What is NFT? Table of Contents

What is NFT? and how NFT can make you money?

Do you remember? At one time, buying cryptocurrency was the strangest trend on the Internet. This trend is now a thing of the past. At the moment, the most popular strange behavior is to buy NFT, that is, non-fungible tokens.

How strange is it? Jack Dorsey, Twitter’s co-founder and CEO, sold his first tweet for $2.9 million. Alexander M. Ramirez-Mallis, a Brooklyn filmmaker, sold his 52-minute fart for about $420. Of course, the price is not as high as Jack Dorsey’s tweet, but it is ridiculous in itself that someone spends money to buy it.

So, what are non-fungible tokens, and why do people spend absurdly to buy them?

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The wonderful world of NFT

To define what a non-fungible token is, the easiest way is to first determine the meaning of fungible. Basically, funging is a feature of assets that allows assets to be exchanged: my $100 bill is the same value as your $100 bill. Even if we trade banknotes for various reasons, we end up with the same amount of funds. The same is true for cryptocurrencies: my 1 BTC is worth the same as your 1 BTC. In other words, both legal currency and cryptocurrency are funged. 1 BTC is always equal to 1 BTC, 1 ETH is always equal to 1 ETH, and so on. This is the beauty of tradable tokens.

The NFT is to make each token is unique, irreplaceable, and therefore changed the whole pattern. NFT is a one-to-one encrypted asset on the blockchain, with a special identification code and metadata that can distinguish them from each other. In other words, although my non-fungible token and yours look very similar, their value may never be the same. NFT is a digital representation of an asset. To a certain extent, just like a digital passport, each token contains a unique non-transferable code that can be distinguished from other codes. Non-fungible tokens are also scalable. In other words, in some cases, you can combine two NFTs to “cultivate” a third unique non-fungible token.

Just like Bitcoin, non-fungible tokens also contain ownership details. This makes it easier to identify and transfer between token holders. Compared with physical collections such as NBA or Pokemon trading cards, NFT ‘s metadata and digital attributes are the reasons why people prefer it. There will be many fakes in physical collections, and the accuracy of the details varies. Digital collectibles are different. People can use their data to trace to the original issuer, so fakes have nowhere to hide.

Such tokens are developed according to the ERC-721 standard, which defines the minimum interface required for game token transactions and distribution-ownership details, security, and metadata. The ERC-1155 standard further reduces the transaction and storage costs of NFTs and batches multiple types of non-fungible tokens into one contract.

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Key features of non-fungible tokens

In addition to being unique in nature, there are some features that make NFT unique:

Indestructible
All data is stored on the blockchain through smart contracts, which means that each token cannot be removed, copied or destroyed.
Indivisible -Bitcoin can be divided and hold a part of it, while NFT cannot be divided into smaller denominations. They exist and trade as a whole.
Not interoperable
Non-fungible tokens exist entirely in the field in which they are created. For example, Blockchain Heroes and Gods Unchained are digital trading card games, you can get NFT from the digital package. Because they are not interoperable, cards made for Blockchain Heroes cannot be played on Gods Unchained.
Unalterable ownership
Once you purchase a token, the actual owner is you, not the individual or company that made the token. When purchasing music from the iTunes store, you did not actually purchase the song, you just purchased the license to listen to it. The non-fungible token the 100% belongs to you, you can trade or collect.
Verifiable
Tokens like digital art can be traced back to the original creator, that is, the work can be verified without a third party.

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NFT market past and present

Before the current revival, the most famous case of non-fungible tokens was Cryptokitties, a game for you to collect and raise digital “kittens”. Each kitten is unique and has its own ether price. They can reproduce and produce new offspring, whose attributes and values ​​are different from those of their parents. The game was small when it was launched in November 2017, but it quickly won the favor of the fan base, who spent about $20 million to buy, feed or breed kittens.

Currently, the market for non-fungible tokens is centered on collectibles: emojis, digital artwork, sports cards, and rare items. One of the best examples is the NBA Top Shot, where you can buy NBA game “moments”. Line up to buy digital packs, open them, and then collect or sell the moments you get. In fact, they were sold for millions of dollars at certain moments.

Although these uses of NFTs may sound trivial, their subsequent effects may have a significant commercial impact.

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Benefit of NFTs

Although the concept of digital representation and unique identification of assets is not equivalent to NFT, combined with the addition of blockchain technology and smart contracts, it forms a powerful force for change.

One of the most obvious benefits of non-fungible tokens is market efficiency. By converting physical assets into digital assets, the process is simplified and intermediaries are eliminated. For example, artists no longer need to hire brokers to sell their works—they can directly connect with their audiences through the blockchain. The same applies to mass-produced products. Let’s take the NFT of a water glass as an example. The digital representation of the physical object allows different participants in the supply chain to interact with it and track its source, production and sales throughout the process.

Another benefit of this token is identity management. How many times do I have to show my passport when I go to the airport? Suppose we create a token for a personal passport, each with its own identification characteristics so that the immigration process can be simplified.

Non-fungible tokens also allow for the division of assets such as real estate, thereby realizing the potential of democratization of investment. Compared with physical assets, it is much easier to distribute digital real estate assets to multiple owners. This benefit can also be extended beyond the real estate sector. For example, paintings can also be owned by multiple people, right? Divide the painting into NFT and distribute it between you and the co-owners.

Now, let us talk about the most exciting benefit: the creation of new markets and forms of investment. We see that many people are making various investments-cards, emojis, digital artwork, etc. Investors are no longer limited to stocks and cryptocurrencies. As the definition of the term “investor” becomes more and more broad, so non-traditional investors are everywhere, which is a very beautiful thing.

To truly implement the potential use of NFTs, it is clear that changes in applicable regulations are required. However, the above facts show that the concept of NFT has great potential.

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What is the Source of NFT value?

As with most assets in any market, supply and demand are the key drivers of prices. Non-fungible tokens are scarce in nature, and the needs of gamers, collectors and investors are the reasons why people consume them.

Non-fungible tokens may also bring benefits to their owners. Take Decentraland ‘s gamers as an example. This is a virtual land platform for users to explore. A user decided to buy 64 plots of land, merged into a manor, and named it ” The Secret of Satoshi Nakamoto Tea Garden “. Due to the ideal location and smooth roads, the plot was sold for $80,000-crazy, right? ?

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The future of NFT

Non-fungible tokens are an upgrade to the relatively simple concept of cryptocurrency. Our existing financial system uses sophisticated lending and trading systems for different asset types. NFT can take a big step towards the reshaping of this infrastructure.

Now that we are living in the renaissance of collectibles, the true power of this token is beginning to emerge, and the enthusiasm of collectors and gamers may be the reason for the soaring price of such tokens. Although this phenomenon seems very strange to some people at present, it is undeniable that demand exists, and the wonderful world of non-fungible tokens has broad room for growth.

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