What Are NFTs | Non Fungible Tokens
Non Fungible Tokens are a new talk of town. They have become a new craze in cryptocurrency and blockchain world. You might have recently heard that Wikipedia creator’s computer and Non-Fungible Tokens were auctioned for almost $1 Million, and it might have compelled you to think, what these NFTs are. If you want to know about Non Fungible Tokens in simpler terms, then you are at the right place.
What Are NFTs
NFT stands for Nun Fungible Tokens. Simply put, Fungible refers to any such thing that can be replaced by another thing of equal value. For example, a note of 500 Dollars can be replaced by another note of 500 Dollars or 5 notes of 100 Dollars. Similarly, a Non Fungible is any such thing, that can’t be replaced by any similar thing, as it is unique in value. Token refers to a certificate, code or contract, and it is stored on a Blockchain.
NFTs are a set of non-replaceable data that represents a digital asset on a blockchain. If you have any digital asset, that is rare, unique and can’t be replaced by anyother thing, it is appended with a piece of code (identification code or token), which is then stored on a blockchain, and is known as a Non Fungible Token. This code helps in ascertaining the ownership of the digital asset and prevents its piracy and duplication.
Non Fungible Tokens, as the name suggests are the pieces of encrypted data, that are irreplaceable and represent a unique and a non-replaceable asset. These pieces of data grant ownership rights to the beholder and make the digital assets tradeable and verifiable using blockchain technology.
NFTs can include anything ranging from tweets to digital art to a song or an album. If any tweet is non-fungible, it means it can’t be replaced by anyother thing, and if it is a token, it means it is represented by a piece of data on a blockchain. Unlike a bitcoin which can easily be replaced with another one, as both have same value.
Suppose you and your friend, each have a Bitcoin and a drawing pad. Both of you make copies of Monalisa painting, on your respective drawing pads, and suddenly Leonardo Da Vinci, emerges out of his grave, and declares to the world that your painting is going to be digital version of Monalisa and appends his signature on it. Will you ever interchange your painting with your friend now? No, and therefore it has become non-replaceable or Non Fungible. Will you exchange your Bitcoin with your friend? Yes, you will, because none is superior than the other.
Since your painting has increased in value, you would like to maintain ownership rights on it. To do so, you will secure your digital painting with a piece of code, called token. This piece of code will be stored in a Blockchain as Non Fungible Token. Whoever holds the code, holds the ownership rights. This token has no value of its own. It derives value from the asset, which it represents on a blockchain.
Importance Of NFTs
NFTs or Non Fungible Tokens are a new use case of cryptocurrency and its underlying Blockchain technology. It is going to revolutionise the world in the following ways:
- NFTs are going to be of immense use especially in validating ownership rights. NFTs contain the ownership details in encrypted form on a blockchain, which it makes easier to establish and validate the ownership.
- NFTs removes the intermediaries that existed in conventional sale and buying of art forms and rare assets. The original owner has an exclusive control over his asset and it allows him to connect directly with his audience. It is just the ownership that gets validated through the blockchain. All this boosts transparency and discourages piracy and duplication.
- NFTs can help in the diversification of ownership. Imagine a famous and a rare painting in physical form. It can be owned by a single person, as multiple ownership does not make any sense here. Now imagine the same painting in digital form and tokenised on a blockchain, it can be owned by many persons.
- NFTs will pave way for metaverse. Many metaverse companies like Sandbox have many digital assets whch they sell as NFTs using metaverse relevant coins.
- NFTs can help in providing values to intangible assets. for example, the CEO of twitter, Jack Dorsey sold his first tweet as an NFT. Selling a tweet was something that was not heard of in the conventional world.
Why Are People Buying NFTs?
Buying and Selling of NFTs is a new trend in virtual world, and it is witnessing an exponential upward trend. People mostly buy NFTs because of human psychology. People love buying and selling new forms of assets. Buying NFTs grants them authority, access and acceptance in this emerging virtual arena.
Buying and selling of NFTs has emerged as a full fledged business. People are buying NFTs as they have a firm belief in its underlying technology and see a long term value in them. Most of the buyers are well aware about the prospective uses of NFTs, and want to be the early players of the game.
Buying NFTs grants people exclusivity and social status. While on one hand, people faunt them by making them as their social media profile pictures, on the other hand, It helps people form clouts amongs their friends and other people, and form communities like Crypto Punks.
FAQs about NFTs
NFTs are a set of non-replaceable data that represents a digital asset on a blockchain. If you have any digital asset, that is rare, unique and can’t be replaced by anyother thing. It is appended with a piece of code (identification code or token), which is then stored on a blockchain. This code helps in ascertaining the ownership of the digital asset and prevents its piracy and duplication.
Some examples of non fungible tokens are;
1. the first tweet made ever, which was sold as an NFT for millions of dollars.
2. Madhushala NFT collection, that was sold for rs 5.5 crore.