What NFT is and How it Works?
NFT stands for a non-fungible token, which means it can neither be replaced nor interchanged since it has unique properties. As a matter of their uniqueness, NFTs are irreplaceable. Each has a digital signature which made the exchange of NFTs impossible for one another. For example, cryptocurrencies can be traded or exchanged for one another and they’re equal in value; you can trade off a bitcoin for another unit as they are not identifiable, but NFTs are unique assets, each has got its characteristics and structure. To simplify this, consider the following example:
If you borrow your friend’s car for a while, you have to return the same car in due time, not a different one, now if you borrow some Ethereum from him/her, you are supposed to return the number of the same units at the time of delivery; Thus in non-fungible tokens, the main issue is nature of the ownership, not quantity and number. Note that this is a relative exchange. Below we will discuss more the general format of these exchanges.
Difference between fungible and non-fungible assets is clearly shown in this image.
Main Features of NFTs
The uniqueness of non-fungible tokens let the issuers to prove ownership of their digital assets. NFTs have distinct personalities. These assets include photos, videos, artwork, property, or event tickets that have become digital assets.
Ownership of non-fungible tokens sets down on the blockchain. The registered information on the blockchain is shared between all users connected to the blockchain network and manipulation of them is impossible, an attempt to make a change in the information of each Block results in the invalidation of the next block’s hash. Therefore, the recorded information is highly secure for the owner of NFTs.
Most NFTs cannot be split into smaller denominations; one cannot trade-off or transfer a fraction of NFTs.
What is the structure of NFTs?
NFT was first introduced in the Ethereum Development Statement. It was later developed in the EIP-1155 Multi Token standard. As a result, currently Ethereum Blockchain is the first and the best marketplace for NFTs.
ERC-721 Non-Fungible Token Standard
The ERC-721 (Ethereum Request for Comments 721), proposed by William Entriken, Dieter Shirley, Jacob Evans, and Nastassia Sachs in January 2018, is a Non-Fungible Token Standard that implements an API for tokens within Smart Contracts. This standard specifies the ownership of each token for each address and the portability.
Execution code for ERC-721 standard
The ERC-1155 standard allows you to create both interchangeable and non-interchangeable tokens. This standard is applied in computer games as well. For instance, specific numbers like 1000 of an item such as a weapon are offered to players. Unlike ERC-721 which each token is unique and belongs to only one person, in contrary, by this standard, you can divide the same number of items between different addresses.
Execution code for ERC-1155 standard
The Advantages Of Non-Fungible Tokens (NFTs)
● The ability to prove ownership
NFTs are stored in the blockchain network. Hence, the certificate of ownership is available on multiple networks, making it possible to prove a digital asset’s ownership.
● Easy implementation
The NFT marketplace and its activities such as mint and buy or sell are available to everyone.
● Fraud Proof
NFT data and transaction are recorded and stored in the network and can not be tampered with or forged until a transaction is approved.
NFTs have the most up-to-date proprietary information, so they are user-friendly, and tracing them is easy.
All NFTs and related products can be traded off as one desires.
Application of NFT in Industry and Technology
As mentioned above, people can turn their assets, including works of art, video, property, etc., into digital assets with help of NFT technology and keep or sell them in their wallets.
Application of NFT in the game industry
NFT has great potential to make progress in the gaming industry. CryptoKitties, and CryptoPunks are the current games in the field of cryptocurrency; One amazing feature of these games is where you can create your virtual character or virtual pet. the exchange of these virtual characters with the desired price is possible.
Application of NFT in Authentication
NFTs are ideal for counterfeiting by digitizing our identities, academic or medical credentials, and even our appearance. Application of NFT in works of art :
Artists can convert their works to NFT to protect their copyright before any exchange. They can also showcase their work through different NFT marketplaces.
Application of NFT in Ceremonies
Tickets of important events can be converted to NFT to prevent counterfeiting.
In recent years, NFT has attracted the attention of many investors and individuals. The NFT 2f-hour trading volume is about $ 4.5 billion compared to the total 24-hour trading volume of the cryptocurrency market which is $ 341 billion. NFT market liquidity currently accounts for 1.3% of the total cryptocurrency market volume. This statistic has only been reported for a short period of 5 months and is still to be increased.
The NFT market is very new and holds a positive growth potential, so if you are planning to invest in NFT market, it’s good to educate yourself in this field.