The world is advancing with digital trends and markets are not left out in the wave of innovations. Technology has taken over the system of things, driving all world sectors and economies to adjust to its standards. This includes everyday transactions and purchases.
Digital pieces, cryptocurrencies, and tokens are more on the rise, all powered by blockchain technology. Human inquisition keeps increasing as investors are seeking means to invest in them.
Non-fungible tokens are a popular name in the market, but only a few individuals have deep knowledge about them.
This will be an amazing opportunity to learn about Non-Fungible tokens, what they are, and how they work. An understanding of the NFT market will serve as leverage to maximize profit.
What are Non-Fungible Tokens (NFTs)?
Non-fungible tokens are unique cryptographic assets that are stored on the blockchain for non-exchange purposes but only for transactions between the owner and the buyer.
NFTs make it possible to transform random or unique pieces into sellable material upon verification of ownership. NFT assets and unique pieces include; digital art, images, sports cards, GIFs, music, virtual trading cards, tweets, etc.
Non Fungible Tokens became more popular after Christie auctioned her house on an NFT network, selling it off to Beeple, a digital artist for $69.3 million. More interest in Non-Fungible Tokens pumped up after Twitter CEO, Jack Dorsey sold his first tweet at an auction to @SinaEstavi for $2,915,835.47.
Non Fungible tokens provide a secured means of trading digital assets while eliminating fraudulent attempts. NFTs are designed to remain unique to their true form as they cannot be exchanged with another token or asset.
NFTs have grown large to become a means of investment as there are virtual real estate hosted and traded on NFT networks.
NFT Explained: How do non-fungible tokens work?
Non-fungible tokens are regulated by the NFT market, but like every other cryptographic project, they are decentralized.
The major difference between Cryptocurrencies and Non-Fungible tokens is that NFTs cannot be exchanged with tokens or assets of similar value.
For instance, Bitcoin, Ethereum, and multiple altcoins in existence can be traded or exchanged for coins of similar value.
NFTs are built with non-fungible features that make them irreplaceable with other tokens. Although NFTs cannot be mutually interchangeable, the NFT market permits traders to combine two NFTs to create a third token.
This feature is known as extensibility.
Just like every cryptographic project is tagged to an owner, all tokens on the NFT market are attached with a unique identification detail to trace the ownership of the token holder.
Owners can decide to add additional traceable features to their Non-Fungible Token. Ownership tags like metadata and attributes serve as an insignia to the token.
NFT was initially hosted as an ERC-721 smart contract but was advanced to an ERC-1155 smart contract. While the ERC-721 smart contract was developed to ensure security, the inclusion of metadata, and confirmation of ownership, the ERC-1155 ensures traders of low storage costs and transaction charges.
CryptoKitties is the most popular Non-Fungible token in circulation. CryptoKitties are digital games in the representation of cats, hosted on the Ethereum platform. CryptoKitties allow traders to trade virtual cats.
To maintain non-fungibility, each cat is attached to a unique code and identification that differentiates it from the rest. All prices of these kitties are pegged on ether.
The technology behind crypto kitties allows them to reproduce and produce new offspring. These offspring are entirely different from their parents as they have different valuations, tags, and attributes.
Importance of Non-Fungible Tokens: Why do people want NFTs?
Here are five reasons why people want NFTs.
● Innovation in the Financial Structure.
Financial structures and systems take a step further with the invention, as NFTs offer a secured platform for exchange and investment in virtual assets. These assets can range from digital artworks to real estate.
● Improved Market Flow and Supply Chain.
NFTs eliminate the use of a ‘middle man’, keeping transactions strictly between the buyer and the seller. The market flow becomes traceable and consistent. Traders do not need the services of an agent and allow holders to gain direct access to the market and potential buyers.
● Identity Tags
Non-Fungible Tokens are designed with a unique identifier attached to each one. This identifier makes each token a single entity of its being. The applications of NFTs are limitless, so this advancement can be harnessed for mainstream identification. NFTs can serve as a great identification tag across digital platforms.
● Circulation and Divisibility
Assets on NFT networks like digital arts are not assigned copyright, rather they are encoded with a unique identity that is traced and verified using blockchain technology. In this scenario, assets are transferred to the new owner (the buyer) upon confirmation of the transaction using a digital ledger. The mode of transfer in the NFT network makes it easier to share digital assets between multiple users than it will be done in real life.
Multiple users can invest in fractional real estate units. This fractional ownership spreads across different assets on the NFT network, while ensuring that each owner is restricted to his share of the ownership until they purchase more.
The digital ledger (blockchain) keeps track of NFTs and makes sure they remain in circulation without being stolen or tampered with. This makes Non-Fungible Token transfer a secured transaction protocol.
Where can I buy non-fungible tokens?
There are multiple ways of buying non-fungible tokens, but it begins with owning a digital wallet.
You proceed to buy NFT on NFT marketplaces.
Top 10 Popular NFT marketplaces in 2021 include:
- NFT ShowRoom
- Nifty Gateway
- Axie Marketplace
Most of these marketplaces also allow traders to sell NFTs.
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