NFTs stand for “Non Fungible Tokens” which are defined as crypto-assets built and stored on the blockchain. For the layman, non-fungible means “unique” and fungible, as we all know means “very similar to one another”. Eg. A $10 bill is fungible in nature as every $10 bill denotes the same value and can be used for the same purpose. NFTs are considered to be a form of digital asset to prove ownership of something in the digital world. As every NFT is unique in nature, it gives a sense of importance and privilege to hold an NFT.
How do NFTs work?
To understand this, we first need to understand that NFTs are different in terms of the data that is stored on the chain. That makes them “non-fungible”. NFTs signify ownership of a digital asset. NFTs use the ERC-721 and ERC-1155 standards, which allow anyone on the blockchain to issue non-fungible tokens as compared to issuing fungible tokens using ERC 20 standards.
Majorly, Ethereum is considered to be the native platform for storing and building NFTs as it allows easy deployment of smart contracts. Also, Solana has recently captured the eyes of the users and hence NFTs are also being built and stored over the Solana blockchain.
NFTs are mostly sold on global marketplaces such as Open Sea — the world’s largest NFT marketplace, Rarible, etc.
Once you have bought an NFT, it can be used for either capital appreciation, displaying it in virtual galleries, or just using it as your display picture.
What are different kinds of NFTs?
- Digital Artworks
- Avatars or PFPs
- Digital Assets such as virtual land NFTs
- Virtual Fashion and Apparel NFTs
- Music, Memes, etc NFTs
What are some top NFT projects?
Axie Infinity, which is a play-to-earn game, is one of the world’s most popular NFT projects being built on the Ethereum blockchain that allows users to raise and trade Axies as an NFT.
CryptoPunks is a PFP project in which there are 10,000 uniquely generated characters. It is also built on the Ethereum blockchain.
VeeFriends is an NFT project started out by a famous American entrepreneur Gary Vaynerchuk. Holding a VeeFriends NFT would allow users to get access to the only invite holder GaryVee’s conference.
Decentraland is a complete virtual 3D space in the metaverse. It is built on the Ethereum blockchain that allows users to buy a piece of land in the virtual world as an NFT.
Moonbirds is an NFT project started in 2022, that gives its holders an exclusive club membership. Currently, it has a trading volume of $500 million+.
Real-Life Use Cases of NFTs
- As NFTs provide the feature of storing data permanently on the blockchain and with their characteristic of being unique in nature, they can be used for storing and verifying individual records which would help prevent forgery.
- NFTs as tokens can be used to prove ownership and Intellectual property rights(IP) of various asset classes and other innovations and inventions.
- As currently being used by VeeFriends, NFTs in the future can be used as a ticketing option to allow entry into specific invite-only events. It would also prevent forgery of the same.
- NFTs have also seen a steep adoption curve in the gaming industry. Users can own NFT tokens as a part of their games and hence can be further utilized and traded among the community.
- Other use cases of NFTs can include brand promotions in the metaverse, digital identity, etc.