The NFT market is thriving at the moment. According to Non Fungible, there are between 15,000 and 50,000 NFT sales every week. These figures are only set to increase as well. But what even is an NFT? And, why are they gaining so much attention? Read on to discover everything that you need to know.
NFT stands for non-fungible token, which is a cryptographically unique token that is linked to some form of digital content. There are many different use cases, including music, digital collectables, artwork, and items in video games.
An NFT features identifying information, which is recorded in a smart contract. It is this information that makes every NFT unique, meaning it cannot be directly placed by another token. This is the important point: no two NFTs are the same.
Bitcoin is the opposite, i.e. a fungible token. You can easily exchange them on a like-for-like basis and they will hold the same value, but that is not the case for an NFT.
NFTs are unique and extensible
It is impossible for one NFT to be equal to another. Each token has a non-transferable, unique identity that distinguishes it from other tokens. Plus, they are extensible, which means you can combine one NFT with another to “breed” a third, unique NFT.
Some of the first NFTs were CryptoKitties
Some of the first non-fungible tokens were CryptoKitties collectables. Every blockchain-based digital kitten is unique. If you send a CryptoKitty to someone, and you get a CryptoKitty from someone else, they will be different from one and other. The aim of the game is to collect different digital kittens.
Within a few short weeks of being launched, the CryptoKitties fan base spent $20 million worth of Ether on purchasing CryptoKitties, as well as feeding and nurturing them.
Understanding how NFTs are used
NFTs are often used to represent digital collectables, such as Sorare, NBA Top Shot, and CryptoKitties. They can also be used for digital assets that must be differentiated from each other to prove their scarcity and/or value. As such, they can represent everything from ownership licenses to artworks and virtual land parcels.
You can buy send sell NFTs on NFT marketplaces. Dedicated marketplaces like Rarible and OpenSea have dominated the field for the past few years. However, we have seen a number of the top cryptocurrency exchanges delve into the space recently. For example, Binance launched its own NFT marketplace in June of last year.
What makes NFTs so special?
NFTs have unique attributes, which are typically linked to a specific asset. You can use them to prove the ownership of a digital item, such as game skins, right through to the ownership of physical assets.
Anyone can invest in NFTs, and a lot of people are capitalising on this. Plus, ownership is secured by a blockchain for great peace of mind.
NFTs represent the evolution of the relatively simple concept of cryptocurrencies. Contemporary finance systems today involve sophisticated loan and trading systems for various asset types, ranging from lending contracts to real estate. By enabling these physical assets to have digital representations, non-fungible tokens represent a step forward in the reinvention of this infrastructure.
Final words on NFTs
We hope that you now have a better understanding of what NFTs are and how they differ from fungible-tokens, such as Bitcoin. Whether you are interested in investing in NFTs or becoming an NFT artist, this is certainly an exciting market with plenty of opportunities.