With every NFT influencer, content producer, and web3 enthusiast discussing the rabbit hole they fell, everyone is wondering, “What is this rabbit hole?” What exactly is an NFT? Is this just another cryptocurrency scam? Is it possible to earn money from it? While we hope to positively guide your opinion about NFTs and their applications, we would allow you to steer the wheel on this one and determine if NFTs are valuable as a technology.
Let’s look at it this way:
A non-fungible token (NFT) is similar to how a cell in an Excel spreadsheet can represent data, such as a person’s name or an inventory item. Just as each cell in an Excel spreadsheet has a unique location and value, each NFT has a unique digital “location” on the blockchain and a unique value. As you can see in the image below, the token ID represents the unique value and the Owner represents the location in the blockchain ledger. NFTs, thus being just a row in the spreadsheet.
The difference is that while all data in an Excel spreadsheet is stored locally or on a server, the token ID and ownership data related to the NFTs are stored on a decentralized blockchain. This allows it to be easily bought, sold, and transferred digitally, allowing the ownership to remain verifiable and secure.
The URL in the 3rd column of the NFT contract represents the metadata. This URL connects the NFT with some extra information, giving it meaning. This metadata is normally stored on a web server or a decentralized server, as it can get expensive to store too much data on the blockchain. The image below can help you understand this better -
To summarize it, these non-fungible tokens are a natively digital way to model ownership of any asset, be it digital or physical in nature.
A unique digital asset that can be traded and represents ownership of something is known as a non-fungible token (NFT). As a result, NFTs have three crucial characteristics:
Our world is becoming more digital, and this fact is affecting all sectors. This process is fuelled not only by technological advancements but also by non-technological factors like the COVID outbreak, which compelled the digitization of every industry.
Nowadays, everyone uses the internet and as humans, we love to own and flaunt what we possess. But this aspect only comes into action if we can prove that the asset, whether physical or digital, actually belongs to us. Making it vital to represent ownership digitally due to our increasingly digital society, and thanks to NFTs we can now accomplish that.
NFTs provide a mechanism to digitally encode ownership of any kind of asset because of their special characteristics. Furthermore, because NFTs are based on blockchains, they are rooted in an immutable registry of records that cannot be altered or taken over by a single entity or by malicious actors. This makes NFTs reliable in the sense that anyone can believe they accurately depict the ownership distribution of assets.
On top of this, since NFTs are created using a particular standard, it is possible to transfer the digital NFT from one platform to another. The easiest example would be the fact that you can trade your NFT on multiple marketplaces, while also being able to showcase your NFTs on platforms such as Instagram and Twitter.
These abilities have enabled NFTs to create what we have termed the “Creator’s Economy.” Enabling NFTs to have a plethora of possible applications and be used everywhere where digital ownership models are required. NFTs, therefore, hold the potential to be among the most significant building elements used to construct the digital world.
Over the last years, there have been multiple different types of entries as NFTs. Some have gained huge popularity, while some have snoozed off. Below, you can find some examples of different types of NFTs-
The best example of this would be the development of the digital collectibles known as Cryptokitties. In reality, Cryptokitties was the first software to employ NFTs. It's noteworthy to note that the Ethereum network was congested in 2017 as a result of the ubiquity of Cryptokitties.
Artwork is another well-known use case for NFTs. The most common kind of non-fungible tokens used in this industry are programmable works of art, which uniquely mix creativity and technology.
3. Events tickets-
These NFTs can be used by attendees at events like concerts and music festivals to validate their IDs and tickets. The quantity of NFT tickets that event organizers may print on a certain blockchain platform could be limited. Customers could bid on the tickets, save them in their wallets, and then easily access them on their mobile devices.
The most common kind of non-fungible tokens in the gaming business are in-game items. NFTs are attracting a lot of attention from game developers. They could make it possible to keep track of who owns what in-game items, fostering the growth of in-game economies. In particular, NFTs in the gaming industry concentrate on providing gamers with a range of advantages.
NFTs having the ability to alter the value of in-game artefacts, despite the fact that they were usually necessary for a better gaming experience. You may now make money while playing by selling NFTs obtained from the game. NFT developers or game designers, on the other hand, could receive a royalty for each thing that is bought via the game.
5. Real-world assets/ Phygits
These are a special kind of digital assets (NFTs) that have underlying physical assets attached to them. These phygits (as we like to call them)represent real-world assets and profit from the possibilities presented by cryptographic proof of ownership. This gives us a solution for the ever-growing problem of Counterfeit, etc.
While being a part of popular culture and an instant favourite among internet users, memes have also been associated with NFTs. The ability of original meme authors to engage in a developing future ecosystem is demonstrated by the sale of memes as NFTs.
As we just explained, each NFT is distinct and cannot be exchanged for any other token. The operation of identity NFTs is comparable to that of event ticket NFTs. They can act as distinctive identifiers, providing dependable assistance for identity management systems.
Certifications and licences might display the usual applications of identity-based NFTs. The identity management industry may alter as a result of the issuance of certificates, licences, and NFTs for the purpose of demonstrating and confirming an individual's data. Identity-based NFTs may also make sure that people could store proof of their identities without worrying about losing it.
8. Domain Names-
The best examples of domain name NFTs are decentralized domain name services like Unstoppable Domains and the Ethereum Name Service (ENS). Long and complicated user addresses may be transformed by ENS into a flexible and personable experience for users with quicker onboarding. For example -Unstoppable Domains.
We believe that with the ever-increasing growth in the space, there would possibly be new entries added to this list, but only the ones where the problem of ownership and verification persists would be the use cases that will stick.
NFTs are digital twins/receipts of a digital or physical asset, that enable us to track ownership and verify it at any given point. This makes it possible to safely trade assets online.
The overview of the various benefits of non-fungible tokens demonstrates the reasons for their astoundingly large appeal. Non-fungible tokens are unquestionably one of the next big things in internet commerce. Furthermore, their benefits have become viable marketing factors for several sorts of consumers.
While non-fungible tokens' benefits suggest a bright future for them, it's crucial to be aware of their drawbacks. For instance, the adoption of NFTs is fraught with difficulties due to the absence of standards and a unified, global infrastructure. Nevertheless, the benefits of NFTs always outweigh the drawbacks. With minor modifications, the current NFT limits could well be addressed.
There have been many use cases of NFTs until today, but which one do you think will stick? If you’re not ready to answer yet, don’t worry, it is called a rabbit hole for a reason. Just stay put and subscribe to our newsletter to get notified about our next blog.
Next, we dive deeper into how NFTs work. Excited? We are!
warranti is a marketplace and ecosystem for authentic high-value collectibles. We use digital twins to ensure faster and more efficient trading, fewer costs and on-chain authenticity. The physical asset is kept with a highly secure and licensed partner until sold and redeemed.
The digital counterpart, also known as a digital twin, that represents the asset ownership, belongs to the owner of the asset. Collectors can trade, exchange and redeem their assets at any time, providing a seamless trading experience.