Crypto trending - Part 4

22 September 2020

One of the trending terms on the entire crypto market recently, known as the next DeFi, is “NFTs.” In fact, NFT is not new, there are many well-known NFT projects that even started from 2017-2018.

So, why is it hot now? Let’s find out!

I. What is NFT?

Firstly, to understand why NFT is important and how it will shape the future, we must understand the definition of NFT. So, what is NFT? How is it different from other tokens?

NFT stands for Non-Fungible-Token. The word “Fungible” and “Non-Fungible” may sound complicated, however, it will be easier to understand with some examples.

Bitcoin, or more simply - Gold, they are Fungible Assets. That is, 1 Bitcoin is 1 Bitcoin. 1 Gold is 1 Gold. If I borrow 1 Bitcoin from you, I can give you back 1 Bitcoin or 2 payments of 0.5 Bitcoin, or 10 payments of 0.1 Bitcoin. As long as in the end, you get your 1 Bitcoin back. Similarly, if I borrow $100 from you and when I pay you back, I can give you five payments of $20, so, it doesn’t matter if I return you exactly $100 or not, as long as $100 is returned.

However, with Non-Fungible assets, it is a different story. For instance, Van Gogh’s Starry Night painting is a Non-Fungible asset and it is valuable for its scarcity. If you “owe” me a Starry Night painting, you cannot pay me money or give me a similar painting, it must be the original painting painted by Van Gogh himself. Also, there are other examples of Non-Fungible assets to think of such as paintings, land, rare collectibles, etc. Likewise, NFTs are tokens or digital assets that are irreplaceable. If Bitcoin has 21 million coins with similar nature, each NFT is a unique asset even though they are developed on the same blockchain.

II. The nature of NFTs.

• Unique: Each NFT has a unique nature which makes them valuable and different from other NFTs.
• Scarce: One of the characteristics of NFTs is scarcity. You can think of a Yugioh card or Magic The Gathering, there are cards produced massively, and there are cards with limited numbers and that’s what makes them scarce.
• Indivisible: With fungible assets such as Bitcoin or ETH, you can split it into as many portions as you wish and trade it. However, with NFTs (non-fungible assets), they cannot be splitted, rather, NFTs can only be bought/sold/kept intact. You can’t sell half of a painting or half of an airline ticket, right?.

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III. The Application of NFT

1. What can NFTs do?

Obviously, NFT has been existing for 2-3 years. A typical example for this is Crypto Kitties. Developed in 2017, Crypto Kitties is a blockchain game on Ethereum that allows players to purchase, collect, breed and sell virtual cats. Apart from that, there are many other applications of NFTs, ranging from gaming to digital assets.

So, what are applications of the NFT that have made it so trendy this year?