NFTs Explained: Revolutionary Use Cases And Benefits
NFT stands for ‘Non-Fungible Token’.
An NFT it is a digital asset that can represent real-world items, like a painting or a concert ticket, or virtual-world items, like a spaceship or a collectible.
Each NFT has a unique identification code and metadata which make it unique and disguisable from any other NFT.
And each NFT has a value, which is determined for what somebody is willing to pay for them based on the utility, demand or scarcity of the NFT.
There is much more to an NFT than just a .jpeg picture so we are going to describe the most important NFT aspects so you can get an overall good knowledge of what an NFT is.
And we are going to use a real NFT examples so the concepts are easier to understand.
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Fungible vs Non-Fungible Tokens
To understand what an NFT is, first you need to have clear what are fungible and non-fungible tokens.
The definition of fungible is:
‘Being something (such as money or commodity) of such a nature that one part or quantity may be replaced by another equal part or quantity in paying a debt or settling an account.’
As an example, fiat currencies (dollar, euro, yen,…) and cryptocurrencies are fungible.
If I have a one dollar coin and you have a one dollar coin, we can exchange the one dollar coins because they are equal parts and have the same value.
The definition of non-fungible token is:
‘A unique digital identifier that cannot be copied, substituted or subdivided, that is recorded in a blockchain, and that is used to certify authenticity and ownership.’
As an example, real-world painting or virtual-world NFTs are non fungible.
The ‘Mona Lisa’ painting and ‘The Last Support’ are both paintings from Leonardo Da Vinci but they cannot be exchange by each other or by any other painting. This is because both paintings have characteristics that make them unique and distinguishable.
But, even with a clear definition, for some assets there is a thin line that makes more complicated to classify them as fungible or non-fungible.
Now, what do you think? Is a gold bar a fungible or a non-fungible token? And what about a Bitcoin?
Many people still considers NFTs like little more than pictures than can be replicated by ‘copy + paste’ or ‘Save as’.
But this misconception is far away from reality.
NFTs are created through a smart contract minting process,
with a unique identification number and metadata,
making them FULLY traceable.
Because of the unique identification number, it is possible to trace the history of the NFT from the time it was minted as well as the digital wallet which is the current owner of the NFT.
Only the owner of the wallet where the NFT is stored will be able to sell it in a secondary market or benefit of the utilities associated to the specific NFT.
So trying to replicate an NFT by ‘copy + paste’ or ‘Save as’ brings the same value as trying to replicate money by scanning a 100 dollars bill and then printing it.
The difference here would be that trying to counterfeit money will lead to severe penalties while trying to counterfeit an NFT may not yet considered as an offence.
How are NFTs created?
NFTs are created and minted on a blockchain network using smart contracts.
The process of creating an NFT involves a few key steps:
– Choose a blockchain platform: The first step in creating an NFT is to choose a blockchain platform that supports NFTs, such as Ethereum, Binance Smart Chain, or Flow.
– Create a digital asset: The next step is to create a digital asset that will be turned into an NFT. This could be anything from digital art, music, videos, or even a tweet.
– Store the digital asset on the blockchain: Once the digital asset is created, it needs to be stored on the blockchain. This is done by uploading the digital asset to a decentralized storage system, such as IPFS (InterPlanetary File System), and linking it to a smart contract.
– Mint the NFT: The final step is to mint the NFT by linking the digital asset to a unique identifier on the blockchain. This is done by calling a function on the smart contract that creates a new token with a unique identifier and links it to the digital asset.
Minting an NFT usually requires paying a transaction fee, which goes to the network validators who process the transaction.
Once the NFT is minted, it can be bought, sold, or traded like any other digital asset on the blockchain.
What are Smart Contracts?
Smart contracts play a crucial role in the creation and management of Non-Fungible Tokens (NFTs).
The smart contract for an NFT includes the rules and conditions that govern the creation, ownership, and transfer of the asset.
It specifies who can create the NFT, how it can be transferred, and what happens in the case of disputes or ownership claims.
When an NFT is created, the smart contract assigns it a unique identifier and stores information about the asset, such as its metadata, in a decentralized manner.
The contract also specifies the terms of the sale or auction of the NFT and automatically executes the transaction once the agreed-upon price is met.
