Why Non-Fungible Tokens (NFT’s) Have Unrealized Potential
Non-Fungible tokens had entered the market in the form of a block chain technology-based game named ‘Crypto kitties’. Under this game, people can buy and collect a virtual form of unique kitties. The virtual cats were totally different you can say unique from each other. There was another market referred to as a secondary one where buyers sell and purchase cats at unspecified rates depending upon its demand and rarity in the market. Though this game was immensely popular topping over 12 million in sales but failed to grab the attention of more serious and potential investors. There is much more potential in a non-fungible token than a just a kitty collectible game. We have a long way to go in order to explore the real-world applications, let us discuss what are non-fungible tokens.
Brief introduction about Non-fungible tokens
In order to understand fully what are non-fungible tokens, let us explore a little about fungible tokens. A fungible token is a special form of cryptographic token which is generally identical and easily replaceable. For example, if you give lend someone 1 $ note and when he will return you the money he will give another 1 $ note. Note that, it won’t be the same as the earlier one but identical in appearance and value as well. On the other hand, non-fungible tokens are a unique form of cryptographic tokens which are not interchangeable. These are a representation of the value of an item in virtual token that is unique and irreplaceable. They are used in accordance to pay for a service or exchange value. Mostly, the tokens are fungible in cryptocurrency but there is a need for more non-fungible tokens because of the potential they hold.
Non-fungible tokens are non-divisible, irreplaceable and unique whereas a fungible one can be divided into smaller parts. You cannot trade a non-fungible token by dividing it into smaller parts. Many of us might be thinking if fungible tokens are better than non-divisible ones than why are latter one is popular in the market. We will discuss this further in this article.
Attract the collectors
Many of us are collectors of precious items that are close to our heart, unique or hold some high value in the market. Everyone is a collector in one way or another. The uniqueness of NFTs allure the collectors the most. The demand for NFTs is also increasing extensively due to its scarcity and uniqueness. Likewise, earlier in the 17th-century people used to collect tulips because of their uniqueness. Due to the increase in the demand for tulips, its prices started to increase enormously. Another good example of collectibles can be paintings. In a year, the total amount spends on purchasing artwork goes up to 40 million dollars. People love to collect unique items, like jewelry, coins, cards, and art. However, NFTs hold much more potential in them, then just to be used as a collectible item.
Applications of NFTs
NFTs are basically digital assets made with block chain technology. So, it is a collection of data containing valuable things. Some of the applications of NFTs are:
As we discussed above, non-fungible tokens can be used as a virtual collectible. We can develop a blockchain system for NFT for collecting paintings, sculptures, assets, jewelry, certificates, etc virtually. The person having the ownership of any of these only have to show the NFT data to declare his ownership. The chances fraud and forgery are next to minimal, as the data is secured under the block chain system and certification is digitally traceable.
It was first introduced through a collectible game named crypto kitties. The rise of NFTs in the world of gaming is emerging since then. In the games, props like clothes, weapons, are regarded as tradable items. After creating a game with NFTs it would be possible to trade these props within the game using game points.
Just like any movie or concert ticket NFTs hold the same unique nature they are non-divisible and irreplaceable. So, they can be represented by NFT. Therefore, tokenizing these tickets will also prevent fake tickets. Digital ticketing can be possible by using block chain technology.
In order to prevent fraud and make transaction traceable a reliable source of technology is required to make all certification digitally stored and available. NFT is a good way to store the certificates, patents, contracts and other legal documents digitally on the block chain and there is no fear these certifications getting destroyed or being tempered.
NFT can be applied to identity authentication in order to achieve a full record of a person. Likewise a driving license, passport and birth certificate you can also own an NFT. However, these certificates cannot be made traceable and identity verification can be realized by adding access controls to the NFTs. We can further use these NFTs for personal identification during admissions in colleges and universities.
Implementation of NFTs
The whole industry is trying excessively to tokenize every possible real-world entity after the emergence of cryptocurrencies. The first attempt to record NFTs in the block chain technology was in 2013 with the popularity of the color coin. These coins built on bitcoin and represent houses, commodities, and stocks in the real world. Furthermore, Ethereum came with smart contracts which allow users to create their own assets in a block chain system. Likewise, several standards are proposed for NFT.
The potential of non-fungible tokens is not just limited to games or used as collectible only it is much broader than that. As we discussed in this article, the growth of NFTs will go on the same future direction as blockchain technology. In order to represent entities in the real world, NFT is taking up every sector gradually. Some of the applications of NFTs we have discussed and some are waiting to get to the real world.