NFT tokens - a new level of digital trust
Probably each of us once collected various types of cards, tokens or stickers. Regardless of whether they were heroes from games, books, pop culture or sports stars, such cards were important for us. For some people they were just a piece of paper, for us they were of great emotional importance. NFT tokens are such cards nowadays.
NFT tokens are currently one of the hottest topics in the cryptocurrency industry and clearly dominate this year’s trends. However, before you throw yourself into collecting – read what NFT tokens are and what they can be used for, apart from collecting.
What are NFT tokens?
NFT tokens are limited in number, unique digital assets that have a measurable, indivisible value that allows you to acquire ownership of products that occur both virtually and outside the digital reality. They are one of the key elements of the new digital economy based on blockchain technology. Unchangeable tokens, which are becoming an increasingly popular method of making transactions in digital reality, ensuring the security and privacy of data storage based on the principle of digital trust, according to which the success of such activities is in the hands of every digital reality user.
The non-exchangeability of the tokens indicates that the assets at our disposal have their own unique and inimitable value, which can be determined between the persons making the transaction, allowing for equity ownership of high-value items. Importantly, replication and transfer of NFT tokens are not possible if their current owner does not consent to this type of action. Performing such a transaction is not possible even for the token producer, thus guaranteeing security for the parties participating in the exchange.
An important feature of NFT tokens is their indivisibility, which means that they always function as an inseparable whole and are passed on in this form. The transfer in question takes place using unique identifiers linked to each resource, which makes it unique by including unique metadata. Performing transactions is supported and facilitated by cryptocurrency wallets, which store the private key securing the funds stored in the wallet. The principle of their operation is similar to logging in to a bank account on which we have private funds, in order to make a transaction, we need login data, including a password equivalent to the private key in a cryptocurrency wallet. As in the case of making a transfer from an account, each transaction made in the blochchain system requires authorization with a cryptographic key and is irreversible, and the parties involved can update and verify its status and correct execution.
What is blockchain and what is the uniqueness of NFT tokens?
Blockchain is a structure where transaction and event logs are stored in a distributed manner, without a central unit to control all resources. Each block belonging to the structure is secured with the help of cryptographic functions and is connected with successive blocks constituting the apparatus for transferring data from the previous block. The blocks are also time-stamped, which make it possible to define the moment at which the transaction or event was registered.
How does this translate to NFT tokens?
It’s quite simple, each NFT token functioning in the structure has its unique identifier associated with other, unique identifiers functioning in a given grid, which reflects the blockchain structure.
In practice, this means that every transaction made with tokens leaves a digital trace of its source. This affects the security and transparency of financial activities that become resistant to cyber attacks. Each code change in the blockchain is registered and an attempt to interfere with its original record will end with a blockade.
What in such a system determines the uniqueness of NFT tokens?
In addition to the name, balance and assigned symbol, they also have information about property or attributes, which makes them more reliable by confirming their source and authenticity. As a result, users gain new opportunities for their practical use, including going beyond the virtual ecosystem. To initiate the creation of a token, you need a smart contact, i.e. a smart contract that has a predetermined path of action – the conclusion of the transaction is preceded by a transfer of funds, for which the appropriate program is responsible. Certified companies providing services in the field of digital technologies are responsible for this type of transfers.
What can help you manage NFT tokens?
Decentralized DApps applications can support peer-to-peer activities that ensure secure transfer of cryptocurrencies and digital items. Unlike traditional applications based on a centralized system, they can operate independently, which makes them resistant to cyber attacks and works much faster. In addition to the most recognized Ethereum,on the market, there are other strong playersincluding Tron, Binance Smart Chain and several smaller blockchains that successfully operate decentralized applications.
NFT tokens – how to use their potential?
According to a growing group of specialists on the financial market and programmers, holders of NFT tokens will soon become one of the main players on the markets in many sectors of the economy, not only in the digital world. Where else can their potential be used?
Works of art and collectibles
NFT tokens are actively entering the art market, reaching dizzying sums, as exemplified by Justin Roiland (the creator of the “Rick and Morty” series) and his cryptoart series. The collection of 16 paintings was sold at the beginning of 2021 for a total sum of 1,300 ETH (Ethereum), which is currently worth US $ 2.6 million. Within the digital zone, the token can function as a confirmation of the value and authenticity of a given work of art, due to the possibility of including metadata about the resource and adding information about the property. The token becomes a kind of certificate of authenticity, confirming the translation of the digital currency into a measurable amount functioning in a non-digital reality. The non-exchangeability of NFT tokens additionally increases their value, making them, unlike other cryptocurrencies, a unique asset with a collector’s value. The standard defining non-exchangeable tokens in the Ethereum environment is ERC-721, which makes them unique and allows them to be considered a collector’s item with a specific financial impact. Thanks to this arrangement, NFT tokens can function outside conventional financial applications and are great as representatives of physical assets, i.e. works of art.
Computer games – opening to the global market
The market where tokens experience the greatest boom is the games market, where they have been a recognized and perfect payment method for a long time. Therefore, game producers and developers decided to go a step further and go beyond the digital world, thus mitigating the effects of inflation affecting global markets. As the present value of money continues to decline, consumers are more likely to buy goods whose value they can be sure of. This is where the NFT token comes in, offering secure, transparent and independent transactions. As many games have economies, we get a strong bargaining coin to act in reality.
Clothing market – the guarantee of the authenticity of product
Token NFT can be used when personalizing items purchased from large brands that produce a series of exclusive products, in which each of the products will have a unique genotype – style, color or attributes, and what is important for collectibles, it will be produced within the limit of pieces strictly defined by the token. Nike wants to use such technology, that will provide customers with a special application enabling control over the project. In this case, the ownership will be transferred only after the payment has been made, and the token will be linked with a unique identifier generated by the system. This will prevent the legitimacy of producing counterfeits and make it much more difficult to steal such a consumer good. In this case, the attached NFT token will also control the amount of the product on the market, which will allow you to control the state of demand and supply, and thus, to assess the shortages and prevent them.
The real estate market – transaction security
The blockchain system, tested and improved many times, is ideal for storing data on the ownership of movable and immovable assets, including the real estate market. Blockchain may include, inter alia, identification data which, thanks to a reliable and integral system of blocks, increase the privacy and security of data of persons in the functioning system. This would allow for non-authorized transfers of resources with the help of third parties, while reducing the burden on the global economy.
Securing data – increasing the level of trust
Trade on the open market, in the global blockchain network, is constantly developing, opening up new opportunities in the seller-buyer relationship, while redefining the name of a collector’s item, which the NFT token is itself. You can already look at projects that use its capabilities in terms of digital identity, licensing or certification.
As the above examples show, the possibilities of using NFT tokens are constantly increasing, they are subject to market fluctuations like any other financial product, but now their value is constantly growing, and the forecasts for the coming year are very promising, which should be used.