Smart contracts for NFTs also provide the ability to program royalty payments for creators.
This means that whenever an NFT is resold, a percentage of the sale automatically goes to the original creator, allowing them to continue to benefit from the value of their work.
For example, by selling this Moca NFT, the creators would receive a 5% creators earning.
NFT Use Cases
Non-fungible tokens (NFTs) have become a buzzword in recent years due to their unique nature and the vast array of potential use cases they offer.
Essentially, an NFT is a digital asset that is unique and verified on a blockchain network, which makes it immutable and transparent.
This quality has opened up endless possibilities for NFTs in various industries, from art and gaming to real estate and fashion.
NFTs have revolutionized the way we think about ownership and value in the digital world, providing new opportunities for creators, collectors, and investors alike.
In this context, understanding the different use cases of NFTs and their potential benefits is crucial to grasping their significance and potential impact on various fields:
– Digital Art: NFTs have become a popular way for digital artists to sell their work as unique, one-of-a-kind pieces.
– Gaming: NFTs are being used in the gaming industry to enable gamers to buy, sell and trade in-game items.
– Collectibles: NFTs are being used to create unique collectibles, such as sports memorabilia and trading cards.
– Virtual Real Estate: NFTs are being used to buy and sell virtual real estate in online worlds such as Decentraland.
– Music: Musicians and bands are using NFTs to sell exclusive music releases, concert tickets, and other music-related items.
– Fashion: NFTs are being used to sell unique virtual fashion items, such as digital sneakers, clothes, and accessories.
– Sports: NFTs are being used to create digital collectibles for sports fans, such as NBA Top Shot.
– Domain names: Web3 domain name NFTs are non-fungible tokens that represent ownership of a specific domain name.
– Charity Fundraising: NFTs are being used for charity fundraising, where a portion of the proceeds from the sale of an NFT go towards a charitable cause.
– Real-World Asset Ownership: NFTs can be used to represent ownership of real-world assets, such as real estate or artwork, providing a way to transfer ownership in a transparent and secure manner.
NFTs as Online Identity
NFTs are becoming more and more popular as online identity tools.
NFT owners are proud of their virtual assets and being part of a strong community. So it is normal that they start using their most dear NFTs to identify themselves in the Web3 space.
Using NFTs as online identities has several advantages:
– Secure verification: Because each NFT is unique and authenticated on the blockchain, NFTs can be used to verify an individual’s identity and establish online trust.
– Control over personal data: NFTs can give us more privacy and control over what we share with others. By using NFTs we can decide what information to share and with whom.
– Standardization and consistency: NFTs facilitate interoperability among Web3 platforms and services. Because they can be recorded and validated on decentralized networks, NFTs can be readily transferred between platforms and services.
As an example, our colleague Moca Gosi uses a Mocaverse NFT as a Profile Picture (PFP) across several platforms
Be a Web3 PRO; follow the Moca Gosi’s Twitter account for valuable Web3 information and security and safety advice.
Non-fungible tokens (NFTs) are becoming increasingly popular in the gaming industry, where they are being used to represent unique in-game items, assets, and characters. In gaming, NFTs are digital tokens that are stored on a blockchain and are unique and non-interchangeable, meaning that no two NFTs are exactly alike.
NFTs can be used in various ways within gaming. For example, NFTs can be used to represent rare or unique in-game items such as weapons, armor, and other virtual goods. These items can be owned and traded by players on a blockchain-based marketplace, allowing players to generate income from their gaming activities.
NFTs can also be used to represent virtual land or real estate within gaming worlds. This allows players to buy, sell, and develop virtual properties within a game or virtual environment.
Another application of NFTs in gaming is the creation and ownership of unique in-game characters. Players can create and customize their own NFT characters, which can then be bought, sold, and traded on blockchain-based marketplaces.
Overall, the use of NFTs in gaming has the potential to transform the gaming industry by allowing players to own and profit from their in-game assets in a secure and transparent manner. It also creates new opportunities for game developers and publishers to monetize their creations, and for investors to participate in the growing gaming industry.
Digital Art NFT
NFT digital art refers to digital artworks that are unique, authenticated, and verified on a blockchain network using non-fungible tokens (NFTs).
