Non Fungible Tokens (NFT’s) are getting more attention in the crypto market. But what exactly are NFT’s and how are NFT’s used? In this blog we dive deeper into the subject.
To have a good understanding of what NFT’s are we will first explain what the difference is between fungible and non-fungible tokens. The main characteristic of fungible tokens is that they are interchangeable with each other. An good example of this characteristic is that every Bitcoin has the same value. So, it doesn’t matter which Bitcoin you own. In addition, another characteristic is that fungible tokens are divisible. As an example, you can send or receive a part of one Bitcoin.
Non-fungible tokens, also known as NFT’s, contain something unique and are therefore not replicable. This unique aspect is written inside the metadata of the token itself and can be seen as a permanent, unalterable certificate of authenticity. Hence, a main characteristic of NFT’s is that it is possible to identify items. Another characteristic of NFT’s is that they are not divisible. This is best explained with the following example: for instance, when you buy a ticket for a concert you cannot give someone else a part of that concert ticket. A part of a ticket does not have any value. The great benefit of this protocol is that people can claim ownership of a certain product or item via a NFT token.
How are NFT’s used?
One of the things NFT’s can be used for is to prove ownership of digital items. Earlier was mentioned that NFT’s behave like a certificate of authenticity and therefore we can connect them to a specific item. Examples of such items are:
- Gaming items (rare skins or weapons)
- Virtual Assets and addresses
- Real World assets (ownership)
- Verification (educational diploma’s or medical history)
Another trend is that more artists are starting to use NFT’s. Especially, since the coronavirus pandemic there is an increasing amount of artists that starts using NFT’s because it allows artists to continue working. An advantage of this is that it makes it possible for artists to sell their work digitally without losing their intellectual property.
NFT’s in the gaming industry
NFT’s can also be used in the gaming industries. In a time where free-to-play games are becoming more popular, gaming companies are searching for other ways to make a profit. One of these ways is through cosmetic changes to your character. For example through skins and rare items. With NFT’s tokens, these items can be traded and traced back to its origin. At the moment there are already some games on the blockchain of Ethereum. Let’s give some examples of popular games where people are using NFT’s:
One of the very first and most popular games is Cryptokitties. In this game people can collect, breed, and exchange (virtual) cats. Every cat has its own attributes (called “Cattributes”) which makes them truly unique and 100% your Kitty. This makes it that some kitties with good looks, or better cattributes become very wanted. In September 2018 a kitty named Dragon was sold for a record breaking price of 600 ETH (approximately $170,000 at the time)! These high prices say enough about the popularity of collecting and trading these cryptokitties.
Draco, the Dragon Fancy we teased when CryptoKitties first launched a year ago, is finally arriving! We'll be chasing Draco the Fancy Cat at 5PM PST on Friday, November 30th. Remember you still have time to get a Dreggo and a Draco Jr. Kitty here: https://t.co/nvxuKsWlYG pic.twitter.com/XSF7HzIHNj— CryptoKitties (@CryptoKitties) November 28, 2018
Another popular crypto game is Decentraland which is a game based on a virtual world. Players can create, own, and exchange land virtually. It’s just like the Simcity but then on the blockchain. As mentioned before people can exchange their land. The better someone builds his land, the more other people will buy the land for. Another fun fact of this game is that when you have a VR-headset you can walk through your own created land.
My Crypto Heroes
A third popular crypto game is My Crypto Heroes. As the name of the game indicates it is a game about historic heroes. This game is a classic multiplayer RPG (role playing game) game, where you can create your own team of historic heroes and level them up by completing missions and by fighting. By levelling up your hero (and weapons) the value of your crypto hero grows.
The question now is; Why is it interesting to use NFT’s in the gaming industry? First of all, blockchain-based games give users ownership over their in-game assets with the help of NFT’s. Secondly, it is possible to take away your crypto-collectibles in a game and add them to another game in the same blockchain. This means if a server gets closed, your items would still remain. This makes it really interesting to use NFT’s in the gaming industry.
In this blog, you have learned that non-fungible tokens are unique assets that have unique characteristics and can therefore be connected to a specific item. Additionally, items have different values which make it interesting to use NFT’s. Especially, in the gaming industry, it becomes more popular to use NFT’s.
Read all you need to know in our 'What is Ethereum?' info page!