Non-fungible Tokens or NFTs have made huge waves since their creation these past few years, holding everyone(art lovers, tech enthusiasts, and meme lovers alike) captivated or curious. The question on your mind would be What are NFTs? How do they Work? And most importantly, What is all the Hype about?
This article will answer those questions as best as it can and at the end of this article you should be able to have a general idea of what NFT is about.
What Makes Them Unique?
To Understand the hype and rave in the tech space about NFTs, one would have to understand what non-fungible means. NFTs offer a deviation from traditional fungible tokens like cryptocurrencies.
Fungible simply means interchangeability. For example, imagine a 1000 naira note in your hands, you could always exchange it for another 1000 naira note and they would both have the same value.
Non-fungible Tokens on the other hand are Unique and irreplaceable. This is because each NFT has its own special identity and cannot be swapped for another without losing its value.
NOTE: Other factors can determine the value of an NFT, and non-fungibility does not necessarily mean value. NFTs are an example of Networking goods.
Importance Of Blockchain In NFT Production
NFTs are unique digital certificates of ownership for digital properties, and these properties could be anything from artwork to music or even tweets. Blockchain plays a crucial role in making NFTs operable.
There are three(3) ways blockchain plays a vital role:
Verifying Ownership; Each NFT is stored on a blockchain to ensure uniqueness and avoid it being duplicated. The blockchain keeps track of ownership history, making it clear who owns an NFT.
Enables Secure Transaction; Blockchain uses cryptography to secure transactions involving NFTs, and you can check our article on Blockchain to understand the importance of cryptography.
Facilitating Innovation and Creativity; Blockchain gives creatives a platform to tokenize and monetize their works in new ways. Doing this gives them new and endless possibilities to reach new and wider audiences.
Popular Use Cases of Non-Fungible Tokens (NFTs)
Photos: Photographers can tokenize their work and offer total or partial ownership.
Videos and audio files: Artists can tokenize their music, granting buyers the rights the artist wants them to have.
Artwork: A generalized category of NFTs that includes everything from pixel to abstract art
Comic books and Collectibles: Crypto Punks, and Pudgy Panda are some examples of NFTs in this category.
Sports collectibles: Collections of digital art based on celebrities and sports personalities.
Trading cards: Tokenized digital trading cards.
Domain names: Guessing you already know what a domain name is, NFTs can represent ownership of domain names for your website(s)
Games and more.
Challenges Associated With NFTs
For everything that has a bright side, there is usually a downside that has an adverse effect. And NFTs are not an exception to this rule.
Many blockchains like Bitcoin and Ethereum use PoW to validate transactions and this type of consensus mechanism requires a computer to consume a large amount of energy to solve complex mathematical equations. Mining which is the process of solving computational puzzles also adds to the digital footprint.
Other challenges the NFT market suffers are overcrowding, copycats, low-quality NFTs, and impulsive buying.
Conclusion
In this article, you've learned the meaning of NFTs, the meaning of fungible and non-fungible, the importance of blockchain in NFT production, their various use cases, and the challenges associated with NFTs.
No new technology in the tech space is a trend that would die out, that is why you must watch closely the evolution of NFTs, and make sure you aren't left behind by industrialization.