One of the symbols of 2021 can be considered NFT technology, which has revolutionized the world of digital art and GameFi. Digital art paintings, small pixel art and even Elon Musk’s tweets sell for millions of dollars thanks to NFT! What is this technology and is it really so important? Perhaps it’s just the hype that makes some people easily make a fortune?
What is NFT?
The abbreviation NFT stands for “Non-Fungible Token”, which means “non-fungible token” in English. What is a token? Tokens are called internal money of cryptocurrency projects. However, unlike directly cryptocurrencies, tokens do not have their own blockchain, but are created on the basis of an existing one. For example, the stablecoin USDT, LINK and MKR are tokens on the Ethereum blockchain.
Another important difference between tokens and cryptocurrencies is that they can be used as shares, various certificates, and similar instruments of a particular project. In simple terms, in the world of the blockchain industry, cryptocurrency is cash, and a token is a subway token, a cinema ticket or a bonus point for a supermarket chain, which can be used in the subway of a particular city, a certain cinema or a supermarket chain. For money, you can buy all of the above, but paying in the subway with points from the supermarket will not work. So the usual tokens of crypto projects are interchangeable. This means that one token in the subway is indistinguishable from another: anyone can use it to travel in underground transport. A non-fungible token or NFT can be compared to a plane ticket, which can only be boarded by the person whose details are indicated on the ticket. Here, one ticket cannot replace another, although both of them give the right to fly.
Why are NFTs needed?
The main problem hindering the development of digital art is the exact identification of the original work. In the ordinary world, copies of paintings by famous artists can be easily identified by experts, but in the digital world, this is almost impossible. The fact is that the semantic part (name, size and other file attributes) is easy to fake, and this can be done in a few minutes. It makes no sense for collectors to pay large sums for digital art objects, because uniqueness gives them special value.
The advent of NFT could finally solve this problem. NFT tokens work on the blockchain, which means that the information entered into it can no longer be changed or faked. A single token certifies the right of its owner to the item to which it is attached. By the way, almost everything can be digitized today: from real estate to the service sector.
Another important application of NFTs is found in the GameFi industry – computer games where users can earn real money in the process of gaming. Due to the fact that any item can be linked to the NFT, now only their real owner can be called the real owner of things on his account, and he can dispose of them at his own discretion.