Non-Fungible Tokens Explained: The Beginning of the New Crypto Mania

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There’s a new crypto that’s the talk of the town – it’s the non-fungible token aka NFT. The recent mayhem around this thrilling new digital asset ensued after steeply rising Bitcoin prices and other cryptocurrencies began filling the pockets of crypto investors. Though NFTs have been around for a decade, the new-found hysteria seems to be growing, showing no sign of slowing down.

These digital assets could be picking-up speed that is fuelled by individuals looking for alternative investments or maybe just a way to brag about their new purchases. 

If you are intrigued to wrap your head around this bewildering new way to invest, then read on!

What are non-fungible tokens?

Technically a non-fungible token is a cryptographic asset on blockchain that has its own unique identification code that differentiates it from the rest of the NFTs out there. What primarily differentiates them from how other cryptocurrencies like bitcoin work, is that it is ‘non-fungible’, meaning it cannot be replaced or exchanged at equivalency. If this concept still seems to be going over your heads, let me break it down for you. A non-fungible token can be thought of as a ‘one-of-a-kind’ trading card. If you traded this card for another you’d get something completely different!

NFTs are redefining the value of distinctive items we own. These tokens that can be used to represent any item that is unique or ‘one-of-a-kind’, ranging from things like art, collectables and even real estate, and could even help you earn millions through the value they accrue over time.

How do non-fungible tokens work?

So how can you really make that piece of digital art you created months ago worth millions in a matter of days? 

To help you grapple with the functioning of this eccentric concept let’s get down to the basics. If an artist wishes to sell his art, they would need to ‘create’ or rather ‘mint’ a NFT that will certify ownership for the piece created. These NFTs are stored on an open blockchain ledger, allowing ownership, number of copies, prior sales prices, to be tracked. With blockchain technology safeguarding the identity of original assets, selling fakes is next to impossible, unlike the tragedy of forgeries we see in the real world. 

Currently, most NFTs are a part of the Ethereum blockchain (erc721), but there are various other blockchains that can also implement their own versions of NFTs. Some have already begun incorporating them, like TRON

What baffling items can you expect to see at a NFT Auction? Here are some non-fungible token examples:

  • Virtual Real Estate: Yes you heard that right, digital lands are selling for millions as a NFT. Decentraland – an ethereum-based blockchain platform that allows users to partake in a world built on virtual reality – recently sold for a million bucks!
  • Digital Art: From psychedelic digital illustrations to gifs of nyan cat – they are all in for minting the big bucks too. 

Here’s a pretty little picture of CryptoKitty and it just sold for $170K.

Image: CryptoKitties.co

If this didn’t set your mind off into an explosion, let me tell you about another JPG file made by an artist known as Beeple that was sold on an online auction by Christie’s for $69.3 million! 

There are several other digital art pieces that are shaking things up in the NFT world, you can check some out here.

“Everydays — The First 5000 Days”, a collage of images that the artist Beeple has been posted online since 2007, was the image that sold for $69 million. 

Image: The New York Times

  • Limited Edition Fashion: A unique, limited-edition sneaker  was put up for auction joining in the realm of new-age NFT fashion. These hypercrafted sneakers could be used physically in real life and could also be held in a digital format as an avatar, in a virtual world.

Image: MetaGrail

  • Digital Trading Cards: Just like the old days, when having a physical pokemon trading card gave you a superior sense of ownership, today, digital trading cards are making it to the long list of NFTs that people are flocking to get a piece of. Sorare is a fantasy football trading game where NFTs in the form of cards of real players can be traded to make money.

These are just some examples scrapped off the surface of possible non-fungible token use cases. After Jack Dorsey, the CEO of Twitter, decided to sell his first-ever tweet as a NFT, it only reinstated the endless possibilities that this modern digital token opens up. Scads of people are swarming to buy Jack’s precious digital asset, with the highest bidder offering $2.5 million

So are NFTs on track to become the future of finance?

The exclusive arena of NFTs are currently seeing a new breed of  investors who are looking to buy these digital assets to profit from the value they accrue over time, as their worth fluctuates with demand. People are buying, selling and trading these NFTs like they would do for stocks on the stock market. But can NFTs tread outside of the investment ecosystem? Possibly, yes. But just as anything that lives on the internet, not everything sticks around. The bubble could pop. Any blockchain could go down and take a slew of NFTs down with it. Being hacked is just another threat that’s on the radar as well. But this is all just speculation. With cryptos recently climbing up the charts, maybe NFTs could be the modern token that’s here to stay.

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