We have recently attended Web3Conf, Goa (India), What Are NFTs And How Do They Work?
NFTs are making a lot of news lately, and that is mostly related to the success of NFT marketplaces like Open sea. But NFTs have tons of use cases and we have barely scratched the surface.
NFTs are being used mostly in digital art. But the truth is that anything can be an NFT. This article will shed some light on NFTs to understand what they really are and how they work. We will also be discussing the ways we can use an NFT. At the end of this article, you’ll be confident in your understanding of NFTs.
What is An NFT?
NFTs are non-fungible tokens similar to cryptocurrencies. But they have different purposes and functions. NFTs can be used to represent ownership of digital assets, such as virtual pets or game items. They can represent a variety of things like virtual items, real-world objects, or even people. It is an emerging technology that will soon be used in various industries. Blockchain is the backbone of this technology and it is a decentralized database that stores information about all transactions.
NFTs are also called crypto-collectibles because they can be traded like traditional collectibles. Also, they are unique because they cannot be duplicated. Each NFT is tracked on the blockchain so it can only be owned by one person at a time.
They can be stored on the blockchain and traded in a decentralized manner without the need for any third party to facilitate the trade. In this way, NFTs can operate across multiple different platforms without the need for an intermediary to manage the transaction.
How Does An NFT Work?
The NFTs are created on the Ethereum blockchain using either the ERC-721 or ERC-1151 Smart Contracts. To mint an NFT, we use the object’s metadata and pass it into the Minting function of the Contract. This creates a unique fingerprint for the contract, which cannot be duplicated. This is also called the public key. Now, these digital assets can be uniquely identified through their public key. They can be traded, bought, or sold on the blockchain.
Eos, Neo, and Tron are examples of other leading blockchains that have also released their own NFT token standards to encourage developers to build and host NFTs on their blockchain networks. Finally, it’s important to note that it’s not just the fungibility of NFTs. The infrastructure that supports NFTs is also different.
Unlike all other cryptocurrencies, NFTs cannot be listed, bought, or sold on centralized or decentralized exchanges. Instead, users must use tailor-made NFT marketplaces to participate in the listing and trading of these assets. OpenSea and Rarible are among the most popular, but there are countless other options available depending on which NFT collection you’re interested in.
Uses of NFTs
As we’ll see now, NFTs have tons of use cases outside digital art.
Creating Non-Fungible Assets on The Blockchain
NFTs are a type of digital asset that is stored on the blockchain. It can be transferred, traded, or exchanged without any restrictions.
NFTs can represent any type of digital asset, such as a physical object, a cryptocurrency token, membership in an organization, and so on. The tokens are not interchangeable between different digital assets. They have their own unique set of attributes.
Proof of Ownership
NFTs work by storing data about the ownership of the token on the blockchain. The data is stored as an ERC-721 token, which is a specific type of smart contract that was created for NFTs to store their data.
Each of these contracts creates a public key for the NFTs at the time of minting. By using that key, we can identify the ownership of the NFT.
Authenticity
Authenticity, and proof of ownership go hand in hand. We can mint a set of NFTs with a similar key pattern and using that pattern we can identify if a given NFT is authentic or not.
Conclusion!!
Non-fungible tokens (NFT) have become hugely popular with crypto users and companies alike because of the way they revolutionized the gaming and collectibles space. Since June 2017 there has been a total of $25 billion spent on NFTs, including a further $21 billion in secondary sales. For gamers and collectors, NFTs provide an opportunity for them to become the immutable owners of in-game items and other unique assets, as well as create and monetize structures like casinos and theme parks in virtual worlds.
They can also sell individual digital items they accrue during gameplay such as costumes, avatars, and in-game currency on a secondary market.Â
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