NFT – Non-Fungible Token

NFT – Non-Fungible Token
Picture: Akorcagin | Dreamstime

At the end of winter 2021, a lot of information about NFT tokens appeared on the Internet. And since then, more and more people have been writing about this newly minted trend – an exclusively new type of tokens that cannot be replaced by any similar token, similar in essence.

So what is NFT? For what purposes is it used? What areas of life has he already begun to change?

NFT stands for Non-Fungible Token, which means non-fungible token. This technology originates from 2017, and it was created on the Ethereum blockchain platform.

And its main feature is the digitization of interaction with absolutely any virtual and physical goods.

NFT token property

The word “tokens” can often be heard from people. It has long been a part of human life and every day its popularity is growing. And in NFT tokens, “non-fungibility” plays the main role. If you look around and carefully look at the things that surround us, then most of them have the same property.

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After all, what does non-interchangeability essentially mean? This is a product, a thing endowed with such special characteristics that cannot be replaced using another similar thing or product.

Take elementary examples from life – our apartment, shoes and clothes, a cell phone, a car, which at the time of purchase were ordinary, or even thousands of other models. But in the process of our use, each made this thing unique to him.

What is a token?

The token has an English origin from the word Token and means an identification mark, a symbol. This is a virtual digital unit issued by a certain person, the cost of which is regulated by the author, and accounting and functioning is based on blockchain technology.
Picture: Media Whalestock | Dreamstime

The technology named last implies decentralization in its essence, namely: the conduct of all financial transactions without strict control of interested financial institutions, without the participation of intermediaries.

Any agreements concluded with banks, whether for the opening and use of credit or deposit accounts, are stored in the banks where we executed them. And what lies in the same places for years runs the risk of being stolen or forged. Blockchain technology provides storage of data on all ongoing transactions on millions of computers connected to this technology, which makes it much more difficult to fake any information or steal money.

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The very first currency closely associated with the use of blockchain technology was bitcoin. This is a digital virtual Internet currency that does not have a material form. It doesn’t physically exist. In certain registries, called the blockchain, all data is stored, which takes into account the number of monetary units of each user and when and where transfers are made. These operations are similar to cashless payments in a store with a bank card, while there is also no cash, only the operations carried out do not go through banks and do not leave any traces there.

The issue of monetary units in circulation occurs with the help of the functioning of many computers according to a special program that performs these operations thanks to a kind of mathematical algorithms. At the same time, the logs of all transactions with all bitcoins are stored literally on every computer that is connected to the bitcoin system, and each person is able to view the history of all operations performed over the entire period of the existence of this system.

Everything about cryptocurrency from “A” to “Z”
Everything about cryptocurrency from “A” to “Z”

Later, Vitalik Buterin created a new kind of cryptocurrency, which he called Ethereum. He introduced smart contracts into circulation, which were able to carry out complex transactions with various digital assets without human mediation, based on a certain mathematical algorithm.

Due to the fact that not all digital assets such as Bitcoin, Litecoin, Ethereum are interchangeable and not all are equal in their natural essence, NFT tokens were created.

Non-fungible NFT tokens

So, Non-Fungible Token is a kind of digital, virtual certificate, which is something unique.

Picture: Sergei Babenko | Dreamstime

They differ from cryptocurrencies in three ways:

  • rare;
  • indivisibility;
  • uniqueness.

In simple words, NFT tokens can be attached to absolutely every digital object, whether it’s a video, or a movie, or photos. Through non-fungible tokens, programmers have solved the problem of securing copyright for digital objects.

Token – a unit of account that is not a cryptocurrency
Token – a unit of account that is not a cryptocurrency

Each token encodes all the information about a particular product, about its owners, about all the operations that were carried out with it. And since the blockchain, in which tokens are stored, has the property of openness and transparency of all ongoing operations, then anyone can find out any information about the product at any time.

Even any physical product can be tokenized, although there are still a number of difficult tasks to be solved for this purpose. But digital goods are just perfect for this. Namely:

  • Digital art
  • Absolutely all items of computer games: characters, weapons, skins, etc.
  • All items in virtual universes.