NFT (non-fungible token, non-fungible token) is a special blockchain asset that is used to link with another digital asset. The key difference is its irreplaceability. For example, cryptocurrencies Bitcoin or Ethereum are replaceable – any 1 BTC is equal to any other 1 BTC. In turn, each NFT token is unique.
Non-fungible tokens are widely used in a wide variety of industries, but the technology has penetrated deeply into the realms of games and digital collectibles. The most common NFT standards are ERC-721 and BEP-721 (on Ethereum and Binance Smart Chain blockchains, respectively). Btcnewsweb.com editors prepared an overview of the features of non-replaceable tokens (NFT).
What are NFT tokens and what are their features
Fungible assets, such as bitcoin, ether, ruble or dollar, differ in that each unit is completely similar to another unit and can be replaced with it. There are no differences between them. This feature is a characteristic feature of all assets that are used as payment instruments.
Non-fungible tokens (NFT) are unique and indivisible. They also work on smart contracts like other cryptocurrencies, however, these contracts contain additional information that is different for each specific NFT. Thus, one token cannot be replaced with another. These are provably scarce assets with certain digital identities. There are many opportunities for using such tokens, which we will talk about.
Reason for popularity among users
NFT tokens have become very popular among both users and development companies due to their revolutionary influence in the field of games and virtual collectibles. According to the website NonFungible.com, since 2017, users have spent more than $ 280 million on such assets, of which $ 117 million – in the last month alone.
Blockchain technologies have allowed gamers and collectors to secure a secure right to own certain unique assets, as well as sell them, earning real money. Some projects, such as The Sandbox and Decentraland, give users the ability to create and monetize their own structures or sell existing unique items on the secondary market.
Examples of using
A few examples where NFT tokens play an important role:
- Game industry, including gambling. The functions of selling, buying and transferring rare in-game items or skills greatly help in improving the game economy.
- Decentralized assets. These assets can be not only financial, but also any other – in the same games, for example, you can purchase virtual land plots. In a non-gaming environment – NFT tokens are used in ENS (Ethereum Name Service) to facilitate the purchase / sale of domains.
- Artists and other creatives can digitally sell art to collectors without resorting to promotion houses or art galleries, allowing them to keep most of the profits for themselves. It is possible to program the NFT so that every time an object of art is resold, it will receive royalties. For example, Star Trek actor William Shatner released 90,000 digital cards of his photos on the WAX blockchain in 2020. Initially, the cards were sold for the dollar. Shatner now receives passive income from every resell of collectible cards.
- Fight against identity theft. You can digitize information about appearance, medical records, education, etc. into tokens. Thus, the possibility of forgery of personal data by intruders is completely excluded.
The total market value of NFT tokens is growing every day by about $ 7-9 million, which suggests that collectible assets have already moved from the phase of a simple hobby to the phase of serious financial (and not only financial) instruments.
What are ERC-721 / BEP-721 tokens
Today, the most common blockchain for creating NFTs is Ethereum, since such tokens usually comply with the ERC-721 standard. This standard describes a set of mandatory functions that each non-replaceable token must include, but does not impose restrictions on additional attributes that can be added by the developer.
Each ERC-721 token is unique and different from other tokens from the same smart contract. The differences can be very different – age, rarity, or even appearance. The fact is that all NFTs have a tokenId variable, so for any ERC-721 contract there is a pair contract address + uint256 tokenId, which makes it unique. Further, the dApp allows you to put some image as a tokenId, be it a weapon, a skill icon, or a kitten.
BEP-721 tokens are built in a similar way, with the only difference that they are located on the Binance Smart Chain blockchain – it is already catching up with Ethereum in popularity in the development of decentralized projects and assets.
Projects with NFT tokens
Here are some specific examples of using non-replaceable tokens in applications. We’ve already mentioned Decentraland and The Sandbox, and here are a few more apps:
Aavegotchi is an online game with support for DeFi collectible items, which is based on working with avatars (in this case, it is NFT), generating aTokens and interacting with the Aavegotchi universe.
