The concept of non fungible tokens, or NFTs, has recently become quite popular in the world of cryptocurrency and blockchain technology.
Although not as easy to understand as the more basic ERC20 token standard, NFTs are becoming increasingly popular thanks to their numerous advantages over traditional cryptocurrency coins and tokens.
If you want to know more about non fungible tokens and how they work, you’ve come to the right place!
What are NFTs?
NFTs are tokens that represent a unique digital asset. They come in many forms, but generally can be thought of as scarce. The digital assets they represent can vary widely, from in-game items and collectibles to real estate deeds.
NFTs are usually created by the company or individual holding the assets on behalf of someone else, and people who own NFTs have a stake in those assets.
NFT ownership is represented by a cryptographic key (usually on their blockchain address) that gives them certain rights related to those assets. For example, owning an NFT for a rare item might give you exclusive access to it for its entire lifespan, or the right to monetize it through reselling or trading with others. To learn more about how these properties work, check out our blog post: What’s a Non Fungible Token?
NFTs provide both intrinsic and extrinsic value. Intrinsic value is derived from the scarcity of a given token, while extrinsic value comes from what others think of the token - like rarity and marketability.
Some NFTs might have both types of value: when buying expensive art at auction, for instance, buyers often buy with both types in mind because once purchased it's no longer for sale at any price.
Examples of NFTs in games
Pokemon Go, CryptoKitties, Cryptopunks, and Gods Unchained are all examples of games that have utilized the power of non fungible tokens.
Non fungible tokens allow for collectibles or memorabilia in games to be unique and have varying values.
This creates an opportunity for players to trade their items with each other on secondary markets such as open auctions or cryptocurrency exchanges like OpenSea.
Different types of NFTs can also allow game developers to design a more diverse gaming environment that is not just based on level progression but rather in-game items as well. Imagine an RPG where players can choose from a variety of different classes that play completely differently from one another by equipping different weapons and armor.
Another example is City Builder where you have to build up your town’s economy by developing specific buildings which each generate resources in order to make your people happy.
NFTs provide endless possibilities for game developers because they offer an entirely new way to incentivize gameplay besides leveling up or completing quests. If done correctly, this type of game could turn into something like Pokémon GO where people are collecting these digital objects purely for enjoyment purposes rather than any sort of profit motive whatsoever.
How do non-fungible tokens work?
Non-Fungible Tokens (NFTs) are tokens that can not be traded with other NFTs. Instead, each token is unique and cannot be exchanged for another token on the blockchain.
One of the most notable examples of an NFT is CryptoKitties, a game where players buy, sell and trade various breeds of virtual cats. NFTs are often difficult for new users because they must first acquire them before they can use them.
What is an example of a fungible token?
A fungible token is a type of cryptocurrency that is interchangeable with others. The word fungibility means that one unit can be substituted for another identical unit. For example, if I give you $1, and then I take $1 from your wallet and give it to someone else, the dollar bills are interchangeable.
One dollar bill is as good as any other dollar bill in terms of value. Bitcoin also represents a form of a fungible token because it can be traded for other tokens or fiat currencies such as the U.S. Dollar on popular exchanges like Coinbase or Kraken, among others.
Non-fungible tokens (NFTs) are virtual assets that have special properties that make them different than other types of tokens in the blockchain space.
What are some examples of non-fungible tokens?
Non-fungible tokens are non-interchangeable tokens that have a different value and utility. The most popular example of a non fungible token is the CryptoKitty, which has different attributes like eye color, hair length, fur pattern, and nose shape.
While these features make it unique and valuable, they cannot be exchanged for another CryptoKitty with similar features.
The idea of non-fungibility originated in the 18th century when Sir Isaac Newton developed his theory of colors by adding white light to a prism.
This created 7 distinct colors as seen through the prism: red, orange, yellow, green, blue violet.
He discovered that no two colors were exactly alike because each color was composed of its own wavelengths or frequencies.
How do you make money with NFTs?
Non fungible tokens are items that are unique and have a high level of rarity. The properties of the token can be determined by the creator or the community.
They can be used for a variety of purposes, but many creators will use them as digital representations for physical goods. For example, someone might create a non fungible token that is tied to a specific piece of clothing. When someone buys this token, they will receive that specific piece of clothing in real life. As more people purchase these tokens, it will increase the price of each token.
One interesting way that you could use NFTs is if you create a company where people come in to make their own customized t-shirts using augmented reality technology.
In order for someone to make their shirt, they would first need to buy a non fungible token from your company's website. Next, your customer would walk into your store and design their own t-shirt on an iPad with augmented reality technology.
Lastly, the customer would walk out with their very own personalized t-shirt!
How do you make money selling NFTs?
Non-Fungible tokens are a digital representation of a physical asset. They represent something real that has value in the world. The fun part about NFTs is that they can be completely unique and unlike anything else in the world.
This makes them perfect for collectibles, limited edition items, property rights, or game assets. Because of their uniqueness, the price of an individual token will vary based on its quality and popularity.
The beauty with NFTs is that they can have scarcity without a fixed supply. If you buy 10 rare lemons and make 10 copies, each one would be identical - with NFTs you could have just as many copies but each one would still be different because each token has its own ID on the blockchain which reflects its own transaction history and metadata. In this way it's possible to have unlimited copies but only limited quantities.
Why it’s all the rage
Non fungible tokens can be used as collectibles, for in-game items, or in a variety of other ways. The most common use is for trading cards. However, this is still an emerging field and many non fungible tokens have yet to be explored.
As the technology becomes more mainstream and they become more widely available, we should see a lot more ideas come out on how NFTs can be used.
Tokenization is a process in which an asset, such as a house or digital content, is broken down into a digital token. These tokens can then be traded on the blockchain. This process has so many benefits, but how does it work? The tokenization process includes four steps:
The future will be tokenized
In the digital world, there are many ways to own something. You can purchase it outright or lease it for a certain amount of time. But what if you wanted to just borrow something for a short period of time? This is where non-fungible tokens come in.
The idea behind them is that they act as a stand in for an item with unique attributes, and can be exchanged on demand. The first major tokenized assets were CryptoKitties, which took the world by storm earlier this year.
They have since spawned imitators like CryptoPuppies and CryptoPets, but the concept has been used for other things as well like tickets and loyalty points from brands like AirAsia and Starwood Hotels.