We hope every one of you is having a great time. In this article, we are going to discuss a very important topic which many of us may not be familiar yet but has gained a bit of attention recently with the launch of a game called Crypto Kitties. This game went viral after it was launched and with it the idea of non-fungible tokens began to hover among the crypto community. Now you may think what was special about this game ?

                          Well long story short, this game was the first implementation of non-fungible tokens on the blockchain or more specifically on the Ethereum Blockchain where users can collect and breed digital cats 🐱 that lives on the blockchain. Each of the kitties are one-of-a-kind that means it cannot be replicated, taken away or destroyed and that's the overall beauty of the concept, the concept of digital scarcity or rareness on the blockchain and was not like anything people have seen before this. To understand the implications these could have on our society let start off with the defination of non-fungible tokens. As per wikipedia, the defination goes something like this -

A non-fungible token (NFT) is a special type of cryptographic token which represents something unique; non-fungible tokens are thus not interchangeable._source

                         This is in complete contrast with cryptocurrency or tokens most people are familiar with. To understand this a bit better let's consider us Flamingirl and Pankaj.

Situation is as below:

👉 Flamingirl owns 1 Eth and a crypto kitty named A.

👉 Pankaj owns 1 Eth and a crypto kitty named B

                         Now say, if Flamingirl and Pankaj wants to interchange their 1 Eth, they can do so as both Flamingirl's and Pankaj's 1 Eth are indistinguishable with no uniqueness between the her 1 Eth and his 1 Eth and both the Eth have the same value as for ETH being a fungible token it doesn't matter which particular ETH they hold. This is not only the case for ETH but is valid for every ERC20 token out there. In fact Bitcoin, Litecoin and all similar cryptocurrencies out there are all fungible tokens and interchangeable with one another within their blockchain. But this is not the case for the Crypokitties. Both Flamingirl's and Pankaj's crypto kitties A an B despite being on the same Ethereum blockchain are unique on their own and are not directly interchangeable one for the other as both the kitties have different genes, traits and value.

                         So it may so happen that Flamingirl's crypto kitty A may worth say 0.9 ETH while Pankaj's crypto kitty B may worth say 0.6 ETH depending on the features / traits in demand. That is to say both the crypto kitties or non-fungible tokens A and B may have different value.

                         If you think in a technical way each crypto kitty is a token based of some unique information and thus Flamingirl's cat is completely different from Pankaj's and so cannot be interchanged. You can think of it like both Flamingirl and Pankaj have their own graduation certificates as non-fungible token. Although their individual certificates are valuable to them but being completely unique they cannot be interchanged one for the other.

                         Cryptocurrency(Fungible token) is the first demonstrated use case of Blockchain and by virtue of its functionality, do require to be interchangeable but with the blockchain technology progressing with time people began to realize that cryptocurrency was just a scratch on the surface and Blockchain has far more usage potential. Due to its inherent properties like immutability and security, Blockchain started to be seemed as the best for storing information and digital proof of ownerships of all kind. But all this wasn't easy as current fungible tokens were good at storing value but not capable of storing unique information into the tokens, which is required if we want to store information like proof of identity, proof of ownership etc.

                         This is where Non-Fungible token plays a key role enabling users to store unique information in the form of tokens on the blockchain while making it impossible for anyone to steal your ownership or identity. Regarding this, we would also like to point out the fact that just as fungible tokens on Ethereum are based on ERC20 protocol, for non-fungible tokens are based of the ERC721 protocol, which was introduced with cryptokitties and has gained a bit of popularity since.

👉 Unique and Not Interchangeable - As we have discussed in the example above since Non-Fungible token are based on some unique information, therefore, one Non-fungible token cannot be interchanged for another non-fungible token even of the same type.

👉 Not divisible - If we consider Bitcoin, we all know that it is a fungible token and can be divided into smaller parts known as Satoshi and similar is the case of all other fungible tokens. But talk about any Non-fungible token eg. Cryptokitties,

they cannot be divided into smaller part and either we own a full cat or we own nothing. This is same as the fact that if we convert out ID card into a non-fungible token then trying to divide the token would be like trying to divide our ID card into parts which seem meaningless even to think about such a scenario hahaha..

👉 Based on ERC721 protocol - All non-fungible tokens as of now are issued on Ethereum Blockchain and the Protocol followed id ERC721.

                         If we speak of applications of non-fungible tokens then we are only are limited by our imagination and nevertheless below is a list of few applications of Non-fungible token.

👉 Digital collectables - Non-fungible tokens has brought in the idea of digital scarcity, which is a great thing by itself and has lead to the trend of owning digital collectable just like real-world collectables. Eg of a collectable based on the Non-fungible token as discussed above is crypto kitties, where users can collect, trade and even breed their digital cats to produce a completely different and unique digital cat.

👉 Digital Identity - These tokens can also be used to represents a user birth certificate, his graduation degree, national Id etc. which are easily verifiable anywhere, without compromising the user's security and privacy.

👉 Digital proof of ownership - Non-fungible can be used as a proof of ownership of real world property, artworks or even intellectual property.

👉 In game assets - Non-fungible tokens can also represent in-game assets which are in complete control of the user who own those assets.

                         Non-fungible tokens on blockchain is a new idea and also the protocol(ERC721) on which these tokens are issued. We are still in very early stage of Non-fungible tokens and as more developers become familiar with these tokens and the protocol the more these token become mainstream.

This article was written by @pankajborah and @flamingirl.

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