What is an Non-Fungible Token (NFT)? The Trendy Blockchain Technology Explained
What is an NFT?
NFT stands for Non-Fungible Token, which is non-fungible and non-divisible. Each token is unique and irreplaceable, and every transaction must be completed one by one. Each NFT work is bound with a string of unique codes and has anti-counterfeiting functions to prove its unique and permanent ownership. NFTs transform digital works into verifiable assets that are easy to trade on the blockchain.
How does it work?
Non-Fungible Token is irreplaceable and indivisible, so it is very suitable for some areas such as artwork, games, e-deposits and identity authentication. In addition to the cryptographic confirmation of assets (asset identity confirmation) through NFT, the trust problem can be solved. On the other hand, traditional physical assets have passed such authentication, which greatly improves the liquidity of assets; integrates painting, calligraphy, sculpture and other arts. The products are stored on the blockchain in the form of NFT, which not only strengthens the anti-counterfeiting requirements of the collectibles, but also improves the efficiency of physical rights confirmation and transaction circulation.
NFTs are traded and the process is different on each platform. A digital creator owns the copyright for the item and the right to make copies. If the buyer wants to make copies, it has to be approved by the creator. Each copy is considered a unique NFT.
What are the differences between non-fungible tokens and cryptocurrency?
Although non-fungible tokens and the cryptocurrencies that we usually know, such as Bitcoin, are built on the blockchain, they carry opposite characteristics. Cryptocurrency is a homogenized token, i.e. Fungible Token. Each cryptocurrency has the same value and function. It can be exchanged at will, or it can be divided into a smaller number of transactions, and its function is just like legal currency. Because of its uniqueness, NFT is suitable for art collections.
How much is NFT worth?
There is huge payoff for many artists, musicians, influencers…, with investors spending a lot to own NFT versions of digital images. Some investors enjoy buying independent creators’ works, for supporting the creative industry; copying and claiming ownership of a digital asset. There are emerging cryptocurrency millionaires and billionaires who are interested in the crypto trading system.
Future of NFT
It is anticipated that there is rapid growth of NFTs in the future, considering world events and the cryptocurrency society: First, COVID-19 has made us more digital, such as the work from home policy; Second, cryptocurrency has become more popular as a digital asset; Third, some large companies attend auctions to guarantee the trust and status of NFTs; Fourth, traditional currency may be shifted to irreplaceable items, such as NFTs, during financial shocks.
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