NFT digital art is created by artists who use various digital tools such as drawing tablets, software, and computer-generated imagery (CGI) to create their works.
Once the artwork is created, it is usually minted as an NFT on a blockchain network, which verifies its authenticity and uniqueness.
Unlike traditional digital art, which can be easily replicated or copied, NFT digital art is one-of-a-kind and cannot be duplicated.
This is because each NFT is assigned a unique identifier, which is recorded on the blockchain, making it impossible to counterfeit or manipulate.
This provides a level of trust and transparency that was previously impossible in the digital art world.
NFT digital art has gained immense popularity in recent years, with several high-profile artists and creators using it to monetize their works.
NFT digital art provides a new revenue stream for artists, who can sell their works as unique, valuable assets that can appreciate in value over time.
Collectors and investors can also purchase NFT digital art as a form of investment or to add to their collections.
NFT digital art has also opened up new possibilities for the art world, allowing artists to reach a global audience and connect with their fans in new ways.
The use of blockchain technology and NFTs has disrupted the traditional art world, providing a new model for ownership, distribution, and monetization of digital art.
People have collected collectibles for many decades as a part of a hobby or for economic gain.
Rare baseball cards, art, comics, or articles from popular movies are some examples of highly sought items by collectors for which in some cases a considerable amount of money is paid.
And NFTs are bringing collectibles to the digital world and in cases adding utilities to the collectibles which do increase the demand and the value of such collectibles.
As an example, the VeVe digital collectibles are NFTs that give ownership over limited series of comics or digital art that can be purchases, sold, traded, upgraded, or customized placed on the virtual showroom.
Or, another example of NFT collectibles or NFT sport, is the Lympo sports cards of athletes which are protected by intellectual property rights and give the NFTs owners the possibility to earn credits to mint more NFTs or get rewarded with tokens by staking their NFTs.
There may be a time, in a non-distance future, that physical and digital collectibles will coexist as nowadays physical and digital books do coexist.
Think about digital collectibles being at the same stage as the first digital books. And think about how the digital books adoption has grown over the years.
NFT Domain Names
Web3 domain name NFTs are non-fungible tokens that represent ownership of a specific domain name on a decentralized web or blockchain-based network.
These NFTs are created and traded on a blockchain and can be used to establish ownership of a domain name in a decentralized manner.
In traditional web hosting, domain names are registered with centralized entities such as ICANN or domain registrars.
However, in a decentralized web, domain names are owned by individuals and organizations who hold the associated NFTs.
Web3 domain name NFTs allow for a more decentralized web, where individuals and organizations have greater control over their digital identities and online presence. With web3 domain name NFTs, the owner of the NFT has complete control over their domain name, and can transfer ownership or sell it as desired.
In addition to establishing ownership of a domain name, web3 domain name NFTs also enable the creation of decentralized websites and applications that are not reliant on centralized servers or hosting providers. Instead, these websites and applications are hosted on a decentralized network, and their content is stored across a distributed network of nodes.
NFT Virtual Real State
NFT virtual real estate refers to the use of non-fungible tokens (NFTs) to represent ownership of virtual real estate properties, such as buildings or other structures, within a digital or virtual environment. This digital or virtual environment could be a video game, virtual reality platform, or other types of virtual worlds.
In NFT virtual real estate, ownership of a virtual property is represented by an NFT, which is stored on a blockchain. The NFT serves as proof of ownership and can be transferred between individuals in a secure and transparent manner. Virtual real estate can also be developed and improved upon, similar to physical real estate.
NFT virtual real estate has several potential benefits. One of the main advantages is that it allows for the creation of unique, virtual properties that can be owned, bought, and sold by individuals and organizations. This opens up new opportunities for virtual real estate investment, as well as for creative expression and entrepreneurship within virtual environments.
Another benefit of NFT virtual real estate is that it can be easily integrated into various digital platforms, such as video games or virtual reality experiences. This creates new opportunities for developers to monetize their creations, as well as for users to generate income from their virtual real estate holdings.
How to Keep Safe your NFTs
Do not risk your NFTs.
Digital Safety Knowledge and Crypto Safety Good Practices is what you need to protect your NFTs from hacks, scams and mishaps.
How much do you Know about Web3?
What is a Seed Phrase?
