What Are Non-Fungible Tokens?

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What Are Non-Fungible Tokens?

It is a virtual token that you create in order to prove authenticity and the right to own an asset using cryptography. For example, if you have a virtual property – a virtual work of art, you can create a non-interchangeable token to tokenize the piece. The NFT that you now have reflects that ownership of the work belongs to you. It is not interchangeable since your work is unique. NFT is stored on the blockchain as your property.

What are some examples of non-fungible products?

When it can be interchangeable (in this case a token), it can be replaced by something identical. For example, a banknote worth $ 1 is no different from other banknotes of the same denomination. If you are a brief acquaintance with the dollar, it is unlikely that you will return to it. Items that cannot be replaced even by identical ones. An example is a plane ticket. You will not be able to board an aircraft with someone else’s ticket.

How are non-fungible tokens different?

They can offer their holders unique characteristics that make coins very rare. Most cryptocurrencies (including Bitcoin) have fully interchangeable coins. For the Altcoins, the ERC-20 standard created on the basis of Ethereum is most often used.

For unique tokens, there is also a solution – ERC721. This standard can be compared with baseball cards. Each card has unique information, while the card itself can be very rare. By the way, the ERC-721 is already used by baseball teams.

Are unique tokens needed at all?

The world is gradually rejecting the paper, and supporters of unique tokens believe that they will be of interest not only to collectors.

For example, they can be used as a reliable and immutable counterpart of birth certificates, university diplomas, guarantee certificates, and identity cards, as well as documents confirming the ownership of real estate and art objects.

In this case, the physically existing assets will be properly digitized and placed in a cryptocurrency wallet, where they will be kept safe, protected from tampering and falsification attempts by third parties.

What are the pros and cons of non-fungible tokens?

ERC-721 is not perfect, like ERC-20 this standard has its drawbacks. These tokens have all the advantages of ordinary altcoins based on Ethereum, which we wrote about earlier. For example, unique tokens can help transfer almost any asset to the blockchain with one hundred percent protection against any attacks and hacks.

Unfortunately, there are also disadvantages. ERC-721 is a relatively new standard, so unique token transactions last longer than ordinary token transactions. In addition, developing an ecosystem that would make collectible items on the blockchain meaningful is rather difficult.

Is there any other uses for the ERC-721?

Many crypto enthusiasts believe that this standard can be used not only for collecting.

For example, with the help of unique tokens, one could store birth certificates, diplomas, contracts and identity documents. You can even token objects of art and property.

How are the unique tokens created?

Each developer can make his project completely from scratch, but it is more rational to use ready-made standardized solutions.

At the moment, the development of a decentralized application is quite a costly process, which at the release stage may not pay off at all. In addition, the release of its own unique tokens leads to confusion on the crypto market.

I’m a freelance writer and full-time curious person. My main interests are philosophy, politics, art, culture, science, and how they’re all interlinked. When I’m not writing, I’m fronting a band, producing records, and making videos. I’m also currently working on launching a YouTube channel that will focus on culture and politics. I think blockchain technology is fascinating because of the huge potential it has to revolutionise not only the financial sector, but society as a whole.