How would you explain a non-fungible token in layman’s terms?
If you have been aware of the blockchain news lately, you must have come across the term “NFT.” Artists and collectors are both getting drawn to the best NFT tokens and their million-dollar bids. But, still, the majority of people do not know the exact meaning of NFTs and their functionality. Hence, here we will explore the NFTs, their working technology, and real-life uses. Additionally, we will also look at where to buy NFT crypto safely.
Table of contents
- Understanding NFTs
- Know about Fungibility
- Know about Non-fungibility
- Know about Digital asset
- Known about Blockchain
- Understanding the difference between cryptocurrency and NFTs
- Understanding workings of NFTs
- Closing Thoughts
Non-fungible Tokens are a type of certification for digital assets that can be in the form of any media. Though videos, music, and arts are the most common NFT media, digital documents, writing, etc., fulfill the criteria as well. Let us understand the relevant terms in the world of NFT crypto:
Know about Fungibility
In easy terms, fungibility refers to anything that is exchangeable. Basically, fungible items are replaceable to other items that hold similar value — for example, silver, gold, currencies, wheat etc. Also, items that are easily available can come in fungible categories.
Know about Non-fungibility
NON-fungibility refers to items that are unique and irreplaceable. For example, an old coin or autograph paper.
Know about Digital asset
Digital assets simply imply anything that is in digital format. Moreover, these assets comprise the right to use, i.e. anyone can copy, duplicate or modify them. Hence, items like audio, documents, images, visual content etc., come under digital assets.
Known about Blockchain
Blockchain technology is a database type that collects digital data as records within its networks. However, blockchain is different from ordinary databases. It is a chain of blocks that connect with each other. This way, this chain of blocks builds a distributed ledger or collection of information/data that stores every activity within the chain. However, we advise you to take guidance from a good NFT expert to learn about blockchain in detail.
Every blockchain ledger has its storage across thousands of individual worldwide servers. Further, this depicts that anybody connected to the network can have access to each users’ entries. Also, they can verify any new entry on the network. This system is known as peer-to-peer network which works over a shared ledger technology. Further, this makes it impossible to modify or change the block data.
Understanding the difference between cryptocurrency and NFTs
The technology behind cryptocurrencies and NFTs are the same. Also, to buy NFTs, individuals need to maintain a digital wallet having adequate crypto coins in it. However, the main purposes of cryptocurrencies and NFTs are very different from one another.
Furthermore, cryptocurrencies intend to operate as digital money either by letting you sell/buy goods or store values. Moreover, they are fungible by nature, like dollars or fiat currencies. On the other hand, NFTs formulate unique tokens that signify ownership and assign copyrights over each digital item. If you want to get in-depth knowledge of this topic, opt for a knowledgeable NFT expert. You can buy or sell NFTs in various NFT-based marketplaces such as openSeas, Rarible etc.
Understanding workings of NFTs
Usually, the Ethereum blockchain creates a large portion of NFTs, even though other blockchains support NFTs as well. As anybody can review blockchain, one can easily trace and verify NFT ownership rights. At the same time, the token owner can stay pseudonymous.
NFT can tokenize a variety of digital items such as artworks, game accessories, clips or entire videos of some popular broadcast. Moreover, the biggest known NFT marketplace is NBA Top shots.
When linking the NFT item that carries ownership rights, the file size of the digital asset does not matter. This is so, as it stays separate from the blockchain.
However, remember that licensing and copyright may not come along while you buy an NFT. But, of course, there are exceptions for some cases. Due to the recent advancements in the underlying blockchain technology, NFTs applications are going beyond the usual digital artworks.
For artists, NFTs are smoothing the way to auction their work in the online world. Additionally, NFTs offer creators ways to get revenue from every further sale of their NFT artwork. On the other hand, buyers can find out the credibility of digital art. Also, it gives buyers the right to showcase their NFT collection wherever they want. In case you are planning to invest in NFTs, understand that it comes with price uncertainty. Where some NFTs are getting sales in the millions, others are stagnant for a long time.
It was an easy explanation of non-fungible tokens for beginners to get a basic idea. However, if you want to learn more, join the NFTiCally and get guidance from the highly knowledgeable NFT expert.