What is an NFT? – Understanding of non-fungible tokens

However, the identification of the ownership and authenticity of these goods has mainly taken place through paper-based and centralized systems, which are very inefficient and leave ample room for fraud. NFTs offer a unique way to revolutionize the identification, ownership, and transfer of digital assets.

The main features of non-fungible tokens

Non-fungible tokens are virtual assets on a blockchain with unique metadata and identification codes that set them apart. Unlike cryptocurrencies, which users can easily trade on platforms like bitiq.org/en/, people cannot trade NTFs for other assets. In contrast, fungible tokens, like virtual coins, are identical, and individuals can use them as a means of payment.

Non-fungible tokens have changed the paradigm of cryptography, making each token unique and irreplaceable. This also means that one NFT cannot be equal to another in value. However, NFTs can be expanded, which means that artists and creators can combine two different NFTs to create a single NFT.

Non-fungible tokens are designed and maintained on the blockchain. Therefore, individuals can only identify them cryptographically. They are also very unique and rare, which affects their high value proposition. NFTs have cryptographic signatures that reside in the blockchain on which they are created and issued. These individual signatures allow users to quickly determine the origin and current owners of certain assets related to these NFTs.

How to create NFTs

Artists, content developers or licensees create non-fungible tokens through a process called “mining”. This process involves signing a transaction on the blockchain and describing the basic details of the token. The data is then streamed to the blockchain to generate a smart contract that creates the token and assigns it to its owner.

Each token has a unique identifier, or token ID, stored in the contract. This makes it easy to confirm ownership of the token and assign it to a new owner when the original owner needs to transfer the assets.

Use cases for non-fungible tokens

The separate construction of NFTs allows them to support a wide range of use cases. They can represent various physical, digital and metaphysical assets. Blockchain is the foundation of non-fungible tokens, and it also eliminates intermediaries from involvement in transactions that directly connect artists and creators with their audiences. Blockchain also simplifies transactions and enables content developers and artists to effectively attract and reach new global markets.

The creation of NFTs primarily represents digital art, virtual collectibles, and pieces of content such as audio, video, and event tickets. The first major breakthrough for NFTs was a digital collage artwork created by artist Beeple in 2021. NFTs were sold for a record $ 69 million and became the most expensive digital artwork.

The current NFT market is primarily focused on collectibles, including digital art, sports cards and rare valuables. The NBA Top Shot is one of the most popular platforms for NFT collectors. It offers non-fungible NBA moments like digital maps.

Why are NFTs important?

Experts describe NFTs as simple concepts of cryptocurrencies that facilitate digital representations of physical assets, thereby revolutionizing modern financial infrastructure.
One of their main benefits is improved market efficiency. Converting physical assets to digital assets streamlines the process of identifying, owning and transferring them by eliminating intermediaries. This allows artists, creators and content developers to connect directly with their audience. NFTs also improve business processes and democratize investment. They allow different actors in the supply chain to interact with them and trace the origin, creation and transfers of assets.

Like cryptocurrencies, NFTs are a relatively new concept. However, non-fungible tokens have enormous potential to transform various basic business processes and create new markets and investment flows for artists, content developers and investors around the world.

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