Blockchain technology has introduced us all to digital value storage tools. In addition to this value storage, there has also been a rare and limited number of assets available even in the digital environment. Non-fungible tokens or unique tokens can also be the highest level of this rarity. These NFTs, which are also often seen as collectibles, consist of different and unique tokens, unlike cryptopares, where all coins such as ETH and BTC are equivalent to each other.
What is Fungibility?
As we mentioned in the introduction, fungibility is a concept intertwined with flexibility. In economics, it means that a good is exchangeable for its own kind. For example, a value of 10 USD is equivalent to another 10 USD but is also equivalent to 2 pieces of 5 USD, or any combination that adds up to 10 USD. Non-fungibility, on the other hand, means that this property is not possessed. For example, two jewels may not have the same value even though they have the same weight. Factors such as segment differences and labor cause differences between them.
What is a Non-Fungible Token?
To summarize the NFT in one sentence, we can define it as a type of token that represents unique assets on the blockchain. In addition to the fact that these NFTs can be any digital asset (such as jewelry), any real-world asset can also be tokenized in the digital universe. As we can see in the section where we explained the concept of fungibility, an ideal currency should have its own convertibility. At the same time, this makes it almost impossible to track the history of any money (especially in the digital environment). At the beginning of our article, we mentioned that NFTs are seen as collectibles. Unlike an ideal coin, the fact that each unit of NFTs is different from the others shows that we can use them as collectibles at this point.
How are NFTs Created and How Do They Work?
Two standards are used in the creation of NFTs. These are the standards ERC-721 and ERC-1155. First, let’s talk about the ERC-721 standard. The ERC-721 standard is the first standard that provides for the creation of non-fungible assets, built on the basis of the ERC-20 standard. While the ERC-20 standard is an established standard for defining the behavior of monetary assets, ERC-271 is used to define the behavior of unique, collectible assets (such as football players’ collectible cards). For example, a game called CrypoKitties had the authority to own, distribute, and control digital assets using this ERC-721 standard. In addition, the ERC-721 standard also ensures that tokenized digital assets can be used on different platforms. This includes the fact that they are bought and sold in different markets. Most importantly, this standard does not dictate any rules to developers, and this allows and encourages creativity and uniqueness. In short, ERC-721 determines the ownership of digital assets and how they are used.
Another standard used in the development of NFTs is the ERC-1155 standard. In addition to what the ERC-october21 standard can do, this standard makes the environment in which the ERC-721 standard works available for the creation and definition of digital asset classes. To illustrate with an example, ERC-1155 allows you to identify items in a computer game and create different classes of items. At the same time, it allows both the substitution of a single contract and the inclusion of unique tokens. It can be said that in the coming period, new standards will be added to these standards, and standards that give manufacturers wider freedoms and provide ease of access to users will be used more.
NFTs can be easily transferred between different applications. Just like any other blockchain token, you need an address if you want to store and transfer NFTs. You can do this through your wallet. NFTs cannot be copied or transferred by anyone, including those who issue the NFT, without the permission of the owner. NFTs can be bought and sold on open marketplaces. These markets bring buyers and sellers together. Each token has a separate price. These prices are determined by the value that buyers and sellers give them.
What can NFTs be used for?
Due to their nature, NFTs can often be used for collectibles, including game items. Applications using NFTs are called decentralized applications, or DApps. In addition, NFTs can also be used as an investment product. As another example, NFTs allow real-life works of art to be stored in digital environments, exchanged, and partially owned. On the other hand, they increase trades by contributing to liquidity by providing easy access to low liquidity and works. In other words, a collector or investor can make investments and own collectible items that he or she would not normally do. Along with their uniqueness, NFTs can also be a very useful tool for creating a digital identity. It is obvious that they will make a great contribution to the ever-expanding digital world in terms of data security and easy transfer of information when requested, as well as providing access only to the person who owns the token. They can also create great convenience in storing and transferring software licenses.
Here are the major NFT apps:
Centrifuge is a financial operating system and a pioneering project on the use of NFTs in business areas. Centrifuge is converting financial documents (such as invoices, purchase documents, and company records) into digital assets using NFTS. The fact that invoices have become NFT and joined the Ethereum chain will allow us to pay for these invoices with tangible assets in the Ethereum chain in the medium-long term, so debts can be received and records can be kept more easily.
Codex Protocol is a project that uses NFTs for art and collectibles. It has serious support from many art lovers and collectors. Users can take partial ownership of products, make offers, borrow, and lend by presenting their assets. Codex tries to keep commissions to a minimum by blocking scams as well. Since transactions and records made using the blockchain cannot be changed in any way, criminals and fake artists can be easily detected and recorded.
CryptoKitties is perhaps the most popular NFT project. The game is based on collecting, breeding, and trading virtual cats. Each “CryptoKitty” in the game has different characteristics, such as age, breed, and color.
Many games, such as Gods Unchained, My Crypto Heroes, and Decentraland, also use NFT products in-game or directly in their games. Apart from the games, Crypto Stamps issued by the Austrian Post Office can also be used as collectibles by being bought and sold, in addition to being used while sending mail.
In addition to their use in digital art and games, NFTs can also be used to track real-life artwork and assets. Matching real assets with NFTs and keeping track of these artifacts will come in handy for minimizing thefts. QR codes and NFT tags will be useful for this purpose. Recording or tagging data with NFTs will also solve many data storage and protection problems. Significant improvements in data reliability and transparency can be achieved by storing small time periods, commercial records, and information on marketplaces with NFTs. On a more technical side, NFTs have pioneered the ERC-1633 standard, which will enable NFTs to be exchanged for ERC-20 tokens, with RFTs (re-fungible tokens) that can be seen as the next step towards unique digital assets.
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