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What are Non-Fungible Tokens (NFTs) and how do they work?

by BlockchainX 9 days ago in cryptocurrency
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Maybe you have heard of Non-Fungible Token, but what is it? Is it equivalent to a unique and irreplaceable work of art? Non-convertible tokens, or NFT (Non-Fungible Token ), among other things, are contributing to the NFT development of digital art, becoming a new way of investing in art or digital assets such as GIFs and tweets. In fact, tweets from famous people are already being auctioned off. Furthermore, the application in the financial field of irreplaceable tokens make them indispensable in the crypto industry.

In 2020, the non-fungible token (NFT) market grew by almost 300% , three times its size in 2019. Currently, operations involving NFTs exceed US$300 million in transaction volume. A recent study carried out by NonFungible.com shows us a great growth of this market with the necessary conditions to become the leading digital asset category in the virtual economy. But what are non-fungible tokens (NFTs) really and how do they work?

What is an NFT?

In order to explain what a non-fungible token (TNF) or (NFT) according to its use in English is, we must first break down the term to help us better understand what it is. Token , “symbolic (a)” is an individual unit created by some organizations in order to provide their users with a valuable product to interact with the company. Non-Fungible , defines something unique, that cannot be substituted or replaced by another.

With this clear, we can delve a little more into its meaning in the digital world. In this scope we can define non-fungible tokens as unique digital assets, encrypted and linked to the blockchain. These cannot be exchanged for others, due to their unique and unrepeatable nature. And thanks to their unique features, NFTs also cannot be copied or split into smaller fractional units . As its name suggests, NFT is unique and not tradeable.

In other words, tokens represent something unique, encrypted, that cannot be exchanged and whose use is focused on the representation of assets. Developed using blockchain technology, NFTs are cryptocurrency tokens that represent a single entity on the blockchain . And, since they are not interchangeable, they can serve as proof of authenticity and ownership in the digital field. Thus, NFTs can be taken as digital assets or tokenized versions of assets of real world value.

What is the operation of these tokens?

The rise of Non-Fungible Tokens has been such that a number of different frameworks have been designed for their creation and publication, the most popular of which is known as ERC-721. This Ethernet Square issuance is considered the standard for the creation, issuance, and trading of non-homogeneous or non-exchangeable assets on an Ethereum blockchain. In addition, a newer, newer, and more up-to-date version of the standard called ERC-1155 is now available.

This new standard also allows the conclusion of tradable and non-tradable tokens in a digital contract, opening up a whole new range of possibilities for these types of transactions. In addition, the standardization of NFT issuance allows for a greater degree of interoperability between the various decentralized applications; which ultimately benefits the users. This means that unique resources can be transferred between different applications with relative ease, between different open trading platforms like OpenSea.

These markets interconnect sellers and buyers by assigning a unique value to each token that is traded. Naturally, TNFs are prone to price changes in response to market supply and demand. As with any other valuable item, the value is not attached to the item itself, but is assigned by the people who find it valuable. In this way, each item becomes valuable. And the same is true today with digital collections.

What are your main utilities?

Non-fungible tokens are also known as collector’s cryptocurrencies, and are key components of the new blockchain-based digital economy. In the world of decentralized applications (DApps), they can be used to generate unique digital items . Which can be investment products, collectibles, art or any other product of significant value. And, thanks to the continuous evolution of the field of different online games, some games have already started to have their own economies.

This can help minimize the problem of runaway inflation present in many games today. By using Blockchain technology to tokenize in-game assets, the growth possibilities of this industry will be unimaginable. Apart from this , a large number of assets have also begun to be tokenized in the real world, thanks to the fact that TNFs can represent different types of real assets, which can be contained and traded in the form of tokens on the blockchain.

In this way, the development of art and the revaluation of digital assets are also encouraged , providing much-needed liquidity to markets that lack it, such as works of art, real estate and rare collections, etc. Another field that is benefiting from non-fungible tokens is that of digital identity, the possibility of storing identification data in a chain of blocks increases the security and integrity of the data.

Known Non-Fungible Token-Based Projects

As we have already mentioned, the market for non-fungible tokens has grown by almost 300% in the last year alone. And it does not stop growing, the amount generated by NFT transactions in February of the current year easily averages amounts greater than 300 million dollars. According to data provided by the CryptoSlam portal, most of this income is concentrated in only 5 NFT projects. NBA Top Shot being the biggest revenue generator.

But we can’t overlook TNF’s first high-profile project: the game known as CryptoKitties, which allows players to interact with virtual pets (cats) built on the Ethereum network. With characteristics similar to those of a real cat such as age, color or breed. The one that must be fed and cared for and that can also be sold for a value that may or may not vary according to market conditions .

But we can’t overlook TNF’s first high-profile project: the game known as CryptoKitties, which allows players to interact with virtual pets (cats) built on the Ethereum network. With characteristics similar to those of a real cat such as age, color or breed. The one that must be fed and cared for and that can also be sold for a value that may or may not vary according to market conditions .

Nor can we fail to mention the increase in the number of collectible items that use NFT Development Services , such as online games, among which we can mention:

decentraland

gods unchained

My crypto heroes

Binance Collectibles

crypto seals

Just to name the most popular. Also, one cannot ignore the fact that the most expensive token was sold in February for $1,545,000 on Ethereum and was a piece belonging to the Crypto Punk project. Called “Ape in a fedora hat” .

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BlockchainX

Safe and Secure Blockchain Technology Service Provider

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