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What You Need To Know About Non-Fungible Tokens (NFT)

  NFTs are tokens that we can use to represent ownership of unique items. They let us tokenize things like art, collectibles, even real estate. They can only have one official owner at a time and they’re secured by the Ethereum blockchain – no one can modify the record of ownership or copy/paste a new NFT into existence.

NFT stands for non-fungible token. Non-fungible is an economic term that you could use to describe things like your furniture, a song file, or your computer. These things are not interchangeable with other items because they have unique properties.

Fungible items, on the other hand, can be exchanged because their value defines them rather than their unique properties. For example, ETH or dollars are fungible because 1 ETH / $1 USD is exchangeable for another 1 ETH / $1 USD.

An NFT Internet:

  • NFTs are digitally unique, no two NFTs are the same.
  • NFTs are compatible with anything built using Ethereum. An NFT ticket for an event can be traded on every Ethereum marketplace, for an entirely different NFT. You could trade a piece of art for a ticket.
  • Every NFT must have an owner and this is of public record and easy for anyone to verify.
  • Content creators can sell their work anywhere and can access a global market.
  • Items can be used in surprising ways. For example, you can use digital artwork as collateral in a decentralized loan.

There are many different types of NFTs and not all of them have the same function/ goal. Here is a list of the different catégories of NFTs.

The different categories of NFT:

  • Collectables such as CryptoKitties
  • Metaverses: used for video games or a website they are usually as a part/ field within the game for the buyer to build what they would like on it – big companies buy space to market their product.

How do NFTs work?

NFTs are different from ERC-20 tokens, such as DAI or LINK, in that each individual token is completely unique and is not divisible. NFTs gives the ability to assign or claim ownership of any unique piece of digital data, trackable by using Ethereum’s blockchain as a public ledger. An NFT is minted from digital objects as a representation of digital or non-digital assets. For example, an NFT could represent:

  • Real-World Items:
    • Deeds to a car
    • Tickets to a real-world event
    • Tokenized invoices
    • Legal documents
    • Signatures.
  • Digital Art:
    • GIFs
    • Collectibles
    • Music
    • Videos.

NFT’s have some special properties:

  • Each token minted has a unique identifier that is directly linked to one Ethereum address.
  • They’re not directly interchangeable with other tokens 1:1. For example, 1 ETH is exactly the same as another ETH. This isn’t the case with NFTs.
  • Each token has an owner and this information is easily verifiable.
  • They live on Ethereum and can be bought and sold on any Ethereum-based NFT market.

What are NFTs used for?

Here’s more information on some of the better-developed use-cases and visions for NFTs on Ethereum.

  • Digital content
  • Gaming items
  • Domain names
  • Physical items
  • Investments and collateral.

The environmental impact of NFTs:

NFTs are growing in popularity which means they’re also coming under increased scrutiny – especially over their carbon footprint.

 

To clarify a few things:

  • NFTs aren’t directly increasing the carbon footprint of Ethereum.
  • The way Ethereum keeps your funds and assets secure is currently energy-intensive but it’s about to improve.
  • Once improved, Ethereum’s carbon footprint will be 99.95% better, making it more energy-efficient than many existing industries.

How to create an NFT?

1)      An NFT is always backed by a media file. This file could be in the following formats:

a)      JPG
b)      GIF
c)      MP3
d)      GLB and more

2)  Take this file to a minting platform. A variety of NFT minting platforms have been launched in the last couple of months. While choosing a particular NFT minting platform one must definitely take care of aspects like the minting fees, does the platform allow the user to earn royalty.

3)  Once the minting platform is chosen, the user must connect his wallet to the platform and upload the file.

4)   Next very important step is to decide whether you want to create an edition-based NFT or a standalone NFT. In case you choose the edition-based NFT, you need to mention the royalty percentage. Once everything is sorted out, you can start the minting process.

About the author

Pavan Malipatil

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