NFT | Non-Fungible Tokens 101 Guide
First Of All… What Does Fungible & Non-Fungible Mean?
Fungible: If an item is fungible, then it can be substituted or exchanged for any similar item. Fiat currencies, like the US dollar, contain fungible units. A one dollar bill can be exchanged for any other dollar bill.
Cryptocurrency tokens like Bitcoin, Ethereum and MANA are all fungible because one token can be exchanged for any other token of the same currency. The only thing that changes is a record on the blockchain registering the transaction.
Non-Fungible: A non-fungible asset therefore has the opposite characteristics to this definition: they are unique, irreplaceable and non-interchangeable.
One physical example of a non-fungible asset could be a plane ticket. While they look the same as other tickets, each one has different passenger names, destinations, departure times and seat numbers.
Now that you understand the concept of Fungibility, let’s move forward! The recent appearance of non-fungible tokens has left many confused regarding what these tokens are, and what do they do.
Every currency, whether crypto or a fiat, needs fungibility if it wishes to be seen and used as a medium of exchange, a unit of account, or a store of value. In fact, when it comes to cryptocurrencies, fungibility might be even more important, since it allows them to maintain the legitimacy of interchangeability between different units.
Blockchain is literally a chain of blocks. When we say the words “block” and “chain” in this context, we are actually talking about digital information (the “block”) stored in a public database (the “chain”). “Blocks” on the blockchain are made up of digital pieces of information. Specifically, they have three parts: Transactions (day, time, amount, etc); Participants (user’s “digital” signature”) and a Block to distinguish them from each other.
Ethereum is an open-source platform that enables thousands of decentralized cryptocurrencies and projects to be built and deployed on their open, public blockchain.
ERC-721 is the seven hundred and twenty-first proposal in the Ethereum proposal process (EIPs) to standardize how these applications are made and how Ethereum will work.
The World Of Collectibles
Crypto Collectibles and the ERC- 721 Token
The ERC-721 protocol makes each token unique. They may operate on the same smart contract, but each token has its own cryptographic signature.
Perhaps the most common reference or use case for NFTs of the
ERC-721 standard, is CryptoKitties, which uses the standard to power a crypto-collectible online game.
There are also many other useful applications for ERC-721 contracts.
Uses of Non-Fungible Tokens (NFTs)
NFTs are shaping the future of technology, including: securing digital ownership, protecting intellectual property, tracking digital assets and overall creating real world value.
What Can We Do With NFTs?
NFTs are best known for their utility as Collectibles, where users can keep digital assets assigned to their names and ownership is immutable.
NFTs give players real ownership over in-game items. Gamers can monetize their efforts by actually owning (and even selling) the rare assets they earn in games.
Tokenization of event tickets prevents fraud (including fake tickets) and opens up new, decentralized markets for trading and reselling.
Identity & Certificates
Birth certificates, passports, driving licenses, contracts or even patents can be tokenized with NFTs and used for identity authentication and certification.
Charity & Donation
NFTs can provide entrepreneurs with new ways to raise funds and engage with their stakeholders. They can also assure the safety of transfers and support Not-For-Profit organizations to manage their funds.
Creating NFT based licenses can reduce software piracy, and even allow people to sell their license when they no longer need it. The license here acts as an asset.
The Non-Fungible Future
The realm of possibilities for non-fungible digital assets is vast. Your identity, qualifications, real-world property, and digital collectibles could all exist on the blockchain. They would be tokens you can keep, show, share, or sell.
NFTs can empower us as individuals to instantly transact with anyone in the world, while companies can manage their entire inventories using digital tokens. Given time and investment, NFTs may become the foundation for future economies.
Artists could launch NFT smart contracts which store their music, prove its authenticity and give the holder immutable legal license.
Buyers and sellers will store property records in the Ethereum blockchain, allowing the property purchase process to be executed in an intelligent contract, with the actions planned for each of the parties involved.
Selling a tokenized car would be as easy as accepting the payment from the buyer and transferring the token ownership. It is this ease and frictionless way of functioning that gives tokens an edge in real-world situations.
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