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With the rising popularity of cryptocurrency, the rise of a new generation of crypto-lovers has also fueled the growth of a new beast: non-fungible tokens.
And at least once a week, I get the questions: What does NFT mean and what is NFT in Crypto? NFT stands for non-fungible tokens and they are one of the cryptographic types of tokens which represent ownership of digitally scarce goods. Some great examples of NFTs represent arts, collectibles, and other digitally stored items.
Fungible vs. Non-Fungible Tokens
In economics, fungibility is the characteristic of goods or
commodities where each individual unit is interchangeable and indistinguishable from other goods. Fungibility’s meaning can be best explained with an example.
If Alice has a $5 bill then she can exchange that bill with Bob for equally exchanged value of $5 bill.
What is a famous example of a non-fungible token? A famous example of non-fungible tokens can be best described in an example thinking of
Imagine Alice owns a 1st edition collectible basketball
card. This card has individual properties which make its value.
If Bob owns a 1st edition collectible baseball card, then its value will not be equal just because of the two properties being 1st edition and collectible card.
There are factors such as year of production and quality of card and how it’s been taken care of during its years of being collected.
- Provably Scarce
- Indivisible (Most cannot be split in fraction or denominations)
- Guaranteed Ownership
- Easily Transferrable
Where are NFTs stored?
Non-fungible tokens can be programmed, stored, and implemented
on any blockchain which supports ERC-721 and ERC-1155 standards on Ethereum (ETH) blockchain.
A well known standard for creating tokens on the Ethereum blockchain. Some examples are Stablecoins such as USDT or DAI. DeFI tokens are also generally programmed using ERC-20 standards, such as $LEND, yearn.finance ($YFI), and Uniswap ($UNI). ERC-20 allows for fungible tokens, completely indistinguishable from another.
This means, it does not matter where you get the tokens from, whether that’s a friend or from an exchange, the value represented of the tokens is through market price and not solely its properties within the token (excluding tainted tokens).
This is a common standard for creating non-fungible tokens. This allows for creating smart contracts with distinguishable tokens with different properties.
A common example within the decentralized application community is the CryptoKitties. These digitally furry friends allow for creating and breeding and collecting virtual kittens.
This is the next step for creating a standard with the ability for both fungible and non-fungible tokens. This standard was proposed by Enjin, a project focused on blockchain-based gaming.
In many games such as League of Legends (LoL) or World of Warcraft (WoW), players receive items when they join the game, such as common shields and swords, or digital gold from ranking up.
Think of a non-fungible token within a game being a ‘one of a kind’ item which only one player may posses.
CryptoKitties is an blockchain game built on Ethereum blockchain and was developed by Axiom Zen. This game allows players to purchase, collect, breed and sell virtual cats.
You can collect and trade CryptoKitties and you can even breed the rarest cats to create your own non-fungible friend.
The most expensive CryptoKitty named ‘Dragon’, was sold for 600 ETH worth roughly $170,000 US Dollars.
My Crypto Heroes
“Where your time and passion will become your assets. Get great extensions and Land through collecting/training historical Heroes!” My Crypto Heroes is a blockchain game that enables non-fungible tokens like Heroes and Extension and are stored on the Ethereum blockchain. ERC-721 allows for tokens to be stored on-chain and can be used, traded, and sold within the game and on blockchain.
“The ultimate digital trading card game that gives players true ownership of their collection. Play for free, play for keeps, or trade on open marketplaces.”
Gods Unchained, The Ethereum based game was the most popular blockchain game prior to further blockchain developed games. The cryptocurrency collectible card game was developed by Immutable, an Australia based blockchain gaming startup. The Immutable mission is to “make virtual worlds real.” And they hope to make this a reality by landing a $2.4 million deal from Coinbase Ventures, Continue Capital, Nirvana Capital, and Sora Ventures during its very first funding round in 2018.
“Create, explore and trade in the first-ever virtual world owned by its users.”
Decentraland is a virtual world that is owned by its users, who can build, explore, play games, socialize and earn money from their creations. In fact, it is a world that is built around MANA, a blockchain-based token used for trading goods and services provided by users
SuperRare is a social media network for art creators and collectors, built and backed by blockchain. Creators can create their own digital artworks and tokenize on the Ethereum blockchain. Collectors have the ability to buy and trade artworks with royalties going back to the creator thanks to smart contracts.
OpenSea is the marketplace for digital goods. This marketplace offers collectibles, gaming items, digital art, and more digital assets that are backed by blockchain technology. A peer-to-peer marketplace for rare digital items and crypto collectibles.
NFT Domain Names
Ethereum Naming Service (ENS) – .eth
The Ethereum Name Service (ENS) is a naming system based on the Ethereum blockchain and includes distributed, open, and extensible domains. ENS’s plans to map human-readable names like ‘nich. eth’ to machine-readable identifiers such as Ethereum addresses, other cryptocurrency addresses, content hashes, and metadata.
Unstoppable Domains – .crypto
Unstoppable Domains is building domains using Blockchain technology. Unstoppable Domains is a San Francisco-based company and the company is backed by Draper Associates and Boost VC and has received grants from the Ethereum Foundation and the Zilliqa Foundation.
NFTs in Decentralized Finance (DeFI)
Currently in DeFI, the majority use collateralized loans. I would like to see a non-fungible token as a collateral for a loan.Imagine, a non-fungible token such as a piece of land title, or bank note, or even a piece of art could one day be used as collateral in a loan.
Thank you For Reading