What Are Non-Fungible Tokens?
NFTs are new and unique representations of goods or assets that take the form of digital tokens. Through the use of cryptography, NFTs can prove the authenticity, as well as ownership of such assets and goods.
NFTs are quite unique, and no other item can replace them, the possible implications of this are many, and they might even create an entirely new class of digital assets in the future. It is even possible that real-world items and assets might be this closely tied to digital tokens, all with the goal of securing the ownership of such items.
The concept of NFTs
The NFTs were brought to the mainstream together with CryptoKitties. This is a concept that gained a lot of popularity near the end of the previous year. Some of them were so popular, that they were priced and sold for hundreds of thousands of dollars. Despite the fact that NFT protocols and standards exist apart from Ethereum, the most important standard which allows their creation is the one connected to ERC-721 tokens.
The ERC721 standard intends to serve as a standard API for non-fungible tokens within a smart contract.
The standard has the following functions and events in the smart contract which enable usage, ownership, and transfer of non fungible tokens (NFT’s)
According to the specification, each NFT is identified by a unique 256-bit positive integer. The pair of (address, uint256) where uint256 is an unsigned integer is a unique identifier of a nonfungible asset on the blockchain. This integer is equivalent to a unique identifier that never changes and is bound to that specific asset.
The specification draws several functions from the ERC-20 specification to provide backward compatibility.
name – Name of the token/asset
symbol – Symbol of the token/asset
balanceOf – the balance of a given address
totalSupply – total supply of the asset/token
This has become the very base for the making, trading, and similar actions regarding the assets that are classified as non-fungible.
Types of NFTs and their use cases
When it comes to NFTs, it is important to note that they create a verifiable scarcity of certain assets. This was a popular idea at first, and has seen a lot of success with CryptoKitties. However, ever since then, the NFTs’ possible applications have grown, and has even expanded outside of the digital world.
The gaming industry’s continuous acceptance of cryptos has been expanded to also include non-fungible assets as well. For example, the platform called WAX now allows its users to use NFTs for trading within a decentralized marketplace. Not only that, but they can even make their personal digital stores, where they can exchange goods.
There are even discussions of concepts like fractional ownership of various real-world art pieces. The asset can be sold off to an entire group of owners by being split into smaller parts. When the art piece is sold for profit at the later date, these fragment holders will receive a part of the profits, in regards to their fractional stake.
This concept can go even bigger, and can even be applied to the world of real estate. For now, there are several marketplaces dedicated to trading and exchanging NFTs, and they include names like WAX, which we mentioned already, but also Rare Bits, and OpenBazaar.
What awaits the NFTs in the future?
As we have mentioned earlier, the concept of NFTs is still in an early stage, and even now, it has many potential uses. In the future, it might be present in a wide range of different markets. The digitization of the world, adoption of IoT tech, blockchain technology, and cryptos, in general, continue to progress with each passing day. New practical uses for these technologies are emerging on a daily basis at this point, and we can expect that the same will be true for the NFT use as well.
WAX has already given us a lot to go from when it comes to potential uses of this concept. Soon, it might be possible to use them to claim ownership of all kinds of physical collectibles. Exchanges like WAX would be capable of enabling the tokenization of such collectibles.
There is a lot of progress being made in this field all the time, and while we are certainly not there yet, the rapid rate of tech progress might get us to that point within a few years.
Some of the more traditional assets, like stocks, bonds, precious metals and alike, might also be tokenized. The possibilities might actually be endless, once the systems become more reliable and efficient. The problems that need taking care of currently are high gas costs, as well as scalability.
Non-Fungible Tokens Conclusion
NFTs are possibly a new method of tokenizing real-life goods and assets that can then be traded off, sold, or even shared by multiple individual token holders. Those who own the tokens would also act as owners of the asset in question. This is a rather innovative use of this technology, with a lot of possible application in the future.
It will definitely remain as one of the more practical uses of digital currencies, and they might even reach a mainstream adoption, due to the rapid progress within the industry. This is certainly an interesting concept, and quite possibly one of the most practical ways to use digital tokens.