NFTs are currently taking the digital art and collectibles world by storm. Digital
artists are seeing their lives change thanks to huge sales to a new crypto-audience.
And celebrities are joining in as they spot a new opportunity to connect with fans.
But digital art is only one way to use NFTs. Really they can be used to represent
ownership of any unique asset, like a deed for an item in the digital or physical
realm.
NFTs are tokens that we can use to represent ownership of unique items. They let us
tokenise things like art, collectibles, even real estate. They can only have one
official owner at a time and they're secured by the Ethereum blockchain – no one can
modify the record of ownership or copy/paste a new NFT into existence.
NFT stands for non-fungible token. Non-fungible is an economic term that you could
use to describe things like your furniture, a song file, or your computer. These
things are not interchangeable for other items because they have unique properties.
Fungible items, on the other hand, can be exchanged because their value defines them
rather than their unique properties. For example, ETH or dollars are fungible
because 1 ETH / $1 USD is exchangeable for another 1 ETH / $1 USD.
NFTs and Ethereum solve some of the problems that exist in the internet today. As
everything becomes more digital, there's a need to replicate the properties of
physical items like scarcity, uniqueness, and proof of ownership. Not to mention
that digital items often only work in the context of their product. For example you
can't re-sell an iTunes mp3 you've purchased, or you can't exchange one company's
loyalty points for another platform's credit even if there's a market for it.
NFTs are different from ERC-20 tokens, such as DAI or LINK, in that each individual
token is completely unique and is not divisible. NFTs give the ability to assign or
claim ownership of any unique piece of digital data, trackable by using Ethereum's
blockchain as a public ledger. An NFT is minted from digital objects as a
representation of digital or non-digital assets. For example, an NFT could
represent:
Digital Art: GIFs, Collectibles, Music, Videos
Real World Items: Deeds to a car, Tickets to a real world event, Tokenized invoices,
Legal documents, Signatures
An NFT can only have one owner at a time. Ownership is managed through the uniqueID
and metadata that no other token can replicate. NFTs are minted through smart
contracts that assign ownership and manage the transferability of the NFT's. When
someone creates or mints an NFT, they execute code stored in smart contracts that
conform to different standards, such as ERC-721. This information is added to the
blockchain where the NFT is being managed.
The creator of an NFT gets to decide the scarcity of their asset.
For example, consider a ticket to a sporting event. Just as an organizer of an event
can choose how many tickets to sell, the creator of an NFT can decide how many
replicas exist. Sometimes these are exact replicas, such as 5000 General Admission
tickets. Sometimes several are minted that are very similar, but each slightly
different, such as a ticket with an assigned seat. In another case, the creator may
want to create an NFT where only one is minted as a special rare collectible.
In these cases, each NFT would still have a unique identifier, like a bar code on a
traditional ticket, with only one owner. The intended scarcity of the NFT matters,
and is up to the creator. A creator may intend to make each NFT completely unique to
create scarcity, or have reasons to produce several thousand replicas. Remember,
this information is all public.
Contact us and we'll get back to you as soon as we can.
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