What Is Non-Fungible Tokens (NFT) Guide For Beginners

by

Non-fungible tokens (NFTs) are the hottest trend for the past couple of months. Here’s everything you need to know about them.

With the creation of Bitcoin back in 2009, Satoshi Nakamoto would have probably never guessed that the world would buy digital, collectible CryptoKitties, Punks, Hashmasks, celebrity music, and so forth.

However, all of the above made use of a whole new Ethereum standard for identifying unique assets on its blockchain – the ERC-721, better known as the solution for the creation and transfer of non-fungible tokens.

This article discusses the following questions related to non-fungible tokens:

  1. Introduction to NFTs
  • NFTs have become a major trend, allowing unique identification of assets on the Ethereum blockchain.
  • Originated with the ERC-721 standard, NFTs uniquely define assets and establish ownership and authenticity.
  1. Importance of Non-Fungibility
  • NFTs solve the interchangeability problem present in regular ERC-20 tokens, ensuring assets are unique and indivisible.
  • Describes how fungibility matters for digital currencies like Bitcoin but is problematic for uniquely identifying assets.
  1. Characteristics of NFTs
  • Three key properties: uniqueness, rarity, and indivisibility.
  • Uniqueness achieved through metadata defining asset properties, rarity prevents infinite creation, and indivisibility ensures whole ownership.
  1. How NFTs Work
  • Introduction of Ethereum’s ERC-721 standard for defining unique assets.
  • Explains the ERC721 metadata contract and the use of JSON files to describe NFT properties.
  1. Applications of NFTs
  • NFTs are convenient for digital economies, especially in gaming, creating scarcity, and preventing alterations to in-game assets.
  • Use cases extend to decentralized identity, linking physical properties to digital identities.
  1. Popular NFT Projects
  • Highlights five projects actively using NFTs: CryptoKitties, Decentraland, Gods Unchained, NBA Top Shots, and OpenSea marketplace.
  1. How to Buy NFTs
  • Popular NFT marketplaces like OpenSea and Rarible facilitate buying; requires an ERC-721 compatible wallet.
  • Walks through the process of buying an NFT on OpenSea, either through direct purchase or auction.
  1. Value and Popularity of NFTs
  • Discusses how NFTs gain value through uniqueness, proof of ownership, and authenticity.
  • Mentions specific cases of highly valued NFTs, like Beeple’s “The First 5,000 Days.”
  1. Conclusion
  • Concludes that NFTs have gained popularity due to their role in proving ownership and authenticity, facilitating trustless ownership transfer, and eliminating fraud.

Leave a Comment