To understand tokens and how to convert objects to NFT, you need to figure out in what environment they exist. Let’s check what NFT is and how it gained mainstream attention!

 

Have you already heard about NFT or tokens? Maybe you heard how Rick and Morty co-creator Justin Royland sold a collection of 16 paintings in the form of NFT tokens called "The Best I Could Do". The total amount of the deal was about $1.65 million. Or how Toronto-based artist Krista Kim sold a virtual image of a house on Mars for 500k dollars in the form of NFT.

 

 

NFT, in general, is non-fungible tokens or we could say non-replaceable tokens, digital elements that provide ownership in the blockchain of any digital object from texts and images to financial instruments and domain names. The simplest examples are game items, collectibles like art paintings generated by the AI, tickets to events, and other assets. Interested to know more details?

 

Contents:

Why Are Some Non-fungible Tokens Worth Billions?

NFT Basics

  1. Standardization
  2. Competitiveness
  3. Liquidity
  4. Limited supply
  5. Complex System

Ready for the Mainstream?

 

Why Are Some Non-fungible Tokens Worth Billions?

Before cryptocurrencies and tokens, digital currencies existed for a long time: airline points, online games virtual money, points on discount cards. Digital assets have also been around for quite some time: domain names, online game items, tickets to events.

 

They all simply differ in their attractiveness, liquidity, and compatibility with other products. The virtual item market is also huge, for example, Epic Games events tickets reach over $60 billion this year, and the domain name market continues to grow steadily.

 

However, when we buy such products, we do not get full ownership of them. They can be used, but they have nothing to do with the freedom of storage and transmission in the real world. You probably won't be able to easily sell a Fortnite event ticket or game item.

 

And this is where blockchain comes into play. The technology provides a qualitatively different level for digital assets, giving users the right to own and control the items, adding unique properties that change the relationship between users and developers.

 

NFT Basics

Most NFTs run on the Ethereum blockchain in multiple standards. NFTs are easier to transfer between different decentralized applications:

  • ERC-721 is the first and most popular standard on Ethereum.
  • Other versions of the standards on which NFT is based are ERC-998, ERC-875, ERC-1155.

 

NFT can record all kinds of items, including:

  • Images from paintings to photographs,
  • Stock music, podcasts,
  • Texts, tweets, blogs,
  • 3D models, game assets, maps,
  • Video content, films, streams, shows,
  • IP addresses and domains, and more.

 

To understand tokens and how to convert objects to NFT, you need to figure out in what environment they exist, in this case, in the blockchain.

 

 

To put it simply, the blockchain is a database that is simultaneously stored on a huge number of computers. All devices are connected to centralized nodes (in the form of servers or Internet providers), while the blockchain works in a different way. It does not provide any central nodes; in their system, all devices simultaneously store all information published on the blockchain. Cryptocurrencies like Bitcoin or Ethereum work precisely because of blockchain technology. Tokens, in turn, represent a register entry within the blockchain. A distinctive feature of most tokens is the principle of fungibility.

 

However, it is clear that not all digital assets are fungible. The painting by Pablo Picasso is not identical to the work of Claude Monet, and the file with the song of The Beatles can hardly be replaced with a record of Eminem's concert. Therefore, in order to transfer unique items to the blockchain, the format of non-fungible tokens was created:

  • Each of the NFTs have unique properties and exist in a single copy.
  • It cannot be divided and all information about its author, buyer and all transactions with it is securely stored in the blockchain.
  • In other words, an NFT is a digital certificate attached to a unique entity.

 

Let’s check other unique properties.

1. Standardization

Traditional digital assets do not have common standards or presentation. Online game items are implemented in a completely different way than e-tickets. With public blockchains, developers can create patterns of reuse, inheritance, and access rights for non-fungible tokens. These templates can easily provide ownership of assets as things from the real world, including their transfer, management of state, rights and access conditions.

2. Competitiveness

The most attractive feature of ownership is the ability to trade items at open marketplaces. Users can sell assets that previously existed in closed ecosystems, for example, sell items through blockchain API with the possibility of transactions in any currency. Interaction is possible between different platforms that support smart contracts.

3. Liquidity

Instant NFT trades will result in increased liquidity. Trading platforms will be able to serve a large audience from traders who gamble on asset price differences to gamers who just need to get some items.

4. Limited supply

Smart contracts allow developers to set hard limits on the number of released NFTs and their properties, which cannot be changed after release. For example, a developer can programmatically specify the creation of only a certain amount of a certain rare element, while keeping the number of more general elements infinite.

5. Complex System

The design of the latest NFT solutions makes it possible to build more complex mechanics than a simple generation of cats in CryptoKitties (a popular blockchain-game based on Ethereum that allows gamers to buy, collect or sell virtual cats). However, the story with CryptoKitties has shown that non-fungible tokens are a promising technology, and in addition to entertainment, it allows you to digitize land or real estate property rights, certificates, notaries, tickets or even voting rights.

 

Ready for the Mainstream?

Since almost all areas can be digitalized over time, property rights are a matter of time. We are on the verge of a trend that is already a daily norm in some jurisdictions. Tokens will simplify asset management. The transfer of ownership of the asset, presented in the form of a token, will also significantly accelerate and reduce the cost of its transfer. Also, the ability to put unique data into NFT tokens is an effective use of the blockchain in addition to cryptocurrencies.

 

You can find amazing collectors and creators of NFTs by blockchain technology on the market. For example, the famous CryptoKitties, Blockchain Cuties or Axie Infinity. Some smart collectors have already made decent profits in this market. NFTs have been around for quite some time on the Ethereum network. In the past six months, this topic has started to evolve rapidly thanks to much more attention from the media and large crypto organizations and financial institutions.

 

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