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Using your own words to define non-fungible tokens: NFT

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NFT stands for Non Fungible Token. It is a type of token that is created using blockchain technology. As such they are assets that has a cryptographic foundation and they are programmed to behave just like a crypto currency.

They are used to represent ownership of an asset as it was difficult for creators and owners of assets to lay claim to them. However since they are created using blockchain which runs on the internet, thus being digital, an NFT is used to represent digital assets like music, in game rewards, arts, etc. These are generally called digital collectibles.

It is a unique type of digital assets because it has been created in such a way that once generated it is difficult to forge or manipulate.

Over the years different NFTs have been created and bought by enthusiastic users, thus leading to the creation of an NFT market. Some of the popular NFTs that have been created are NFT Punks and Crypto Kitties.

Because of the unique programmability of NFT, it makes it easier for anyone to trace the NFT back to its origin. Due to this it has relevance and value as it can give precise history of the digital asset it is representing.

Examples of areas where NFTs are being used are games, digital collectibles, domain name, and the metaverse.

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Difference between fungible and non-fungible tokens.

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The concept of fungible and non fungible tokens emanated from real world usages. For instance, a Fiat currency like Naira is the same anywhere it is being used. So N1 in Port Harcourt is the same as N1 in Jigawa, because they have the same value. The same applies to the digital world where a crypto currency like Litecoin is the same. If I have 1 Litecoin and you have one Litecoin, they are the same as the have the same value.

Also, in the real world there are 'things' that are non fungible like a plane ticket, or a boat. This is because the plane ticket was created only for the passenger who intends to travel with it. The boat is a physical asset that is one of a kind because it is unique. Same logic applies to non fungible tokens as the represent assets in a unique way–digitally.

Here are the differences between fungible and non fungible tokens.

Fungible Tokens:

• They are divisible assets
• There are not unique assets
• They are commonly used as a payment mechanism
• They are mainly used as a store of value
• They are interchangeable with other fungible tokens.
• They are created on their own blockchain and/or the token standards being in use, e.g, ERC-20.

Non Fungible Tokens:

• They are not divisible assets
• They are unique assets
• They are commonly used as intellectual property
• They are used in artworks, games, stocks, etc
• They are not interchangeable.
• They are created based on the token standards of the blockchain they run on, e.g, ERC-721, TRC-721.

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Are NFTs interchangeable?

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They are not interchangeable because they are assets based on blockchain with unique properties that makes them not be exchanged for another crypto currency asset or traded equivalently amongst themselves.

They are not like crypto currencies and even the Fiat currency that can be exchanged for another currency or interchangeable with itself.

An NFT has its own identification code and metadata that makes it a standalone asset and unique such that owning an NFT can be easily tracked, traced, and recognized. It also means that they cannot be replicated because of how they are generated and characterized.

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What are the differences between an NFT and other currencies?

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NFT and other currencies have a different that is very clear to see. We shall be looking into some of them below.

Currencies are fungible in nature. They are divisible amongst themselves and are also interchangeable. If you have 1 BTC, you can exchange it for another 1 BTC as they both have the same value. You can also divide the 1 BTC into different bits and use them based on their proportionate values. Same applies to having Fiat currency like Naira.

NFT on the other hand is a non fungible token. As the name implies, it is a token that is Not Fungible. Therefore it cannot be divisible and interchangeable. This is because their mode of creation is different. That said, they are distinct among themselves and unique as 1 NFT is not the same as another NFT. And so they are valued differently based on it's perceived value and the demand for them.

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Is there an NFT marketplace?

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Yes there is an NFT market place. This is an entity which brings about NFT creators, buyers and sellers in one place. Without such entity, there would be no market for NFTs, as such there would be no value for a given NFT.

An NFT market place is a platform where NFTs can be created, stored, displayed, and traded. They are based online as most NFTs are created on a blockchain that also operates online.

There are different types of NFT market places that have specific purposes. Some of them are in-game item, digital collectible cards, and art oriented platforms.

We have some like Opensea, Rarible, Nifty Gateway, NBA Top Shot, Decentraland, and more.

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And how to invest in NFTs?

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To invest in an NFT, you need to operate from an NFT market place. But before you can lay your hands on an NFT, you need to have some crypto currencies in your wallet (preferably Ethereum) to enable you run a smooth transaction.

Here are three steps to properly invest in NFTs.

• Do a due diligence about an NFT or the one you desire. You need to know the existence of an NFT based on your preference. It can be art, music, or a tweet, etc. You can do this by going online to search for a credible platform that helps to give results about NFTs.

