Home Crypto for Beginners What is non-fungible token (NFT)?

What is non-fungible token (NFT)?

Non-fungible tokens (NFTs) are blockchain-based cryptographic assets having unique identifying codes and metadata that separate them from one another. They cannot be traded or exchanged for equivalency, unlike cryptocurrencies. This contrasts with fungible tokens, such as cryptocurrencies, which are identical to one another and hence can be used as a means of exchange. Each NFT's unique construction allows for a variety of applications. They're a great way to digitally represent actual things like real estate and artwork, for example. NFTs can also be used to eliminate intermediaries and link artists with audiences or for identity management because they are based on blockchains. NFTs can eliminate middlemen, streamline transactions, and open up new markets.

Cryptocurrencies, like actual money, are fungible, which means they may be sold or exchanged for one another. One bitcoin, for example, is always worth the same as another bitcoin. A single unit of ether is always equivalent to another unit of ether. Cryptocurrencies are suited as a safe means of transaction in the digital economy because of their fungibility. NFTs change the crypto paradigm by making each token one-of-a-kind and irreplaceable, making it impossible to compare two non-fungible tokens. They are digital representations of assets that have been compared to digital passports since each token has its own unique, non-transferable identity that allows it to be distinguished from others. They're also extendable, which means you can "breed" a third NFT by combining two of them.

NFTs, like Bitcoin, provide ownership data that make it straightforward to identify and transfer tokens between holders. In NFTs, owners can additionally add metadata or attributes related to the asset. Fair trade tokens, for example, can be used to represent coffee beans. Artists can also sign their digital artwork in the metadata with their own signature. The ERC-721 standard gave birth to NFTs. ERC-721 defines the basic interface—ownership details, security, and metadata—required for the exchange and distribution of gaming tokens. It was created by some of the same people that created the ERC-20 smart contract. The ERC-1155 standard expands on this notion by lowering transaction and storage costs for non-fungible tokens and combining different types of non-fungible tokens into a single contract.

Cryptokitties are maybe the most well-known application of NFTs. Cryptokitties, which were first introduced in November 2017, are digital representations of cats that have unique identifiers on the Ethereum blockchain. Each kitten is one-of-a-kind and has a monetary value in ether. They breed amongst themselves, producing new offspring with distinct characteristics and values than their parents. Cryptokitties attracted a fan base that spent $20 million in ether to buy, feed, and care for them just a few weeks after their inception. Some devotees spent upwards of $100,000 on the project. The Bored Ape Yacht Club has recently attracted controversy due to its exorbitant rates, celebrity clientele, and high-profile thefts of some of its 10,000 NFTs.

The costliest NFT ever created is called Everydays – The First 5000 days, which was sold for 69.3 million dollars in March 2021. It is also the reason, that cause boom of NFT sales.

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