What are Non-Fungible Tokens?
Latest posts by Aran Davies (see all)
- Dev Team Roles and Responsibilities - 5 Jul, 2022
- Microservices Architecture vs Monolithic Architecture - 5 Jul, 2022
- How to Transition Away from a Bad Developer? - 29 Jun, 2022
Non-fungible tokens (NFTs) are cryptographic tokens created using blockchain technology. They have distinct characteristics. NFTs have several use cases, and they have a growing market.
The similarities of NFTs with other cryptocurrencies or crypto tokens
NFTs have many similarities with other crypto tokens or cryptocurrencies. They are created on a decentralized blockchain like Ethereum.
Creators of these cryptographic assets use established cryptographic standards to build them. They use the protocol program of a decentralized blockchain network to make NFTs available to everyone interested in them. One can trade NFTs and store them in crypto wallets.
The distinct characteristics of NFTs
NFTs have two distinct characteristics that set them apart from other cryptocurrencies. Firstly, each NFT is unique. One Bitcoin is exactly the same as another Bitcoin, which is also true for Ether, Litecoin, etc. However, no one NFT is equivalent to another.
The second unique characteristic of NFTs is their indivisibility. You can use a fraction of a Bitcoin or Ether in a transaction, however, NFTs don’t allow that.
NFT use cases
The distinct characteristics of NFTs make them suitable for tokenizing anything unique. NFTs have many use cases, e.g.:
- Artists can use NFTs to prove that they indeed are the creators of their digital artworks. This helps them to get fair compensation. NFTs can tokenize a wide range of digital artworks like collages and music.
- Game developers can tokenize unique characters or trading cards in video games.
- Real estate businesses can use NFTs for simplifying transactions and proving ownership.
- Healthcare delivery organizations can secure medical records of patients by using NFTs.
- NFTs can help owners of intellectual properties to prove their ownership.
- The supply chain sector can use NFTs to uniquely identify products and track them.
- Managing academic credentials can be hard. You can use NFTs to tokenize them, which makes it easier to manage them.
Many NFTs representing digital arts or unique game characters commanded a high price, and this trend is growing.
Ethereum: A popular platform to develop NFTs
Many blockchain developers prefer the Ethereum blockchain platform to create NFTs. The reasons are as follows:
- Many crypto projects have already used Ethereum to create their crypto tokens, which makes Ethereum a prominent choice.
- Ethereum offers the Ethereum Virtual Machine (EVM), which provides runtime environments for blockchain applications.
- The Ethereum project team brought concepts like smart contracts and decentralized apps (DApps), which enabled developers to create blockchain apps.
- Ethereum offers the ERC-721 standard, a well-known standard for developing NFTs.
- Developers can use programming languages like Solidity and Vyper to develop smart contracts needed for NFTs on Ethereum.
- There are useful tools for Ethereum blockchain development. A few examples are the Truffle Suite of tools, the Web3.js API, the MetaMask wallet, the Remix IDE, and the Ropsten test network.
Some of the top-selling NFTs are CryptoPunks, Azuki, Tasty Bones XYZ, Bored Ape Yacht Club, mfers, Clone X – X Takashi Murakami, NFT Worlds, Karafuru, Mutant Ape Yacht Club, and Edenhorde.
The trend of NFT games had started with CryptoKitties in November 2017. At the time of writing, some of the top NFT games are Axie Infinity, The Sandbox, Gods Unchained, DeFi Kingdoms, and Splinterlands.
At the time of writing, the top NFT marketplaces are OpenSea, Axie Marketplace, NBA Top Shot Marketplaces, Rarible, SuperRare, Mintable, and Theta Drop.