Blockchain, also known as digital ledger technology (DLT), is a digital database for storing information. For the most part, blockchain technology is used to securely store data regarding transactions into a block.
Each block contains a certain amount of data, and once the block has reached its full capacity, the information is passed on to a different block. These blocks are interconnected, hence forming a chain that is now known as a blockchain.
Blockchain technology is used to store cryptographic digital assets like NFTs (Non-fungible tokens). NFTs are cryptographic assets that are built using the same programming as cryptocurrencies. Much like cryptocurrency, NFTs are also based on blockchain technology.
However, there are many differences between NFTs and cryptocurrencies that make each of them unique. Let’s have a deeper look into what NFTs are and the role they play in the fin-tech space.
What Are NFTs?
As the term suggests, NFTs are digital tokens. This means that each NFT is a representation of digital or physical commodities like art, music files, sports cards, real estate, etc. Each NFT has a unique identification code and metadata that differentiates them from one another.
Non-fungible tokens are digital tokens that are created to remain the same. They can’t be altered, and they can’t be exchanged or traded like cryptocurrencies. Although, largely like Bitcoin, NFTs are stored on a blockchain and can be utilized for commercial transactions.
Characteristics of Non-fungible Tokens (NFTs)
As mentioned earlier, NFTs are used to represent virtually every item that can be sold or bought, both real-world and digital assets. These commodities can include property rights, identities, etc. The most highly valued marketspace for NFTs at the moment is the NBA Top Shot.
NBA (National Basketball Players Association) Top Shot is a marketplace for people to collect iconic moments from the history of Basketball as tokens. These are known as sports cards. The said sports cards have often been sold for millions of dollars.
Another example of a non-fungible token is Jack Dorsey’s recent Twitter update about the first-ever tweet to have ever been tweeted. This token was sold for more than $2.9 million.
NFTs are irreplaceable. Cryptocurrencies, however, have certain values that can be compared. One Bitcoin has a similar value to another Bitcoin. But, this is not the case with NFTs. Each NFT has a specific worth that cannot be matched by another NFT.
Think of NFTs as digital passports because of their unique identity and attributes. While NFTs can’t be exchanged, they can be merged with another NFT to create a third token.
It’s imperative to note that NFTs have ownership details mentioned on the blockchain in some form or another. For example, artists selling their digital artwork can inscribe their trademark in the metadata.
The bottom line is that since the introduction of NFTs into the crypto paradigm, commercial trade has earned designated space in the digital marketplace. It’s safe to say that the distinctive representation of several types of assets as tokens has made selling, buying, and trading much more reliable and efficient.