NFT-token (non-fungible token) is a unique digital certificate that is stored in the blockchain, guarantees the originality of the item and gives exclusive rights to it. This concept came from the world of cryptocurrency. Non-fungible tokens cannot be imperceptibly replaced, divided, replaced. The system is suitable for securing rights to a unique object - a work of art, real estate, an artifact in a computer game.
Difference between Bitcoin and NFT
Each entry in the blockchain is called a token. In an open blockchain, all tokens are like coins of the same monetary value, equal and interchangeable. Cryptocurrency money works like this: for example, one bitcoin can be easily replaced by another, and nothing will change.
But NFT technology works differently. A non-fungible token is a digital coin that cannot be replaced by another token without changing the value and essence of the object. Like cryptocurrencies, NFTs are created on a blockchain, which acts as a database for recording all transactions. Blockchain guarantees the authenticity of non-fungible tokens. Thanks to this system, any user can verify the original and history of a particular NFT through the blockchain.
When buying an NFT token, the user acquires a certificate for the work. In this case, the work itself does not move anywhere. It is located on the eternal storage (IPFS). This certificate, in essence, is a line of code that confirms that the owner of the token is the owner of the original copy of the object. An NFT token is likened to a painting, which may belong to a gallery, museum, or individual, but the audience can see it in a catalog or at an exhibition. NFT tokens are sold on Internet marketplaces that work like AliExpress. The creators of non-fungible tokens post them on trading platforms and wait for offers from buyers.
You can even create an NFT token yourself. To do this, you need to take a digital object (picture, music, photograph, etc.), register in a special marketplace (for example, on SuperRare or OpenSea sites) and upload an object with a description and price there. On many services, you will have to pay a commission for creating an entry in the blockchain, that is, a unique token.
Distinctive features of NFTs
1. Non-fungible token
NFT is a digital certificate that represents a unique object. We can attach an NFT to any digital product such as an image, video, audio, etc. The token will contain all the information about the product. A token is an exclusive right to a product. By owning, buying, selling or exchanging a token, we perform all these operations with the product itself.
Since the tokens are stored in an open and distributed blockchain, information about this product, its owner and the history of operations with this product will always be available and reliable. We can always know who made which product and who it currently belongs to.
NFT technology potentially allows you to tokenize, that is, transfer to the blockchain, any product. Even physical. But there are still many difficult tasks. But digital goods are ideal for tokenization, simply by their nature.
What can be tokenized:
- digital art
- game items: weapons, skins, characters
- any objects in virtual universes, for example, earth
2. True ownership and inalienability
Your digital asset is now decentralized. It does not depend on the system in which it is located. This is especially true for game items. You buy them, but you own them for as long as the developer company allows you. With NFT, you have a certificate of ownership for that item. Another question is that its value depends on how good the game is, and in general, whether it works now, and this is completely up to the developer. But this also applies to other digital assets. Let's say you made a GIF with a flying cat, it went all over the Internet.
How now to prove that you are the real owner? Thanks to NFT, it's easy. Attach a token to a GIF, and the original GIF belongs to you. Yes, everyone else can still download it, but only you own it.
3. Liquidity and interoperability
Now you can easily transfer an object from one game and use it to another. In addition, one object from a crypto game can be sold on any marketplace. It will go to your wallet, which connects to the game, and the game will see that it is now yours. Thanks to NFT, when you get tired of playing, you can sell it.
Firstly, this means that complex mechanics can be incorporated into the properties of a digital object when it is created. For example, upgrades, modifications and behavioral factors of your NFT upgrade. In addition, thanks to smart contracts, any complex transactions have become possible not only with currencies and financial instruments, but also with things. For example, you can get a deposit for digital art
5.“But I can just save this picture!”
Yes, in the past, this was a problem that made life difficult for those who created a digital work. Anyone could keep it for themselves, and this copy was no different from the original. Now, thanks to the NFT, no.
Moreover, I, as the owner of the original work, will tell you - "please save, hang on Instagram, print on a T-shirt, spread my picture as much as possible! Let as many people as possible know about it"! Here's how it works. When we create a rare NFT, 1/1 (the number of this copy / the number of copies that exist at all) based on, for example, a painting that exists only in digital form, we secure ownership of the original. And the value of this original will not decrease, but grow, as the picture itself is copied and distributed. Copies of the work will be distributed, more and more people will learn about your work, the cultural value of the work will grow.
Gioconda. Its value is undeniable. You can hang a reproduction on the wall and look at it, you can download Gioconda on your phone, print it on a T-shirt, you can photograph the original in the Louvre. From this, the value of the original will only grow. In fact, this has been happening for many years. The more noise around the it, the higher their price. The exact same thing will happen with digital art. You can put Beeple drawings on your desktop, but you don't own them.
It looks the same, but it's actually not the same. When we come to the Louvre, we know that we have an original in front of us. Blockchain is the Louvre. The value of a work is determined by the cultural context around it. And the blockchain fixes this value and its ownership, as it allows you to confirm the ownership and originality of any work.
1. NFT technology allows you to digitize and make interaction with any product more convenient. Ownership, purchase, sale, confirmation of originality.
2. Tokenization adds value to a product.
3. This technology has already made a revolution in art, games are next in line. Any item that cannot be eaten is very likely to be tokenized.
Also, I share a link to a really useful video that will help to understand completely what the NFT is. Have a nice watching!