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What is Non Fungible Token and What is NFT mean ?

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What is Non Fungible Token and What is NFT mean ?
What is Non Fungible Token and What is NFT mean ?

What is  Non-Fungible Token and What is NFT mean?

As per WiKi

“A non-fungible token (NFT) is a unique and non-interchangeable unit of data stored on a   blockchain, a form of digital ledger.

NFTs can be associated with reproducible digital files such as photos, videos, and audio.

NFTs use a digital ledger to provide a public certificate of authenticity or proof of ownership, but do not restrict the sharing or copying of the underlying digital files.

The lack of interchangeability (fungibility) distinguishes NFTs from blockchain cryptocurrencies such as Bitcoin.

An NFT is a special type of digital asset or token that can be proved to be unique and not interchangeable with another digital asset token (i.e., fungible). This is why it is referred to as a “non-fungible token”

What is NFT mean – Understanding NFT

NFT is one of a kind of digital asset that represent real-world objects such as music, art, in-game articles video, or even social media post. Being non-fungible, NFT can’t be interchanged with anything else.

It is unique and irreplaceable. Even though one can get a free copy of one item in an NFT, the unique property will surely be missing.

For example, though millions of copies of Van Gogh’s painting The Starry Night is available across the globe, but the original one, kept in Pushkin Museum, still holds the true value.

NFT allow people to prove ownership of digital assets.  Owners can also program royalties for themself into the metadata before selling on, to receive a percentage of future sales.

No matter how many times something has been copied, the current ownership of the original file will always be provable.

To better understand the concept, it is helpful to contrast an NFT with a fungible token or asset.

Fungible tokens, which are the most in the blockchain realm, are tokens in which one has the same characteristics as any other, and thus can be easily replaced by any identical token.

The most familiar illustration of a “fungible” asset is cash. A 100 USD note can be interchanged by any other 100 USD note.

Conversely, real-world examples of non-fungible assets include legal records of asset ownership such as titles to a property, as well as artworks or collectibles.

Non-fungible in an economic term that you could use to describe things like a song file, a painting, or a house.

These things are not interchangeable with other items, because they have unique properties.

Although a painting can be copied or photographed, the original is still the original & the replica doesn’t have the same value.

So NFT represent ownership of unique items like art, collectibles, even real estate. They can only have one official owner at a time & they are secured by the Ethereum blockchain.

No one can copy-paste & create a new NFT. On similar lines, no one can modify the record of ownership of an NFT.

Characteristics of NFTs

  1. Uniqueness: With NFTs it is possible to produce a limited number of tokens, with each being individually identifiable.
  2. Rarity: Rarity in NFTs can come in many forms and can be either artificial, numerical or historical.
  3. Ownership: Proof of ownership of underlying assets, the potential of fractional ownership, provenance tracking of assets are some characteristics that are very important in the context of NFTs backed by real-world tangible assets.
  4. Immutability: This is an inherent quality of all blockchain-based tokens. The tokens as well as the information embedded on the tokens are highly resistant to tampering. This results in substantial trust and transparency.
  5. Programmability: In addition to allowing artistic or business expression, NFTs can be programmed in any way that programmable software can – for example to ensure artists continue to receive residuals or moral rights throughout the lifetime of work and not just the first sale.

Prominent use cases of NFT

  1. Digital art: NFT platforms provide an avenue for artists to showcase their work, in some cases directly to the public with new or no intermediaries and lower associated costs.

Here, with the help of smart contracts, the artist can connect directly to the public. Smart contracts helps not just the initial sale but also the , subsequent sales.

  1. In-game assets: Major gaming houses have already started experimenting with tokens in their platform besides provenance tracking and transaction recording on the blockchain. NFTs bring about an additional source of revenue for gamers who can buy/sell the collectibles, in-game “skins” and other assets.
  1. Content ownership: Videos/audio content in the art and music space have recently been auctioned out by artists via NFTs to raise funds for new albums, sell out old records.

Here, the NFTs depict a right of ownership of the content, and any proceeds earned from the resale of underlying assets will be distributed proportionally to the NFT token holders.

  1. Certificates: NFTs are utilized for transparency, provenance tracking and to facilitate the authenticity and verification of records.

The Amitabh Bachchan NFT is a set of limited-edition digital collectibles featuring the Bollywood superstar.

It includes some of the most exclusive creations featuring the superstar like poetry in his voice, vintage posters, etc.

Madhushala NFT is the poem collection of actor father’s recorded in the superstar’s own voice.

Type of Token

NFT are created in accordance with certain frameworks or standards and deployed on-chain.

In this way, NFTs can be managed, traded, and owned in accordance with the properties of the framework or protocol as those have been defined according to their issuance properties.

For blockchains that support smart contracts, token standards are often included to tell people how to create, issue and deploy new tokens. In principle, there are three major types of tokens

  1. Fungible tokens are like coins of a currency where each piece is interchangeable with one another, having the same meaning and value. ERC-20 is the most well-known standard for fungible tokens.
  2. Non-fungible tokens are like individual pieces of art. Each piece is distinguishable and might be totally different from every other piece. ERC-721 is the most well-known standard for fungible tokens
  3. Hybrid tokens combine the characteristics of fungible and non-fungible tokens, having classes of tokens where each token is interchangeable but only within the class. Tokens among classes cannot be exchanged with one another.

Popularity of NFT

One of the major reasons for the current popularity of NFT is due to ‘scarcity’. (We can say that essentially, NFTs have created ‘digital scarcity’).

This stands in stark contrast to most digital creations, which are almost always infinite in supply. Hypothetically, cutting off the supply should raise the value of a given asset, assuming it’s in demand.

 NFT allows the buyer to own the original item. Not only that, but it also contains built-in authentication, which serves as proof of ownership. Collectors (Owners) value those “digital bragging rights” almost more than the item itself.

Popular NFT Marketplaces

Currently, the largest NFT marketplaces are:

  1. io: This peer-to-peer platform is very popular (A purveyor of “rare digital items and collectibles).
  2. Rarible: Rarible is a democratic, open marketplace that allows artists and creators to issue and sell NFTs.
  3. Foundation: Here, artists must receive “upvotes” or an invitation from fellow creators to post their art. The community’s exclusivity and cost of entry—artists must also purchase “gas” to mint NFTs—means it may boast higher-caliber artwork.

Conclusion :What is a Non-Fungible Token and What is NFT mean?

NFT stands for non-fungible token. It’s generally built using the same kind of programming as cryptocurrency, like Bitcoin, but there is one big difference.

Physical money and cryptocurrencies are “fungible,” meaning they can be traded or exchanged for one another. They’re also equal in value—one dollar is always worth another dollar; one Bitcoin is always equal to another Bitcoin.

NFTs are different. Each has a digital signature that makes it impossible for NFTs to be exchanged for or equal to one another.

The unique identity and ownership of an NFT is verifiable via the blockchain ledger.

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