A Beginner’s Guide To The World Of Non-Fungible Tokens

If you have hovered around in the world of cryptocurrency for a while now, you must have heard about NFT, or Non-Fungible Tokens, especially after rapper and songwriter Snoop Dogg launched his own NFT token.

To understand what these non-fungible tokens are, let’s first clear what fungible tokens are. In simple terms, fungible tokens are ones that can be made copies of and their value remains same irrespective. For example- every BTC has equal value, and each coin is just the same carrying equal value. It is a fungible token, in the sense that each BTC does not have a unique identity. Think of notebooks manufactured by a same factory, all of them same with same number of pages and same price- these are objects that can be made multiple copies of and their value remains just the same. It is also divisible in nature, in the sense that a 20 dollar note can be divided into 20 parts of 1 dollars and the it holds equal worth.

Non-fungible tokens, on the other hand, are digital assets holding their own unique identity and value which cannot be replicated. These are digital signatures written with a cryptographic algorithm on a blockchain which has the ability to own an identity. In fact, you can tokenize art, music, and even real estate!

To understand how it works on a blockchain, imagine a large spreadsheet with multiple tables created on it. Each of these tables contain details of animated Robots with specific details like size, colour, identification number, etc. Remember, each table carries details of separate and unique animated Robots. Add to these details, a wallet address, the one which holds the ownership of that specific animated Robot, and only the owners of their respective tables can modify or change any information, or sell it. This is a vague idea on how NFT is stored on to the blockchain in an organized, transparent manner.

However, there’s a lot more to NFTs. A few things you should know if you are a beginner:

1. Unique Identity: When an NFT is minted, or is added on blockchain, it is the only one. Once minted, any other copies of the same NFT does not get accepted.
2. Price: You may wonder how millions of dollars are spent on NFT tokens (which might also seem irrational to you). That happens because of subjective perception. NFT prices are usually based on factors like prestige and speculation that are rooted deep into human behavior and desires for luxury goods.
3. NFT 1.0: NFTs, since its launch in 2015, has gone through many changes much like anything else in the world. NFT 1.0, the very first version was very simple- “you like it, you trade it”. It could only be admired and bought/sold in the market. The first NFT was Etheria.
4. NFT 2.0: Then came NFT 2.0 which evolved into tokens that had some traits, and utility. Not all of them had traits, but they did carry some usefulness to them. For example, if you bought a certain 2.0 NFT, you might get a benefit of using it as a discount token for gas fees on Ethereum.
5. NFT 3.0: While 2.0 is still rooting its existence, NFT 3.0 has set its foot in the world with even better functionality and modifications. These NFTs have their own authority, and can even own other NFTs! They have grown into being more interactive, and the best example of the same would be gaming world. If you have a character playing for you in a particular game, you also tend to have equipment/weapons/elements for your character. Your animated character in the game can be an NFT, and all of the other elements you equip it with are NFTs, too. In essence, your NFT character is the parent owning all the other element NFTs you equip it with.
6. Revolutionary: Much like any DeFi projects at present, NFT is bringing in a revolution in the way that we create, buy, or sell art. Imagine no body ever being able to copy your art and sell it on their own. That would be like sorting copyright issues right in the beginning while your art remains as original as ever, which you can monetize and earn well from.
   
   One of the attributes of NFTs and the market place is the beauty of humanness. Since all art and music is created by real people with real stories, it also makes it easier to use these stories as a leverage while selling NFTs. Here’s a brief intro to NFT market places where you can buy and sell them:-

In our next article, we will talk in detail about minting, buying, selling, and the various market places you can do all of that in!

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