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The phenomenon of Bitcoin has revolutionized the world of digital money, and the emergence of NFT tokens has revolutionized the world of innovative assets. What is NFT? How and why were these unusual tokens created, where are they used today? And do they have serious prospects? Read about this and much more in our article.
NFT token – an amazing development story
NFT (Non-Fungible token or non-fungible token) – at its core, it is a product or asset presented in digital form. For example, if you create a token in the form of an electronic plane ticket, it will be unique for each passenger. On such a virtual “ticket” it will be indicated exactly his data – full name, place, date and time of departure and landing. But the digital $10 token will no longer be unique, because there is no defining difference between banknotes of the same denomination. For sellers and buyers in the store, it does not matter what serial number the banknote has and in what year it was issued.
For the first time, the possibility of creating an NFT appeared thanks to the development and release of the so-called “colored” coins. They allowed tokenization of any assets based on the Bitcoin blockchain. Then the first NFT tokens appeared as part of the Rare Pepe Directory application. The NFTs of this project are now considered a real rarity, and they are hunted by crypto-collectors.
So, in 2018, one of these tokens was sold at an auction for $38,000. More recently, the NFT token of the CryptoPunks project under the number #6487 was bought for 100 ETH. But at the current rate it is about $60,000.
However, the world learned about NFTs thanks to the CryptoKitties game. In it, users for the first time got the opportunity to independently create unique tokens. To do this, it was necessary to take two NFTs (in the form of cats) and “get offspring” – in the form
“newborn” NFT. The rarest copies in the wake of the popularity of the game were sold for hundreds of thousands of dollars. And the sheer volume of transactions caused by the high number of NFT exchanges in the game has even led to the congestion of the Ethereum network.
The huge interest of the crypto community stimulated the emergence of an increasing number of games that allowed you to tokenize your assets. The first platforms for trading unusual digital “goods” have appeared. In 2019, the turnover of the NFT token market amounted to more than $150 million, and capitalization grew to $210 million.
The growth of bitcoin in 2020 had a positive impact on the prospects for NFTs. In the first 6 months of this year, turnover increased to $230 million, which is almost a threefold increase compared to the same period in 2019. Most of the funds on the market are brought by operations with virtual land plots in the Decentraland project (almost 50%).
Types of NFT tokens
The Ethereum blockchain allows you to create 3 types of NFT tokens:
- ERC-721 standard. These are unique tokens, and they exist in a single copy. Naturally, they are not interchangeable. The prototype of such a token from real life can be the painting “Mona Lisa” by Da Vinci or a figurine carved by you from wood.
- ERC-1155 standard. These are partially fungible tokens. There may be several identical instances. For example, several copies of the Mona Lisa mentioned above or cars of the same lineup of one manufacturer.
- ERC-988 standard. These are composite tokens that confirm your ownership of other tokens. Here you can draw an analogy with an agreement on opening a deposit box in a bank, in which anything can be stored.
In any case, NFT is the ownership of any digital object: a text, a video, an item in a game or a character, a website on the Internet, a discount card, etc. And ERC-988 tokens – in addition to the above – allow you to own several digital objects and regular ERC-20 standard tokens at once.
Where to use collection tokens?
Thanks to the ability to create tokens, it is now possible to talk about full ownership of digital objects. For example, a character in a game or some object. Previously, control over all in-game property was in the hands of developers. They could change the parameters of any item, confiscate it or “print” ten pieces, block accounts, allow or prohibit trade in objects outside the game world.
So far, the main purpose of the NFT remains the role of a collectible. The value of tokens today depends only on how much a person who wants to buy them is willing to pay for them. Is this or that token a rarity? Or just a “junk” asset? The answers to these questions are not yet determined by the issuer of the token, but only by collectors.
Projects have already appeared that make it possible to tokenize any item. This will require some amount of the project’s internal currency. If your NFT is in demand, the price of it will begin to rise, and it is quite possible to sell it for a profit. If no one is interested in it, you can “destroy” the token and return the currency spent on its creation, albeit with a small fine. The most popular projects today are Aavegotchi, Enjin, Decentraland, My Crypto Heroes, Gods Unchained.
Judging by the statistics, the digital tokens present on the market today are divided into the following conditional categories:
- 45% – gaming;
- 30% – collectible;
- 15% – digital real estate;
- 6% – domain names;
- 4% are digital art.
What are the prospects for NFT tokens?
NFT tokens provide an opportunity to apply blockchain technologies in completely new industries. In addition to the entertainment industry, collectible tokens can be used to digitize ownership of land, real estate, concert tickets, any documents, and even confirm their right to vote in elections.
NFT tokens will simplify the management of personal assets, will allow you to do without intermediaries when transferring ownership of any asset. They make the transfer of such rights much faster and less costly. In addition, the ability to add unique data to tokens will allow you to create digital masterpieces and even whole new directions in digital art. But the most important thing is that in the near future NFTs can become a full-fledged “passport” of your digital objects!
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