Non-fungible Tokens are Here: What You Need To Know About Them
Blockchain technology continues to disrupt human life in significant ways. Its influences are evident in applications and solutions that it keeps on spawning. One of these is the non-fungible token (NFT), an exciting solution with a wide range of uses in our lives.
But what are they? What qualities define them, and crucially, what are some of their use cases? Join me as we unbox NFTs, a concept that has got the cryptoverse buzzing. First off, though, let us understand what a token is.
Value in Digital Form
Crypto tokens are a digital representation of value stored on an existing blockchain. One shouldn’t mistake them for cryptocurrencies, though, which are digital means of concluding transactions.
Fungibility: What’s in a Word?
Though a mouthful, fungibility is quite a simple concept to define. It denotes the ability to interchange a good or a commodity with another of similar nature. Based on this definition, we have two types of tokens:
- Fungible tokens
- Non-fungible tokens
Aside from interchangeability, fungible tokens are identical and divisible, while their value remains regardless of their subdivision. One BTC is equal to two 0.5BTC, or even four 0.25BTC. Their subdivision doesn’t diminish their value. Finally, they operate on the ERC-20 standard on the Ethereum blockchain.
Non-fungible tokens, on the other hand, are not interchangeable with others. Every NFT has a unique digital hash that differentiates it from any other token that is available. For instance, an NFT for a piece of art valued at $ 10,000 is not the same as another NFT of a similar amount issued for a car. Despite the two having the same value, they are entirely different.
Due to their unique nature, NFTs are indivisible; they come in whole. Furthermore, they operate under the ERC-721 and ERC-1155 standards of the Ethereum block.
What are Some of the Everyday Use Cases Of Non-Fungible Tokens?
NFTs can find application in a wide range of areas. Here’s just a few of them.
Tokenization of Real Estate
Properties are inherently unique, therefore, becoming the perfect fit for NFTs.Their tokenization allows one to digitally represent on the blockchain, giving anyone the chance to securitize their property. This process helps in proving ownership hence negating fraudulent activity within the sector.
Additionally, the tokenization of data automates property sales and transfers. The embedded smart contracts execute all the transactions eliminating the need for in-person transactions. Consequently, there’s the streamlining of property acquisition.
Again tying property to NFT unlocks the liquidity in the property sector. Many would-be investors feel priced out of premium properties, but securitization allows for fractional ownership catering to the middle to low-income investors.
Verification of Identities
As our transactions become more and more digitized, so increases the need to secure identities. The world over, identity fraud is a major worry, with uniqueness standing as varied as is humanity. Consequently, it is possible to tokenize all identities.
Courtesy of NFTs, everyone acquires a unique digital identity. Since the ID would run on the blockchain, it is immutable and incorruptible, deterring identity theft. The NFT also eliminates the need to carry physical IDs.
Digitization Of Documents
Related to identity theft is the falsification of credentials, academic and otherwise. Tokenizing an individual’s academic and professional achievements to uncover and eliminate cheats from the system.
Apart from catching the cheats, tokenization of documents helps in their streamlining. It eliminates the need for paper documents, thereby easing data transfers and storage. Instead of issuing a physical deed for a parcel of land that one owns, they could acquire an NFT (a digital record) with all the information. Data in digital form is portable and much secure than that which is in paper form.
Authentication of Artforms
Any artist desires recognition for their craft, but this may not always be the case. Advances in technology have opened floodgates of counterfeiters that prey on other people’s creativity.
Imitation and illegal art sales deny the artists revenue besides soiling their reputations. In these circumstances, an NFT comes in handy. Apart from firming up ownership, it also authenticates any art piece.
Additionally, the NFT allows for the insertion of other information on the work of art in anyone’s possession. Such information includes previous owners and even a smart contract that enables the creator to earn part of the resell fees should the work change ownership.
Event organizers face the challenge of managing ticket sales with the primary issue lies in the secondary market. It is dominated by profiteers who buy tickets in bulk for reselling in the black market at sky-high prices.
Additionally, there’s the counterfeit headache to contend with. As a consequence, many genuine fans opt to stay away from events. Also, the profiteers running the black market exploit many, resulting in disillusionment with the brand affecting revenue.
NFTs help eliminates such concerns as their digital enables locking them to a specific wallet preventing further transfer. And even when the NFT allows for the resale of a ticket, the ticket issuer may insert a smart contract ensuring that they earn a percentage of the sell-on price.
Tracking the Supply Chain
Tracing materials and finished products via the supply chain could pose challenges for many businesses, especially when the volumes are enormous. Allocating every single material/commodity, a unique NFT ensures a real-time audit of its movement. This avoids losses that may result from pilferage or diversion of commodities in transit.
Blockchain’s growing popularity testifies to its significance to our existence. From it have emerged solutions crucial for human interactions. A case in point is the non-fungible tokens. These have come into prominence because of their potentially innumerable uses across our lives. Their architecture makes them the best bet to capture unique data on the blockchain. As we advance, they will find even greater adoption in our day to day functions.