Non-Fungible Tokens Explained

Non-Fungible Tokens Explained

Non-fungible tokens add potential to the creation of security tokens and the tokenization of both digital and real-world assets. Physical assets like property could be tokenized for fractional, or shared, ownership. If these security tokens are non-fungible, ownership over the asset is completely traceable and clear, even if only tokens representing part ownership are sold.

But non-fungible tokens are very different from currency. Fungible refers to things that can be interchanged without gain or loss. If you and I swap one-dollar bills, neither of us is better or worse off. If we swap equal amounts of bitcoins, we’re likewise no better or worse off (save for transaction fees). And if we swap the same number of fungible tokens (such as gambling tokens, whether these be physically stored behind a casino counter or digitally stored on a blockchain), we’re likewise no better or worse off.

Are non-fungible tokens safe? Non-fungible tokens, which use blockchain technology just like cryptocurrency, are generally secure. The distributed nature of blockchains makes NFTs difficult, although not impossible, to hack. One security risk for NFTs is that you could lose access to your non-fungible token if the platform hosting the NFT goes out of business.

What are some examples of non-fungible tokens? Non-fungible tokens can digitally represent any asset, including online-only assets like digital artwork and real assets such as real estate. Other examples of the assets that NFTs can represent include in-game items like avatars, digital and non-digital collectibles, domain names, and event tickets.

Non-fungible tokens and their smart contracts allow for detailed attributes to be added, like the identity of the owner, rich metadata, or secure file links. The potent of non-fungible tokens to immutably prove digital ownership is an important progression for an increasingly digital world. They could see blockchain’s promise of trustless security applied to the ownership or exchange of almost any asset.

As is the challenge of blockchain to date, non-fungible tokens, their protocols and smart contract technology is still being developed. Creating decentralized applications and platforms for the management and creation of non-fungible tokens is still relatively complicated. There is also the challenge of creating a standard. Blockchain development is fragmented, many developers are working on their own projects. To be successful there may need to be unified protocols and interoperability.

The previous paragraph is a parody (if such is possible) of the hype that in the first half of 2021 has come to surround non-fungible tokens. Indeed, the hype has become so overpowering that it may even defy parody. Non-fungible tokens can have legitimacy, and I’ll discuss how that can be at the end of this article. But for now the overwhelming majority of what passes for NFTs is delusion, fueled by the hope of a quick return and the belief that something can be gotten for nothing (or virtually nothing).

Non-fungible tokens or NFTs are cryptographic assets on a blockchain with unique identification codes and metadata that distinguish them from each other. Unlike cryptocurrencies, they cannot be traded or exchanged at equivalency. This differs from fungible tokens like cryptocurrencies, which are identical to each other and, therefore, can be used as a medium for commercial transactions.

Unlike cryptocurrencies and fungible tokens, where anonymity is a virtue, anonymity is a vice for creators of non-fungible tokens. For simplicity, let’s assume therefore that you have a blog where your identity is made manifest.

Other tokens are fungible, in the same way as coins or banknotes. Fungible tokens are identical, they have the same attributes and value when exchanged.

“Non-fungible” more or less means that it’s unique and can’t be replaced with something else. For example, a bitcoin is fungible — trade one for another bitcoin, and you’ll have exactly the same thing. A one-of-a-kind trading card, however, is non-fungible. If you traded it for a different card, you’d have something completely different. You gave up a Squirtle, and got a 1909 T206 Honus Wagner, which StadiumTalk calls “the Mona Lisa of baseball cards.”

Friends, I invite you to check out my book on Non-Fungible Tokens. Invite You To Click to buy the book from the “Buy On Amazon Button”.  You can read a free preview of the book as well. This book will definitely give you a practical insight into NFTs.

Yours sincerely

Anthony Aries