Any currency, whether fiat or cryptocurrency, can only be considered a means of exchanging, transferring, or preserving capital if it is interchangeable (digital aaset)
The fungibility of cryptocurrencies may be a key factor in the adoption of cryptocurrencies worldwide
. However, a new type of non-fungible token (NFT) has recently emerged, which has caused some confusion.
They are considered unique and important tools. Let’s see what NFTs are.
1) What are Non-Fungible Tokens (NFTs)?
NFTs (are novel and unique representations of goods or assets in the form of digital tokens.
By using encryption, NFTs can prove the authenticity or ownership of assets and goods. For example, someone creates virtual artwork and tokenizes it.
In effect, the owner of the token is the direct owner of the artwork created.
NFTs are a unique tool. No other product can replace it. You can come up with tons of uses.
It is even possible that they will create separate, entirely new digital asset classes in the future. Otherwise, they will be closely intertwined with real-world commodities and assets, providing an opportunity to secure their property rights.
Currently, some cryptocurrencies already have some degree of fungibility. Suppose Bitcoin. Each new coin has the same value as the previous coin.
This is not possible when two different bitcoins have different costs. This is a prime example of fungibility.
However, some experts point out that Bitcoin’s fungibility is not absolute.
For example, if certain coins are used for criminal acts, then they are added to the blacklist. After all, the Bitcoin blockchain is transparent, which is achievable. Do blacklisted coins have the same price as other “innocent” coins?
Blacklisted bitcoins will lose their use and, therefore, their utility will also tend to zero.
This problem has been discussed for a long time, but there is no solution yet. However, the introduction of NFTs could lead to some rather interesting results and consequences.
2) NFT concept
NFTs have become especially popular with the advent of blockchain games like CryptoKitties, which use non-fungible tokens on the Ethereum network.
Some of these tokens are very popular and are bought for hundreds of thousands of dollars although NFT protocols and standards exist separately from Ethereum, the most important standard that allows them to be created is the ERC-721 token standard on the Ethereum blockchain.
Thus, the foundation is laid for asset creation, trading, and similar actions that position themselves as non-fungible assets. However, they recently proposed the adoption of a new token standard – ERC-1155, which will help improve the existing standard and provide several other benefits.
For example, it will be possible to enter into contracts for fungible tokens alongside non-fungible tokens, which is currently not possible.
Likewise, the new standard will allow many different NFTs to be implemented within the same transaction. Therefore, the exchange process will be more efficient.
Types of NFTs and their use cases
NFTs impose verifiable restrictions on certain assets.
Initially, this idea appeared in projects such as CryptoKitties, but then new NFT applications became more practical and started to be used outside the digital world.
As a result, non-fungible assets are not only becoming more popular in the gaming industry. For example, on the Decentraland platform, using NFTs, you can buy a piece of land and build a house on it. Other projects, such as CryptoBeasties, Etheremon, also use NFTs.
NFTs are implemented in various games based on “skin” transactions. Usually, this applies to various weapons or armors in FPS games. These elements can be moved not only within a game but also between games.
You can choose a look on your account in one game and transfer it to your account in a completely different game. You can also stream player stories
. A game’s scoreboard, achievements, experience points can be saved on the blockchain and used for another. NFTs can also be used for unique identification.
So you don’t need to create an unlimited number of accounts in different games. Not only does this save time, but it also helps with interacting with other players as they can identify you as the same person in different games.
There is also talk of using NFTs to smash art into small pieces and then sell it to multiple owners at once. It can be applied in real estate in the future.
NFT trading and swapping are currently available on multiple trading platforms such as Rare Bits and OpenBazaar.
4) What is waiting for NFTs in the future?
The NFT concept is still in its infancy, but even now, it has huge application potential. In the future, this technology could be rolled out to various markets. Currently, some projects are already using NFTs, such as EveriToken. We have the right to expect that only NFTs will be developed in the future.
With NFTs, people will be able to efficiently buy and sell property or software licenses without fear of fraud.
NFTs could be a new way to tokenize real-world goods and assets, which can then be transferred or sold to multiple owners of a single token. Everyone who owns the token will be considered the owner of one of the owners.
This innovative use of technology may find widespread applications in the future.