Everything You Need to Know About Non-Fungible Tokens
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Fungibility is important for currencies to maintain their reliability. Each unit of the currency remains to be the same despite the amount of spending. Fungibility, in this case, is essential for any kind of exchange widely used to process daily transactions. It is very important for preserving the validity of the currency’s interchangeability of units.
But often in the case of crypto, the fungibility factor makes it susceptible to losses due to the fluctuating prices for the investor. That’s where the importance of non-fungible tokens need highlighting.
Non-fungible tokens or NFTs are digital assets of the exclusive nature because each differs from one another. Every NFT stores inimitable metadata that leads way for its exclusive admission on the Blockchain. Unlike, other crypto tokens NFTs cannot be interchanged on the same Blockchain. One of the popular forms of NFT is the CryptoKitties, which made its debut around 2017.
The Salient Features of NFT
The list of unique features of non-fungible tokens include:
- Unique ownership
- Not substitutable by another matching NFT
- A unique set of characteristics
- Every non-fungible token signifies ownership and privileges
- NFTs are not separable
The Advantage of Holding an NFT
The composition of a non-fungible token is what makes it different and of more value. The NFT mechanism involves the storage of rich metadata. This transcends the usual toke properties such as the symbol, name supply and the balance of the token. Apart from these, the NFT stores the ownership and asset details as well. Besides these, these owners get provenance assurance, and this includes future buyers as well.
How the Evolution of NFT Impacted its Value
The attempts to create a non-fungible token began around 2013. The first-ever instance was that of Color Coin that was created upon the Bitcoin Network. But the one that made its impression on the crypto world was the advent of ERC721.
It was different in its features considering that, the token could track the movements and ownership patterns of the individual coins, making it valuable and non-fungible. The very first successful application of ERC721 was CryptoKitties, the most expensive of which was traded for $172,625 in 2017.
The Valuation of NFTs
NFTs have found valuable use cases and implementation in antiquities, art pieces, vintage collectibles and likewise. Another industry that realized the significance of non-fungible tokens was the gaming industry. The gamers were already well acquainted with digital collectibles that made it an easy transition.
It is expected that in the future there will be linking of the physical assets with the NFTs to initiate real-world transactions. For example, software licenses or certificates of identification can be traded in NFT form.
Over the years, the use of fungible crypto has yielded positive results establishing its importance in the digital asset ecosystem. The NFTs, however, signify the potential of tokenizing physical assets while holding on to its unique properties. It has proven that it will not cause hindrance to the existing cryptocurrencies in the ecosystem, but rather the spectrum of Blockchain technology in the years to come.
