Non Fungible Tokens are a new talk of town. They have become a new craze in cryptocurrency and blockchain world. You might have recently heard that Wikipedia creator’s computer and Non-Fungible Tokens were auctioned for almost $1 Million, and it might have compelled you to think, what these NFTs are. If you want to know about Non Fungible Tokens in simpler terms, then you are at the right place.
What Are NFTs
NFT stands for Nun Fungible Tokens. Simply put, Fungible refers to any such thing that can be replaced by another thing of equal value. For example, a note of 500 Dollars can be replaced by another note of 500 Dollars or 5 notes of 100 Dollars. Similarly, a Non Fungible is any such thing, that can’t be replaced by any similar thing, as it is unique in value. Token refers to a certificate, code or contract, and it is stored on a Blockchain.
NFTs are a set of non-replaceable data that represents a digital asset on a blockchain. If you have any digital asset, that is rare, unique and can’t be replaced by anyother thing, it is appended with a piece of code (identification code or token), which is then stored on a blockchain, and is known as a Non Fungible Token. This code helps in ascertaining the ownership of the digital asset and prevents its piracy and duplication.
Non Fungible Tokens, as the name suggests are the pieces of encrypted data, that are irreplaceable and represent a unique and a non-replaceable asset. These pieces of data grant ownership rights to the beholder and make the digital assets tradeable and verifiable using blockchain technology.
NFTs can include anything ranging from tweets to digital art to a song or an album. If any tweet is non-fungible, it means it can’t be replaced by anyother thing, and if it is a token, it means it is represented by a piece of data on a blockchain. Unlike a bitcoin which can easily be replaced with another one, as both have same value.
Suppose you and your friend, each have a Bitcoin and a drawing pad. Both of you make copies of Monalisa painting, on your respective drawing pads, and suddenly Leonardo Da Vinci, emerges out of his grave, and declares to the world that your painting is going to be digital version of Monalisa and appends his signature on it. Will you ever interchange your painting with your friend now? No, and therefore it has become non-replaceable or Non Fungible. Will you exchange your Bitcoin with your friend? Yes, you will, because none is superior than the other.
Since your painting has increased in value, you would like to maintain ownership rights on it. To do so, you will secure your digital painting with a piece of code, called token. This piece of code will be stored in a Blockchain as Non Fungible Token. Whoever holds the code, holds the ownership rights. This token has no value of its own. It derives value from the asset, which it represents on a blockchain.
Types of NFTs
There are many types of NFTs, and they are;
|Generative Art NFTs||It is the art generated by computers and AI.|
|Collectibles||They represents some historic event. example; best shots in basketball.|
|Photography NFTs||They represent some best photographs turned into NFTs|
|Music NFTs||They are pieces of music turned into NFTs|
|Game NFTs||The NFTs that are used in games|
|Domain name NFTs||These are domain names traded as NFTs|
|Artwork NFTs||They are the real art turned into NFTs.|
Importance Of NFTs
NFTs or Non Fungible Tokens are a new use case of cryptocurrency and its underlying Blockchain technology. It is going to revolutionise the world in the following ways:
- NFTs are going to be of immense use especially in validating ownership rights. NFTs contain the ownership details in encrypted form on a blockchain, which it makes easier to establish and validate the ownership.
- NFTs removes the intermediaries that existed in conventional sale and buying of art forms and rare assets. The original owner has an exclusive control over his asset and it allows him to connect directly with his audience. It is just the ownership that gets validated through the blockchain. All this boosts transparency and discourages piracy and duplication.
- NFTs can help in the diversification of ownership. Imagine a famous and a rare painting in physical form. It can be owned by a single person, as multiple ownership does not make any sense here. Now imagine the same painting in digital form and tokenised on a blockchain, it can be owned by many persons. Such an NFT is called fractional NFT.
- NFTs will pave way for metaverse. Many metaverse companies like Sandbox have many digital assets whch they sell as NFTs using metaverse relevant coins.
- NFTs can help in providing values to intangible assets. for example, the CEO of twitter, Jack Dorsey sold his first tweet as an NFT. Selling a tweet was something that was not heard of in the conventional world.