How and Why to Use a Burner Wallet
NFT Delegation: Security and Convenience
What if we tell you that you can keep your NFTs safely stored in a cold wallet while being able to use them through a hot wallet.
Security and convenience through NFT delegation.
NFT Frequently Asked Questions (FAQ)
The questions from other people are windows to knowledge that maybe we need, but we never consider we missed.
NFT stands for Non-Fungible Token, which is a unique digital asset that is verified on a blockchain. Unlike cryptocurrencies, which are interchangeable and have the same value, each NFT is unique and can represent anything from digital art, music, videos, tweets, and even virtual real estate.
NFTs are created using blockchain technology, which is a distributed ledger that allows for secure transactions without the need for a centralized authority. Each NFT is associated with a unique code that verifies its authenticity and ownership.
NFTs are valuable because they represent a unique digital asset that can be bought and sold on the open market. Like any other collectible item, the value of an NFT is determined by the demand for it, and the rarity of the item it represents.
To create an NFT, you need to choose a platform that supports the creation and selling of NFTs, such as OpenSea or Rarible. Then you need to upload your digital asset, set a price, and mint your NFT on the blockchain. You will also need to pay a fee to the blockchain network for the transaction.
To buy an NFT, you need to choose a platform that supports the buying and selling of NFTs, such as OpenSea or Rarible. Then you can browse the marketplace for NFTs that interest you, place a bid or buy it now, and pay for the NFT using cryptocurrency.
Yes, you can sell your NFT on a platform that supports the buying and selling of NFTs, such as OpenSea or Rarible. You will need to set a price for your NFT, and then wait for a buyer to purchase it. When the NFT is sold, you will receive the payment in cryptocurrency.
NFTs are created using blockchain technology, which is known for its high energy consumption. The energy consumption of blockchain networks is a concern for the environment, as it contributes to greenhouse gas emissions. However, some blockchain networks are working on becoming more energy-efficient, and some NFT platforms are using carbon offsets to mitigate their environmental impact.
Like any investment, the value of an NFT can go up or down, depending on the market demand for it. While some NFTs have sold for millions of dollars, others have sold for only a few dollars. It is important to do your research and understand the risks before investing in NFTs.
Yes, some games and virtual worlds support the use of NFTs as in-game items or virtual real estate. For example, the virtual world Decentraland allows users to buy and sell virtual land using NFTs.
If you lose access to your NFT, such as losing your private key to your digital wallet, you will not be able to access or sell your NFT. It is important to keep your private keys safe and secure, and to back up your wallet in case of loss or damage.
Cryptocurrencies are digital assets that are designed to be interchangeable and have the same value, while NFTs are unique digital assets that are verified on a blockchain. While both cryptocurrencies and NFTs are based on blockchain technology, they serve different purposes.
As NFTs are a new technology, there are some legal concerns that are still being addressed. For example, there are questions about the copyright and ownership of the digital assets that NFTs represent, as well as the legality of using NFTs for gambling or money laundering. It is important to consult with legal professionals before creating or investing in NFTs.
Yes, you can create an NFT that represents a physical object, such as a piece of artwork or a rare collectible. However, you will need to verify the ownership and authenticity of the physical object before creating the NFT, and there may be legal and copyright considerations to take into account.
Terms that Every NFT Owner Should Know
If you are a seasoned NFT owner you will be familiar with many specific NFT terms.
If you a a newcomer to the NFT space, there are many terms that you need to learn about.
For both seasoned and newcomer NFT, let’s see with how many term you are familiar with.
The process of creating and registering a new NFT on a blockchain network.
Information associated with an NFT, such as the creator, title, description, and image.
A percentage of the sales of an NFT that is paid to the creator or previous owners, often built into the smart contract.
An online platform for buying, selling, and trading NFTs, often with built-in features for browsing and discovery.
The uniqueness of an NFT, often determined by factors such as scarcity, quality, and historical significance.
A group of NFTs created by a single artist or user, often with a common theme or aesthetic
A cryptographic proof that verifies the ownership of an NFT and its history of transactions.
The process of splitting an NFT into smaller fractional shares, allowing for easier and more affordable ownership and trading.
The market for buying and selling NFTs after their initial sale or minting.
The process of intentionally destroying or deleting an NFT.
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