Would you believe that someone from Indian origin purchased digital artwork for 69.3 Million!! Yes, it did happen on 11th March 2021 as a non fungible token. The “EVERYDAYS: THE FIRST 5000 DAYS” got sold out in 69.3 Million before it, the digital artist Beeple’s NFT piece, “CROSSROAD” was sold for $6.6 million on Nifty gateway. People are literally purchasing digital art, music, game, video clips, tweets, and a lot of things that available in the digital space in skyrocket prices.
But why now?On blockchain technology, the concept of Non Fungible Token (NFT) has created this unique royalty assignment for digital items. Assigning these NFTs with the particular digital item makes it worth having; which can’t be replicated or owned by everyone except its owner.
To understand the worthiness of NFT tokens first you need to understand what are these tokens, how are they unique, where to purchase them, and finally digital wallets to store them.
What is Token in Cryptocurrency?
A token is an object or symbol that represents something in either physical or virtual quantity in a particular system that can be exchanged for material, services, or privileges.
In Blockchain Technology the miners are rewarded with a token of gratitude for their digital work according to the consensus mechanism, which is also known as Crypto tokens. These crypto tokens represent fungible and tradable utility and assets created at the time of issuing Initial Coin Offering (ICO) for the particular blockchain. These tokens can be further categorized as Fungible and Non Fungible Tokens.
Difference between Fungible and Non Fungible Token
Cryptocurrencies that are identical to each other are known as fungible tokens and, hence, can be used in transactions. NFT are cryptographic assets with unique identification code and metadata of digital items that separates it from every other NFT on the same or different blockchain. Not like fungible cryptocurrencies, which can be exchanged or traded at equivalency.
Examples of a fungible token would be Rupee in the physical world and Bitcoin or Ether in the virtual world. With fungible tokens, you never have to care which one you have.
According to Wikipedia –A non-fungible token (NFT) is a unit of data on a digital ledger called a blockchain, where each NFT can represent a unique digital item, and thus they are not interchangeable. NFTs can represent digital files such as art, audio, videos, items in video games, and other forms of creative work. While the digital files themselves are infinitely reproducible, the NFTs representing them are tracked on their underlying blockchains and provide buyers with proof of ownership.
Examples of a Non fungible token would be a house in the physical world and Cryptokitties in the virtual world. Like no two houses can be the same. Each house will have its own unique structure and design. A similar concept is applicable for virtual items associated with NFT.
The technology behind Non Fungible Token
An NFT is a unique uint256 ID inside the ERC721 smart contract on ethereum. The value of this ID remains the same forever until the contract exists. The pair (contract address, uint256 tokenId) can be used to identify the specific asset on the ethereum chain. Some ERC721 smart contracts start with Id number = 0 and increment the next token likewise; while it is not the same for all the cases.
The process of creating NFT is known as Minting and destroying it is called burning both the processes are dependent on the type of Blockchain they are using for NFT.
The transfer mechanism in Non fungible token works with ERC721 standards having safe transfer function safeTransferFrom() and unsafe function transferFrom(). The transfer can be started by
- the owner of the NFT
- approved address of NFT
- the authorized operator for the current owner of the NFT
ERC-721 and ERC-1155
Both these standards are developed on Ethereum and the purpose for developing was to improve the standards of gaming on blockchain. Later development of Cryptokitties on ERC721 standards revolutionized the gaming industry with certain features making an NFT token for gaming.
- Allowed token : Non Fungibles
- Transaction: Single token transfer in 15-30 seconds, one at a time.
- Language support: One
- New token requirement: Need new smart contract everytime
- Metadata supported: Static
With the increase in the usage of NFT tokens, ERC721 standards were looking slower, hence an updated standard was needed to make the transaction fast and reliable. ERC1155 was the solution for ERC721 standards on choosing the type of tokens, language barrier, URIs support, and fast transaction. And Enjin is one of the successful NFT blockchain using ERC1155 standards. Few features of ERC1155 are as following
- Allowed token: Fungibles, Non Fungibles, and Semi Fungibles
- Transaction: Batch transfer of multiple tokens in a single transaction ( 150 -200 token each second)
- Language Support: Supports localization of languages, making tokens universal.
- New token requirement: Infinite tokens can be implemented on a single smart contract.
- Metadata support: Points to infinite token URIs without storing additional data on-chain.
Non Fungible Token Assets
Since Jan-2021 NFT has gained a lot of attention in terms of assets for trading highlighted videos of basketball, digital artwork of artists, music royalties of musicians, having own domain, and tweets of Twitter accounts.
Jack’s first tweet as an NFT, for over $2.9 million on March 22,2021 when bidding ended on the “Valuables” platform, a blockchain-powered social media network.
NFT Blockchain Projects like CryptoKitties, 0xcert ERC721 Token, Decentraland, CryptoPunk, Enjin Coin, and Curio Cards are already popular among cryptocurrency users.
You can purchase these NFTs from OpenSea, Rarible, Nifty’s, and JuicyNFTs. After purchasing these digital assets you need an Electronic Wallet to store these NFTs. Metamask and Coinbase can be used to store these ethereum based tokens.
With the ongoing development in the Cryptocurrency space, people have started to recognize Non Fungible Tokens as a digital asset which they can use as a collectible for their digital items. NFTs being a non-interchangeable, non-divisible and unique element makes it a suitable token to collect digital items and support the good value to those digital items in the virtual world.