Why Are People Buying NFTs?
Buying and Selling of NFTs is a new business today, and it is witnessing an exponential upward trend. People mostly buy NFTs because of human psychology. People love buying and selling new forms of assets. Buying NFTs grants them authority, access and acceptance in this emerging virtual arena.
Buying and selling of NFTs has emerged as a full fledged business. People are buying NFTs as they have a firm belief in its underlying technology and see a long term value in them. Most of the buyers are well aware about the prospective uses of NFTs, and want to be the early players of the game.
Buying NFTs grants people exclusivity and social status. While on one hand, people flaunt them by making them as their social media profile pictures, on the other hand, It helps people form clouts amongst their friends and other people, and form communities just like the Crypto Punks.
Can NFTs Have Multiple Owners | Can Multiple People Own One NFT
The answer is yes. NFTs can have multiple owners. There is a way through which NFTs can have multiple owners and that is called NFT fractionalization. It leads to the concept of NFT co-ownership, which allows multiple persons to co-own a given token.
One of the important features that sets NFTs apart from the physical art is the concept of fractional ownership of NFTs. In physical world, the concept of owning a piece of art simultaneously by two or more persons does not make as much sense as it does in case of Non Fungible Tokens.
You might be thinking that if NFTs are non fungible, then how can they have multiple owners. It is possible through fractionalization of NFTs.
How NFT fractionalization works?
NFT fractionalization works through splitting a given NFT into various ERC-20 tokens. Each ERC-20 token means some percentage of the main NFT, and consequently it grants its buyer a percentage of NFT ownership. It is similar to how a physical asset is purchased by a group of people, when none of them wants to have its complete ownership.
NFT fractionalization is governed by smart contracts, which ensures fool proof way of multiple ownership. These smart contracts are transaction protocol on blockchain and hence immutable in nature.
Advantages of NFT Fractionalization
The advantages of the concept of NFT multiple ownership through NFT fractionalization are:
- NFT fractionalization makes the concept of NFTs democratic, by making NFTs affordable to all. This will in turn ensure more participation and hence more acceptance to the NFT system.
- One can add more expensive NFT fractions to his asset collection.
- It will help in making the NFT market fairer and less volatile.
- It will make the buying and selling of NFTs very easy.
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How many owners can an NFT have?
The number of owners that an NFT can have depends upon the creator of an NFT. If the creator sells an NFT as a whole, then there will be just a single owner. However, if the creator decides to split the NFT into various ERC-20 tokens, then there can be multiple owners of an NFT.
Can NFTs Have Sound?
The answer is yes. NFTs can have sound.
Since Non Fungible Tokens can be anything like an image, a gif, a video or an audio. So, if you are turning your video or audio into an NFT, it definitely will have a sound.
Recently, Indian superstar Amitabh Bachchan released an NFT named Madhushala, which is a poetic collection of his father in Amitabh’s rustic baritone. It has a sound.
You can check various kinds of NFTs that have sound from sound.xyz.
Can NFTs Have Words?
Yes, NFTs can have words.
Since NFTs can the tokenised form of any thing like music, video, gif, photo or a word. So, NFTs can have words.
There is in fact a dedicated platform called NFT words, where you can own and collect words as NFTs.
So this was all about the Non Fungible Tokens. We are sure that you would have loved reading this article. Share it with your friends.
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FAQs about NFTs
NFTs are a set of non-replaceable data that represents a digital asset on a blockchain. If you have any digital asset, that is rare, unique and can’t be replaced by anyother thing. It is appended with a piece of code (identification code or token), which is then stored on a blockchain. This code helps in ascertaining the ownership of the digital asset and prevents its piracy and duplication.
Some examples of non fungible tokens are;
1. the first tweet made ever, which was sold as an NFT for millions of dollars.
2. Madhushala NFT collection, that was sold for rs 5.5 crore.
NFTs have started influencing every aspect of our life, and have started showing use case in various important fields. Currently, they are finding their use case in Music, Gaming, Luxury goods, Supply chain, Ticket sales and Metaverse. Once the concept of NFTs and its allied technologies gets developed fully, the use cases of NFTs will increase further.