Non-fungible tokens (NFTs) have become quite popular in 2021. Native NFT platforms such as ENJIN, Rarible and Terra Virtua have hit their all-time high this year. So, what is NFT, and why all the fuss? Why is everyone talking about them? If you are confused about what NFTs are and how they can help you in your investment journey, then read on. Below is a comprehensive guide.
What Are NFTs?
A non-fungible token is a unique blockchain-based token that can represent anything, even physical assets. They represent tangible and intangible items such as digital sneakers, sports cards and even virtual real estate. Their popularity stems from the fact that they can tokenize anything and provide an easy way to transfer digital assets ownership. NFT is a unique token that is generated cryptographically and cannot be replicated. They differ from the other popular cryptocurrencies that have been there in the market, such as Monero, Bitcoin and Ether, as these are fungible, meaning you can exchange one for another. This means that no two NFTs are identical, even though they may be on the same platform. An easy way to think of them is like festival tickets. Each ticket has specific information, such as the purchaser’s name and the date and venue of the event. Hence, it is difficult for them to be traded with one another.
Key Characteristics Of NFTs.
• They Are Indivisible.
NFTs exist exclusively as whole items; hence they cannot be divided into smaller units like bitcoin. You can either purchase the entire amount or nothing at all.
• They Are Verifiable.
They do not need third party verification as they can be authenticated easily. This is possible because digital artwork can be traced back to the original creator. Since they use decentralized platforms, no owner can alter the data once it has been committed.
• They Are Non-Interoperable.
You cannot use one NFT in a particular game and use it in another. For example, a Blockchain Heroes card cannot be played in the Gods Unchained game.
• They Are Indestructible.
NFT data is usually stored via smart contracts on the blockchain. Therefore, the tokens cannot be destroyed or replicated. Also, it is not the companies that create them that have ownership to the NFTs, but the gamers and collectors.
Why Are NFTs Worth Millions?
NFTs gain their value from the fact that they are limited and cannot be duplicated. This makes them quite rare, hence why people sell them for millions of dollars. Since they are easily verifiable and can be traced back to the owner, the owners can possess the individual digital assets knowing that they are authentic and unique.
Their value also stems from their immutability, as they cannot be duplicated, destroyed or even deleted. They exist on their native platform that is stored on the blockchain.
Non-fungible tokens are the future. Their uniqueness and value make them stand out and are attractive to investors. They also make it possible to digitize property rights and tokenize all assets in the future.