Introduction: Non-fungible Tokens (NFTs) are increasingly integrating into the overall blockchain landscape, which is why we thought it was time to share some of our thoughts and experiences in this space. First, we’ll talk about non-fungible tokens (NFTs), what they are, how they present a unique opportunity to use them in real-world applications and how we might soon see the tokenisation of physical goods.
NFTs: A non-fungible token is a unique digital asset that can get easily verified through simple codes. NFTs cannot be copied and hence are unable to create identical copies. The most sophisticated blockchain development platforms like Ethereum which uses NFT technology protocols that ensure security for the system and the properties/objects attached to it.
The types of cryptocurrency tokens vary. For example, there are fungible tokens and non-fungible tokens (NFTs). So, to make things easier for you, I’d like to discuss these two kinds of tokens separately and then summarise everything in this article but let’s first have a look at the following infographic:
Token standards detemination
One of the core aspects of Non-Fungible Token (NFT development) is compliance with standards that are crucial for implementing successful NFT applications. Furthermore, these standards are among the most critical components for NFT operations.
What is a token: A token refers to a set of declared compatible and interoperable protocols with Ethereum blockchains.
Ethereum token standards are categorised based on two distinct properties:
- Fungibility: Fungible tokens refers to tokens that are replaceable by other identical forms of the same asset or good. For example, currency coins like Euros and US dollars are interchangeable. Tokens based on ERC-20 are fungible.
- Non-Fungibility: Non-fungible tokens (NFTs) are assets one unit cannot perfectly substitute for another. ERC-721 governs non-fungible assets, like CryptoKitties and collectibles, while NFTs also follow the ERC-721 standards.
One by one, let’s take a look at the Token Standards:
ERC-20: Tokens built on Ethereum utilise the ERC-20 token standard. Several exchanges and applications, and platforms support ERC-20 tokens. The main advantages of ERC-20 are:
- Smart contracts, ERC-20 tokens can interact with other tokens and serve as a payment system for transactions and goods.
- Using ERC-20, you can conduct financial transactions, and merchants can purchase goods using cryptocurrency.
Thus, Companies can use ERC-20 for crowdfunding, transaction fees and voting decisions.
ERC-721: ERC-721 tokens leverage complete and unbreakable ownership rights for virtual and tangible assets, for example, certificates, artwork, identities, and even our real homes and properties. Assets can be listed in an auction to generate revenue. The Ethereum blockchain records transactions involving ERC-721, ensuring:
- Immutability of assets and transactions.
- Transparency of the ownership and control of assets.
- Security and less risky than other token standards.
- The legitimacy of ownership of assets.
This ERC-721 token is a non-fungible token standard because of its unique contract address and token ID that can prevent counterfeiting and forgery. Thus, it is more secure than other token standards.
ERC-1155: A new buzzword, ERC-1155, is also known as the next-generation multi-token standard. ERC-1155 is a critical token standard that establishes the basis for use cases related to NFT technology.
ERC-721 protocol allows the creation of new assets transferred between wallets, which are scarce and often slow. An individual may be unable to trade multiple NFTs for a specific character in a game, such as swords and skins.
As compared to ERC-721, the ERC-1155 standard can be quite helpful. ERC-1155 supports fungible and non-fungible tokens and enables users to do more transactions per second with increased scalability. Thus, miners can exchange any NFT instantly.
Hence, ERC-1155 combines ERC-20 and ERC-721, making it a semi-fungible token as it allows collection transfers.
NFT Technolgy And Its Real world applications!
Non-fungible tokens are pushing the blockchain development into the mainstream. Now that you know all the technical aspects of NFT technology and token standards! The following are some real-world applications of NFTs:
Domains: Crypto addresses are a new type of NFT and are simple to buy, search, and register. The addresses of Steve Jobs and Vitalik Buterin are unique, resulting in each user having their own identity. Unfortunately, it isn’t easy to attribute a unique identity to an Ethereum Address when there are millions of them in existence. Currently, preventing duplication and misuse of names is one such problem. Therefore, ENS, or Ethereum Name Service, gives every Ethereum user a unique name (crypto addresses) on the Ethereum blockchain that cannot be misused or duplicated.
Sports: Counterfeits, scalping, and bot trading of tickets are increasing at an alarming rate. Blockchain is the perfect alternative for resolving such issues without complications. Furthermore, the immutable nature of blockchain technology safeguards against counterfeit collectables and tickets and makes a legitimate holder of the smart contract.
Real Estate: Selling a piece of land takes a lot of effort and stress. However, your house or land can be tokenised as NFT and displayed at auction. You can effectively prevent fraud in the real estate market by tokenising the property and owning absolute ownership. In real estate, the token standard contains leveraging the asset and getting loans. Thus, Blockchain technology and smart contracts can tokenise your property and get exponentially more value than in the real estate market.
Art: Artists are embracing the digital art space that provides new avenues to express themselves and to sell their work as NFTs in auctions. Creating a new digital art market allows for creating rare and unique pieces. In addition, artists can embed sensors in their art form and connect them to the blockchain network via smart contracts. These contracts can allow other users of blockchain explorers to check the status of IoT sensors connected to these art forms. As a result, blockchain can improve the value of these NFTs and allow them to function uniquely.
Conclusion: The growing role of NFTs and the transformation of digital transactions, assets and other blockchain-related processes will surely keep gaining popularity in different sectors. Furthermore, with the increasing crypto market, the importance of NFT will also rise, making it a lucrative investment for people looking for smart investments in the future. Therefore, investing in NFT technology is an excellent choice for millennials and young entrepreneurs eager to make a fortune in this space at an early stage. If you are interested in adopting blockchain technology in your business.
