As the world of cryptocurrency continues to expand its reach into new territories, new and innovative use cases for the technology have started coming to the fore. While up until recently, Blockchain technology was primarily used for cryptocurrency trading, non-fungible tokens have changed all that.
For those who have primarily stuck with crypto trading for the last few years, the idea and purpose behind non-fungible tokens can be slightly confusing. This article will serve as an introduction to NFTs, outlining what they are, how they work, and why they have become so popular in recent years.
What is an NFT?
Unlike the other commonly known cryptocurrencies such as Ethereum and Bitcoin, NFTs do not function as a type of currency. Rather, NFTs represent what is known as an alternative use case of Blockchain technology.
As with most crypto projects, NFTs started slowly in 2017 and gradually picked up pace over time. It wasn’t until the year 2021 that the scope and prominence of NFTs shot up to unprecedented heights.
When one Bitcoin is traded on a cryptocurrency exchange, you will receive a value equal to one Bitcoin in return. This is because no single cryptocurrency has a unique identifier making cryptocurrencies ideal for interchange.
Conversely, every single NFT has a unique identifier. This is where NFTs get their name since, like two physical paintings, no two NFTs are alike and are hence non-fungible.
NFTs can be thought of as digital tokens that use Blockchain to secure the authenticity and ownership of a one-of-a-kind asset. The asset’s ownership history can be verified through the public ledger known as Blockchain, and hence its authenticity is confirmed.
What Are NFTs Used For?
Even after understanding what an NFT is, it is natural to wonder what the purpose of all this is. Today, NFTs represent songs, digital artworks, and games that can be sold on NFT marketplaces. Given that the NFT game is still very much in its childhood stages, many continue to discover more innovative ways in which these digital assets can be put to use.
The NBA recently began using NFTs to transpose sports card trading onto the digital sphere. Today, these digital trading cards make up an entire trading digital trading ecosystem. A project in a different vein, known as Decentraland, uses NFTs to create whole augmented realities with which users can interact.
While many NFTs are simply unique and authentic static images, many other NFTs have actual in-game uses. An example of this is the NFT based game CryptoKitties, released on the Ethereum network in 2017 but has skyrocketed in popularity over the last two years.
In Cryptokitties, a unique NFT represents a digital kitty, each with a unique genetic makeup. These kitties can be bred to produce more kitties that are equally unique. In this way, kitties can be traded on the Ethereum network to build a collection. While it may not sound like much, at its peak popularity CryptoKitties congested approximately 10% of the entire Ethereum network, which brought everyone’s attention to NFTs in the first place.
Conclusion
Today, NFTs are very easy to create for yourself. As the decentralized finance sphere expands its reach to more users, the quality and quantity of NFTs will continue rising. To conclude, NFTs represents a highly innovative use-case of the powerful Blockchain technology that is currently uprooting the worlds of computation and finance.
There is no shortage of NFT marketplaces where you can buy, sell, and even create your own unique NFTs. To learn more about how you can trade NFTs sign up with 1K Daily Profit and start trading.
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