There’s a lot of buzz around non-fungible tokens (NFTs) and for good reason. They have the potential to revolutionize the way we interact with digital assets. But there are still some things you need to know about them before you start using them. Here are nine important things you should know about NFTs.
What is a non-fungible token (NFT)?
That’s a great question! Nearly anything can be encoded as an NFT: cars, houses, sneakers, and even works of art such as classic paintings. Essentially, any asset that has singular ownership and discrete characteristics can be represented by an NFT – also referred to as a “deed.” You should be aware, however, that a deed is not a digital copy. It is a unique identifier for your unique asset. This means that you do not need to worry about how your NFT is stored or handled – it’s always under the control of its owner.
Furthermore, the token itself is just a smart contract that encodes relevant metadata about the deed in question.
What is it used for?
NFTs are beginning to change the way people think about the ownership and trade of digital assets – including items on video games, cryptocurrencies, etc. With NFTs, you can own a physical asset that is unique, verifiable, and tradable. It’s the best of both worlds! There are already quite a few different use cases for NFTs including exchanging goods in online games, collecting digital art created by peers, and proving ownership of your items on cryptocurrency exchanges.
Remember that this is just the beginning of a new way to think about digital ownership.
How do I create an NFT?
The most basic concept behind creating an NFT is that you will deploy a smart contract to the blockchain. Then, you’ll attach metadata about the deed in question to this smart contract. This metadata can include any information your specific use case requires. For example, if you wanted to tokenize ownership of artworks on EtherVision (a decentralized video game store), you could store the artist’s name in the metadata.
Where can you trade NFTs?
You can already find a number of places on the web that are trading NFTs for other digital assets or fiat currency. Marketplaces such as Jungle, Rarebits, OpenSea, and the NFTy Mag have been accepting offers for a while now. Keep in mind that if you want to trade an NFT for cryptocurrency or fiat currency, there is additional compliance required on both sides of the transaction.
Who is creating NFTs?
Though this technology has just begun to disrupt the world, there are already quite a few companies and organizations that have started to create their own tokens. For example, CryptoKitties has created over 70,000 ERC-721 tokens. Augmentors have already created 100,000 NFTs to use in their blockchain-based game. The OpenSea team is creating a variety of tokens for different games and platforms – most notably Ethereum Monsters. There are even organizations such as Mokens that are creating tokens that you can use to encode your digital identity.
What are the benefits of using an NFT?
Privacy – Your information is kept secure since it’s only associated with an identifier. The details of your deeds are not subject to being accessed by another person unless you allow them.
Longevity – Just like with physical assets, NFTs are not subject to the usual limitations of digital items. You can always access or use your deed at any time in the future. This also means that anyone who purchases your deed will have access to it in perpetuity.
Granularity – You can do anything you want with your deed after it’s created. For example, you could give your deed to someone else for Christmas (if it’s a house), or sell its data for research purposes (if it’s an art collection). The possibilities are endless!
What kinds of NFTs are there?
You can think about non-fungible tokens as either “unstoppable” or “collectibles,” depending on their use case. Unstoppable (or Mass Transferable) tokens cannot be controlled by a particular individual. This is useful in many situations, such as in games where it’s impossible to tell the players from the owners of assets. Collectible tokens are “tethered” to an individual and can be passed on or traded whenever the current owner wants.
Who benefits from NFTs?
You do! And so does everyone else! When you own an NFT, you’ll have complete control over your deed on a blockchain. This means that it is far more secure than a deed held on a centralized database. In general, ownership of an NFT means more privacy and longevity for you as well as better future value potential.
Also, a big benefit of NFTs has yet to be realized – a truly digital inheritance. Imagine being able to transfer virtual items from yourself to your children just as easily as you can hand them down physical objects.
What is the future of NFTs?
Blockchain-based deeds have far more potential than just collecting or trading unique assets. The fact that they are unforgeable and still digital will allow developers to create deeds for all kinds of physical items. For example, artists can create blockchain-based certificates of authenticity for their pieces. Companies can tokenize real estate ownership. There are also NFT-driven projects in the works for music, ebooks, cars, art collections, and many others.
In the future, it’s likely that most digital items will be tracked using NFTs – from virtual pets to your own avatar in a massively multiplayer gaming environment!
Non-fungible tokens are a new technology and they can be quite confusing. Now is the time for you to experiment with them and see how much control you have over your digital deeds. But, don’t forget that as the technology grows, there will be more tools available to assist you. In fact, some game companies are already providing off-chain tools to assist you in using your NFTs more easily.
Be patient – it will take some time for the NFT community to mature and for developers to find their footing in this brave new world. You’ll likely experience a bit of frustration as the ecosystem grows, but that’s okay! Try to enjoy the journey and celebrate each new milestone in its own right.