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Non-Fungible Tokens or NFTs: A Beginner’s Guide

NFTs are currently taking the digital art and collectibles world by storm. NFTs can be used to represent ownership of any unique asset, like a deed for an item in the digital or physical realm.

Non-Fungible Tokens or NFT
Photo by Fakurian Design on Unsplash

The NFT is showing a rising trend with the increase in the number of transactions in this marketplace. Brand Essence Market research noted a growth of 328% in NFT transactions during the first half of 2021, and the third quarter of 2021. So, let us first understand what NFT is and how does it work.

What’s an NFT?

NFT stands for Non-Fungible Token. Non-fungible is an economic term that you could use to describe things like your furniture, a song file, or your computer. Non-Fungible means something unique which cannot be replaced with another.

For instance, Bitcoin is fungible as it can be traded for another bitcoin and one can have the same thing. So non-fungible is a one-of-a-kind trading card that cannot be exchanged. They let us tokenise things like art, collectibles, even real estate. NFTs are tokens that we can use to represent ownership of unique items and hence can only have one official owner at a time.

NFTs are ideal for exchanges of rare collectibles like ‘digitally signed copy of the first tweet by Twitter CEO’ among others. NFTs can be related to photos, audio videos, and other digital files as unique items and use blockchain technology to give NFT A VERIFIED and public proof of ownership.

Working of NFTs

NFTs are part of the Ethereum blockchain. Ethereum is a type of cryptocurrency, like bitcoin or litecoin. The blockchain also supports these NFTs, which store extra information and that’s what makes them work differently from, say, an ethereum coin or other cryptocurrencies. However, blockchains can implement their versions of NFTs.

What kind of NFTs Exist?

NFTs assign or claim ownership of any unique piece of digital data that is trackable by using Ethereum’s blockchain as a public ledger. An NFT is minted from digital objects as a representation of digital or non-digital assets. For example a NFT could represent:

Digital Art:

  1. GIFs
  2. Music
  3. Videos
  4. Collectibles

Real-World Items:

  1. Deeds to a car
  2. Tickets to a real-world event
  3. Signatures
  4. Tokenized invoices
  5. Legal documents

One NFT can have only one owner at a time whose ownership is managed through unique ID and metadata. The ownership and originality of NFT are maintained through smart contracts and also manage their transferability. When someone creates or mints an NFT, they execute code stored in smart contracts that conform to different standards, such as ERC-721. This information is added to the blockchain where the NFT is being managed.

If one owns NFT then:

  1. They can prove their ownership easily.
  2. No manipulation
  3. One can sell NFT, which sometimes can earn the original creator resale royalties
  4. One can hold NFT securely

If one creates NFT then:

  1. You can prove you are the creator
  2. You can determine the scarcity
  3. You can sell it on any NFT market or peer-to-peer

Biggest Use of NFT Today:

The biggest use of NFT today is the digital content realm. NFTs power a new creator economy where creators don’t hand ownership of their content over to the platforms they use to publicise it. NFTs are seen as a way one can own possessions in digital and virtual environment and totally depend on personal tastes and choices. Basically, owning a NFT gives a proud verifiable ownership feeling for a unique thing.

The environmental impact of NFTs

NFTs are growing in popularity which means they’re also coming under increased scrutiny – especially over their carbon footprint.

  • NFTs are not directly increasing the carbon footprint of Ethereum.
  • The way Ethereum keeps funds and assets secure is currently energy-intensive but it’s about to improve.
  • Once improved, Ethereum’s carbon footprint will be 99.95% better, making it more energy-efficient than many existing industries.

What do you think?

Written by Nirmal

Nirmal is from a finance background and is trying to explore writing. She loves researching content and believes music is a soulful therapy.


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