements and to get an idea of that process
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