• The next thing to do is to get the crypto currency where the NFT is generated from. Most of the NFTs being generated are Ethereum based, but other blockchains like Tron and Binance are also in the NFT market. So you need to know the platform where the NFT is being produced.

You can get the crypto currency for the generated NFT through the blockchain platforms or from exchanges.

• Finally, you need where to purchase the NFT. To do this, you need to go over to a reputable NFT market place where NFTs are bought and sold to get yours. Popular marker places includes Opensea, Rarible, Axie marketplace etc.

On the market place, register and connect your crypto wallet.

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How to create a new NFT

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To create an NFT you have to go through a process. The beauty about it is that you don't need to be a professional at writing codes. Because of it's influence from blockchain, it is neither costly nor technical or complex.

To begin you need to choose the type of contents you intend to create and choose format they would come in. You need to have an idea of what you want to create. You can think up anything that could pass as an NFT. After all, it looks as if anything digital can be an NFT.

Your NFT can be generated in any multi media file format of your choosing. The file could be a text, audio, or other format. You can go on to create other styles like virtual lands in metaverse, video game virtual like avatars, etc.

The next step is the Mint the NFT you have decided to form. Through minting, you transform your digital item into a blockchain based asset.

You can mint several identical copies of your creation. This is mostly applicable to those that have a collection. You can decide to offer different versions of the creations in your collections.

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Is it possible to have an NFT stolen?

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So far it is difficult for an NFT to be stolen. However, your NFT can be stolen if you are careless with how your operations. For instance, you risk your NFT to get stolen when you click on bad links, make your secret phase known, or become very careless and make an error.

Generally your NFTs are very safe, but due to a user's error it can get stolen. This can happen when a user gives leeway to hackers who gain access to their NFT.

To this end we can begin to realize that hackers have become manipulative and persuasive to make unsuspecting NFT holders to give them access to their NFTs. Therefore, NFTs are "stolen" everyday because NFT creators have fallen for deceptive scams and exploitation.

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And why use a distributed file system like IPFS in this area?

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A distributed file system such as IPFS is used because it enable users to store and retrieve their data based on the CID (or cryptographic hash) of the content. By using the IPFS system the NFT references the data.

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How are NFTs used in art, video games and collectible card games?

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Before the advent of NFTs it was difficult to place a hold on creations by artist, especially when the artwork is digitized. Videos, images, etc have been passed around repurposed and reposted without the ownership of the artwork or digital file.

With the rise of NFTs creators of artworks can assume ownership and authority to dictate how the artwork can be distributed.

NFTs are changing how video games are being created and played. It has helped to create a new model through which games are played called Play-to-Earn.

With NFTs players can play games and earn in game rewards in the form of NFTs which can then be sold in the market place. Players can also buy their favorite characters in the form of NFTs and use them to play. Through this way they can develop them thus making the characters more valuable.

In game purchases is also a thing considering that in game assets like rewards, collectibles, and avatars can be bought and sold.

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And how are NFTs revolutionizing property titles?

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NFTs are being used to represent ownership of properties that are in the real world and not digital. The use of NFTs help to by pass third party intermediaries as it employs the use of blockchain technology which helps to identify ownership, title encumbrances, and to settle and transactions in an efficient manner.

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How are NFTs regulated?

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NFT has seen a market boom where it traded up to $25B in 2021 alone. It is well known that where there is large sums of money, scammers and frauds are there. Due to this, a lot of users have lost NFTs that are worth large sums of money.

This has raised a lot of questions about NFT cybersecurity threats and the urgent need for regulations.

As of the time of writing there's no regulatory framework regarding NFTs as it is yet to be designed. And the reason why it is so is because there's no clarity on how NFTs should be treated.

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And what are the solutions to the limits of NFT development?

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An NFT is not an asset. It is merely a way of attaining ownership using digital (blockchain) technology. Therefore people who have interests in investing in NFTs should be careful and understand that they are not an asset class.

Production of an NFT requires a lot of energy consumption. That's because they are mainly generated on the Ethereum blockchain that uses the Proof-of-Work (PoW) as it's consensus protocol.

A solution to this issue is to look for other blockchains that produces NFTs with lower energy consumption. Blockchains like Tron and Binance can serve as alternatives because they use less energy during NFT production.

As stated previously, the Ethereum blockchain is one that hosts most NFT activities. This means that to perform any operation you need to get the Ethereum coin, Ether. This makes it difficult for others who wish to partake in the NFT frenzy using Fiat currency like the US Dollars.

The best thing is to make such people become educated on crypto currency exchanges so that they can easily get Ether and use them to purchase any NFT of their choice.