Aavegotchis are pixel ghosts that live on the Ethereum blockchain and meet the ERC-721 standard. The value of each ghost is determined by its rarity, and that, in turn, depends on various nuances (basic features, the number of aTokens embedded in it, items worn). To level up Aavegotchi, the player can participate in various activities and mini-games, as well as buy additional items. Rare copies do well in the secondary market and are rewarded with GHST tokens.
From February 20 to February 23, Binance, as part of the Binance NFT educational promo campaign, will distribute rewards among those who fill out a Google form, subscribe to Binance News / Binance Novini and Aavegotchi, and make purchases / sales of at least $ 100 in pairs GHST / ETH or GHST / ETH. The rewards are distributed randomly: this is $ 1000 in GHST tokens and three NFTs of high rarity.
In addition, there will be AMA sessions with Aavegotchi: on February 22 in the Binance Russian chat, and on February 23 in the Binance Ukrainian chat. There is a prize pool of $ 1000 in GHST tokens, which will be distributed among the winners of the quiz and the authors of the best questions.
CryptoKitties is a popular game on the decentralized Ethereum protocol that allows you to buy, sell and breed virtual cats. Launched and widely publicized back in 2017, it is still an iconic NFT project.
CryptoKitties was the first significant case focused specifically on entertainment and hosted on the second largest blockchain. There was a lot of excitement around him, the project was accused of clogging the network, due to which transactions at that time became expensive and slow. At the moment, CryptoKitties is not just an entertainment project, but also the focus of serious money investments, including from large investors.
In 2009, Enjin launched the Enjin Network, a gaming community platform. Today the number of users exceeds 20 million. In 2017, Enjin integrated blockchain and various products based on it, which made the game economy easier and better for users.
Instead of the generally accepted ERC-721 standard for NFTs, a new ERC-1155 standard has been developed. It is designed not only for games, but also for a wide range of industries, from entertainment and finance to industrial design, artificial intelligence, real estate and more. The basic concept of ERC-1155 is that one smart contract is capable of managing an infinite number of tokens. The contract can contain any items, from weapons and clothing to health recovery potions, magic spells, skills, etc.
Where to buy and store NFT tokens
Assets are traded on open markets such as OpenSea. Many NFT project tokens have been listed on the Binance exchange. The peculiarity of these markets is the decentralized connection of buyers and sellers. The cost of tokens is based on supply and demand. All assets are categorized – for example, Collections, Sports, Art, Domain names, etc.
Trust Wallet is perfect for storing NFT standards ERC-721 and ERC-1155. Each unit of the asset has its own blockchain address. As we recall, NFT cannot replicate (in other words, synchronization of the contents of multiple copies of an object is not possible). Also, even the issuer itself cannot move the token from the wallet, if it does not have the owner’s permission to do so.
Advantages and disadvantages
✅ The ability to buy / sell on special sites, and the more unique the copy, the more valuable it is.
✅ Preservation of copyright forever.
✅ There is no doubt about the authenticity of NFTs as they cannot be counterfeited.
✅ Expanding economic opportunities in games and other systems.
❌ It takes at least a basic understanding of blockchain technology to use assets. Meanwhile, often people are interested in the very value of the token, and not in the underlying technology.
❌ Ease of management depends entirely on the scalability quality of the blockchain on which the token is hosted.
Compared to 2017, the NFT industry has grown significantly. The assets began to be issued, including by many large companies, including the US National Basketball Association or the developer of computer games Ubisoft. The potential of non-replaceable tokens is actively expanding beyond games. In fact, they can be used wherever clear proof of ownership and unparalleled traceability are needed. While NFT still has a number of unresolved compatibility and scalability issues, these are temporary difficulties. Experts are convinced that this is a major growth sector for the blockchain industry.