Famous NFT. A simple explanation and classification.

The term “Non-Fungible Token” (NFT) is hotly discussed in the media these days. Almost everyone has heard of it at least once. Quirky art, gifs, memes, collections, games, crypto-money, de-fi, dapps, dex, blockchain, and other fashionable buzzwords swirl around the intriguing term NFT. It generates the feeling of scarcity or the ability to lose something valuable, being out of this crazy movement. People trying to get into this flow, and understand what is going on.

So, what the hell is this Token? The answer is quite simple: this is a blockchain-based unit that represents a unique digital asset and verifies ownership.

Just like cryptocurrencies, tokens are stored on the blockchain, but compared to cryptocurrencies, they are unique (not fungible). Coins don’t have this quality; many individuals can buy, possess, transmit, and receive a coin (bitcoin, litecon, dogecoin etc.); nevertheless, NFT is the single instance, a one-of-a-kind thing, and only one person will own it.

For example:

–  You made a unique photo – this is your digital asset. 

–  You are the author of this image – you own it. 

–  In order to sell it, you need to issue a Token to confirm the ownership of the digital asset (photo). In Layman’s terms, we can call it a “digital certificate of ownership, contract”.

–  Now you can set a price for your Token and sell it. That means you will transfer the ownership for your picture to another person, for the named price. And thanks to the blockchain, such transactions will be carried out quickly, conveniently, and reliably.

The first and fundamental blockchain network to store NFTs was Ethereum, but right now, there are a ton of others, including Bitcoin Cash, Cardano, FLOW, GoChain, Solana, Tezos, Polygon, Klaytn and that’s only the tip of the iceberg. The same story with marketplaces, you can sell and buy NFTs on platforms like Opensea, Axie Marketplace, Lavra Labs, Rarible, Superare, Mintable …. and others.

Can I create an NFT of something other than an image?

Yes, images are one of the most popular digital assets today, but you can tokenize almost anything, including video, audio tracks, services, securities etc.

There are already non-official NFT types in place:

  • Collectibles tokens – are collectible items with the goal of building a collection that will rise in value, be admired, and cost more over time (exp. ​​CryptoPunks, CryptoKitties, BoredApeYachtclub).
  • Access NFTs – allow people to have an exclusive experience, like attending online or offline events such as concerts, webinars, or participating in voting by verifying their identity and tickets.
  • Digital Art NFTs – tokenized artworks like paintings, pictures, memes, doodles, etc.
  • Game assets– in-game objects such as weapons, avatars, or any kind of accessories that may be used to fulfill quests or sold to other players for a profit.
  • Property rights – the individual grant of access or ownership to specific files (like songs, audio tracks etc)
  • Digital identity – identity-based NFTs which can be used to prove and validate a person’s records and ensure that individuals can store confirmation of their identity without fear of losing it.
  • Physical Assets – tokenization of real-world commodities as land, real estate, or any other tangible products by applying cryptographic proof of ownership.
  • Domain Names – decentralised naming, like ENS or Unstoppable Domains, which can turn long and complicated addresses into a flexible and user-friendly experience.

Despite such immense popularity, digital tokens are still new to the tech world and are weakly regulated. Taxes, anti-money laundering rules, secure custody, industry knowledge, and interoperability are important considerations when dealing with NFTs, especially when large funds are involved.

As a result, before making any investments, always conduct your own investigation. Also, please keep in mind that the material in this article is not investment advice and should not be construed as such. 

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