A non-fungible token (NFT) is a distinct, individual token that exists on a blockchain, such as Ethereum. Unlike cryptocurrencies like Bitcoin, each NFT token contains unique data, which means that non-fungible tokens are not interchangeable with each other. This non-fungible nature of the tokens means that their use cases differ greatly from their fungible counterparts.
A fungible token, on the other hand, can be exchanged for the same type of token equally without any difference between them.
To illustrate the difference between fungible and non-fungible tokens, let's consider the example of two people who both have a dollar. In this scenario, we can swap dollars and it doesn't matter because both dollars have the same value. Neither of us loses out as they are equal.
However, with non-fungible tokens, they are both unique, which means that if we both have an NFT, mine could be a baseball card, and yours could be your birth certificate. Obviously, we cannot exchange these two tokens equally because they have different values and serve different purposes. This is what makes non-fungible tokens unique and different from fungible tokens.
Non-fungible tokens are used to create verifiable digital scarcity, making them ideal for several specific applications that require unique digital items. This has initially proven popular for blockchain games and collectibles like CryptoKitties on the Ethereum blockchain. In addition, NFTs can be used to represent in-game assets, which are controlled by the user instead of the game developer. One exciting benefit of this arrangement is that non-fungible tokens or digital items may outlive the game they were initially created for and find use in separate future games. Another potential use of NFTs is in digital art, where they can help prove authenticity and ownership.
Is an NFT The Same as an ERC-721?
The Ethereum community has widely adopted the ERC-721 protocol as the industry standard for Non-Fungible Tokens on Ethereum. Many notable projects such as CryptoKitties, CryptoCuties, and Decentraland follow the ERC-721 protocol for their NFTs. In line with this standard, Mintable has also exclusively adopted the ERC-721 standard for our digital item creation service. Although there are other blockchains and formats that incorporate non-fungible properties, it is evident that the most popular use cases are all on Ethereum using the ERC-721 standard.
Non-fungible tokens gained widespread attention when CryptoKitties went viral in December of 2017, ultimately raising $12.5 million in investment. This marked a significant turning point for NFTs, bringing them to the forefront of the digital art and collectibles industry.
Are NFT’s Use Cases Limited to Ethereum Gaming and Collectibles?
Imagine a world where every retail store sold items not via bar codes, but through tokenized assets. In this world, every item of value would have an NFT representing it. If someone asked you if your Prada purse was real, you could simply show them the NFT representing your Prada and verify that the wallet address matches that of your purse. When checking out and purchasing an item, the cashier would scan items via the address of the NFT rather than their barcode.
This is just one example of how NFTs could revolutionize the way we interact with businesses, and the possibilities are truly endless. It's difficult to fully grasp the future impact of NFTs on our world, as their potential uses are only limited by the creativity of programmers.
If NFTs were to be globally adopted, they could vastly change the way we do business. Many people believe that NFTs will be the next wave of adoption for blockchain technology, as they have so many use cases and potential impacts. How could they not be widely adopted?