Non-fungible Crypto Art Tokens Explained | NFT Examples

What Are Non-Fungible Tokens (NFTs)?

As there are a lot of questions surrounding the new digital currency issue called the Non-Fungible Token (NFT), this article will introduce the concept by explaining what NFTs are and how they work.

A non-fungible token is a type of digital asset that has a unique identity. These assets can be used for trading or other purposes such as digital collection as a store of value.

First, let's start with a basic definition. An NFT is a type of digital asset that can be used as a unique representation of something else such as a physical item or a service. For example, you could use an NFT to represent your physical artwork. The physical art piece would be digitized and then be created as an NFT which you could sell for money or trade with other people peer to peer on a decentralized exchange.

Examples of NFTs

For example, let's say that I own a piece of rare art created by a well known artist consisting of great value. If I was interested in selling this piece to someone else outside of a central art house, the only way that this person can buy with confidence is to confirm that the art is indeed authentic. If this piece of art had a unique identifier, then the person could go online and digitally verify the item’s authenticity.

This is where NFTs come into play. With NFTs, the person who purchased the piece of art would have a unique identifier along with a time stamped record of legal details pertinent to the item sold which can establish authenticity, ownership details and transfer of ownership all on one unique record.

Why Do We Need NFTs?

The main reason for the existence of NFTs is that each NFT is a unique digital record and undisputed representation of an asset which can prove ownership, time of ownership, other pertinent legal details as well as the explicit authenticity of the asset since an NFT cannot be copied.

NFTs offer the benefits of supporting, solidifying and streamlining the transactional process, recordkeeping and time stamped verification of ownership behind the legal transfer underlying traditional physical assets such as real estate, stocks, bonds or any other physically or digitally associated asset.

Let's take a look at another real life example. Say that I own a piece of land. Although I have access to the deed to this piece of land, I may not know if the deed is unique and if anyone else legally owns the piece of land. I also do not know if the deed is valid. If I want to sell the piece of land, I have no way of knowing if anyone else is trying to sell the same piece of land.

With NFTs, all of this information will be stored on a blockchain via a smart contract. This means that I can now create a digital asset that will contain all of the information about the piece of land in question. Once the digital asset is created, I can then legally transfer it to someone else while recording and time stamping the transaction.

Now, this digital asset can be used as a legal digital ledger to verify the authenticity of the land.

What are some uses for NFTs?

One of the most popular use cases for NFTs is in the collectibles niche. They are especially useful for trading and collecting unique digital representations of sports cards, video games, and other physical items.

Another use for NFTs is to represent virtual items. An NFT can represent a virtual item such as a game character, a digital design such as a logo or even a virtual pet. In this case, the NFT would be the unique identifier for the virtual item.

Another main advantage of using NFTs instead of traditional digital assets is that they can be traded directly between people. There is no need to go through an intermediary like a third party exchange which ultimately streamlines the process while minimizing financial and time costs.

NFT Marketplaces

You can get NFTs from an online marketplace including OpenSea and CryptoKitties.

OpenSea allows people to create NFTs based on real-world items. The items include paintings, rare coins, and even pets.

CryptoKitties is similar to OpenSea, but it allows people to create NFT's based on digital items. The items are digital art, digital music, and digital video games.

In both cases, the diverse range of NFTs are created by the people who want to sell them.

‍

How much are NFTs worth?

The value of an NFT depends on a number of factors. The first factor is the demand for the item represented by the NFT. Just like any physical asset, if there is high demand for a certain item, then the price of the NFT will also be higher.

The second factor is supply. If there is limited supply of an item, then the price of an NFT will be higher. If there is very little supply, then the price may be very high.

The third factor is the cost of creating the NFT. The more expensive the creation process is, the less likely it is that the item will be produced in large quantities or variations.

The fourth factor is the scarcity of the item. If the item is very rare, then the NFT will carry more perceived value and ultimately be more valuable.

Non-Fungible Tokens and Gaming

In simple words, NFTs with respect to gaming are unique tokens that can be used by the players for the purposes of playing the game as well as trading them amongst themselves. These unique tokens are not just digital assets but they may also be physical objects. Ultimately these tokens differ from other digital assets like stocks, gold and crypto currencies as they can be traded among the players and can be transferred from one player to another player quickly, seamlessly and with little transactional cost.

Non-fungible tokens are created through the process of creating smart contracts via the blockchain. In this process, players create unique tokens by leveraging smart contracts utilizing the ERC-1157 token standard. Once created, players can transfer these unique tokens between each other.

To play the game, players use the NFTs to pay the gas fee required to complete and digitally record a successful transaction. There are many games that have been developed using the ERC-1157 token standard designed for blockchain games. Some of the popular games that have been developed using this standard are Gods Unchained and Etherbots.

If you want to invest in some of the games that are based on this standard, then you can find them in decentralized exchanges. However, there may be certain restrictions that apply to these tokens.

The most important thing that you should keep in mind before investing in any game is that you should read the rules and regulations of each game. This will help you to understand the risks involved in potentially investing in NFTs associated with each game.

What Does This Mean For Cryptocurrency?

In the future, all cryptocurrencies will likely be based on NFTs. Currently, many cryptocurrencies are based on ERC20 tokens. ERC20 tokens are similar to NFTs because they are digital assets that contain a unique identifier. However, ERC20 tokens are not truly NFTs because they are fungible. Fungibility refers to the fact that two identical ERC20 tokens are interchangeable.

If you remember from above, ERC20 tokens were created so that developers could create their own tokens. ERC20 tokens allow developers to create tokens without having to worry about creating a unique identifier.

With NFTs, we may finally be able to create a truly decentralized cryptocurrency. When this happens, it will open up a whole new world of possibilities. For example, imagine being able to trade your digital assets across the globe without any restrictions.