When thinking about crypto, most people think of a form of virtual currency. So, Non-Fungible Token (NFT- Non-fungible Token) and crypto collectibles seem to be quite new concepts.
10 Bitcoins is equivalent to 10 Bitcoins. So why doesn’t 10 NFT equal 10 NFT?
And what are these collectibles? What does it have to do with the crypto world?
This is not an advertisement for a comic shop or some premium skins in some titles, so there is no link for loot boxes with 0.02% chance to get some items. high end products.
However, we will see that the unique forms of assets that the NFT allows to create are actually very important for the future of distributed ledger technology.
What is Non-Fungible Token?
Non-Fungible Token is a crypto token used to create a unique asset.
The only assets can be works of art, ownership, identification and of course collectibles. With NFT, all types of real assets and digital assets can be registered on a blockchain, so all the details of the owner will be securely stored and immutable.
All NFTs have 4 core characteristics:
- They cannot be cloned.
- They cannot be faked.
- They cannot be printed on demand.
- They have the same lasting ownership and security as Bitcoin.
Through these characteristics, NFTs can be used to identify unique items and limited edition products. No one can counterfeit an NFT-linked product, and no one can claim ownership of an item even if they have stolen it.
Imagine that someone is trying to sell you a limited edition Porsche. With NFT, you can easily check if a vehicle is registered in a limited edition smart contract and if the seller is the rightful owner. If the vehicle is not compatible with NFT then it is a fake. If the vehicle is legitimate but the NFT shows that the owner is someone else, you immediately find out that the vehicle has been stolen and can get out of a complicated situation.
Is NFT really necessary?
Yes of course! You may not live in a former communist country but you have certainly heard at least once about nationalization.
Although the government is your protector, throughout history rulers have sometimes confiscated property from their citizens. And once the situation changes, for one or more generations, it is nearly impossible to prove who is the rightful owner.
Today, governments are less likely to proactively seize assets from their citizens. However, we still hear about dangerous gangs stealing and modifying documents to profit themselves from citizens’ fees.
However, government organizations invest in security to improve the security of the centralized ledger. But an event like the one in Haiti from 2010 shows that that is not enough.
For example, in 2010, an earthquake devastated Haiti and destroyed buildings in the city containing documents relating to land ownership. After the damage, citizens had to reclaim their land but there was no proof of ownership and reconstruction became very complicated.
Going deeper into the digital world, it can be seen that the definition of ownership has changed drastically. Thanks to the internet, you can watch movies, download software and video games without having to go to a store to buy CDs or DVDs.
However, if you’ve ever used Netflix, you already know that you can’t close your account and transfer all your movies to Amazon Prime.
And if you’ve ever used Steam, you may have realized that by requiring you to sign in, you’re actually responsible for an outside Middleman in order to be able to play the game and use the software you’re using. paid with his own money.
ERC721 and ERC1155
While the EOS platform can be used to generate NFTs, the most commonly used smart contract is ERC721 from ETH. If ERC20 comes with a token of equal value to the next, then ERC721 introduces indivisible and unique tokens.
Tokens deployed through ERC721 are not interchangeable even if they are of the same class. Most of the time one token has distinct characteristics from another that make them have different values so they are not interchangeable.
Today, the most common use of ERC721 and NFT is in games to deploy unique items known as crypto collectibles.
However, the accompanying limitation of the ERC721 is that it has only can deploy one token portfolio at a time. So if you have to implement more unique asset classes or even need an in-game currency system, you might have to use a few smarter contracts and even ERC20.
Of course that would expand the use of gas and could even come with basic problems like communication difficulties between the ERC721 and the ERC20.
ERC1155 solves this problem by proposing a standard where a single contract acts as the interface for multiple tokens such as fungible, semi-fungible and non-fungible.
Irreplaceable and flexible
Fungible… Fungi… Mushrooms?
Actually no! Fungible/fungibility is a term that represents the property of an item that the individual units are interchangeable and indistinguishable from one another. This term comes from fung in Latin, means “perform” and is not related to the Latin noun fungus or fungus or the English plural form of “fungi” (both meaning fungus).
In some cases, when one thing can be fungible, it is like another thing in the same category. When one thing is not fungible, the two things are different even if they are in the same category. The two bricks may be the same but mine is definitely different from yours, even if both are houses.
We encounter the versatility of assets in finance when describing fiat money. For our economy to work, all currencies must be swapped to the same value. My $1 bill is the same as your $1 bill.
In creating BTC and other cryptocurrencies, developers have retained the asset with flexibility to highlight the possibility of using cryptocurrencies and tokens as a new and more reliable financial system for exchange of goods and services.
Some say that Bitcoin is irreplaceable because it can be traced back and checked to see what it was used for. For example, if a coin is used in illegal transactions, people will avoid buying it, thus rendering it useless. While it is true, BTC is still considered a fungible currency because all coins are created equal.
Tokens typically revolve around an ecosystem, often a decentralized application, in which they are used for various processes and transactions. These tokens are all fungible.
However, the power of tokens can even be applied to represent real-life assets or digital items from a game title. Although the ownership and rules of digital assets are stored on a blockchain, owners can always control their assets just by holding a single token.
And because the NFT describes a particular asset class, it will be different from any other NFT, even if they serve the same purpose.
What is crypto collectibles?
Crypto collectibles are blockchain-based digital collectibles in the form of NFTs. Like in the case of every other token, there is a smart contract on their platform. Smart contracts allow crypto collectibles to be bought, sold, and traded for a relative value influenced by rarity and demand.
In fact, an entire ancillary industry has built on the fact that crypto collections grow beyond peer-to-peer trading into marketplaces where people can buy and sell them.
When you buy a collectible cryptocurrency, you can hold it in your Metamask or put it in an NFT-enabled wallet. But keep in mind that it is expensive to send a collectible crypto because it contains more data than a typical transaction.
In addition to being used as a store of value and for trading, cryptocurrency collectibles are largely used in the creation of crypto games.
CryptoKitties sounds familiar to you right?
CriptoKitties is the best known crypto game related to crypto collectibles.
CryptoKitties is a game built on the ETH blockchain in which players buy, breed and sell unique cats with different characteristics. Some features and configurations are rarer than others that make the collection more valuable. And if you wonder what its worth, imagine that the most expensive CryptoKitty sold for 600 ETH (about $170,000 at the time).
How can this be? It is very simply because the world loves to collect rare objects. People collect postage stamps, old banknotes, baseball cards and a lot of things that may look like trash but are sold for quite substantial amounts.
NFT Market and Game Industry
NFTs bring decentralization to the gaming industry. If you’ve ever invested a lot of time, energy, and possibly money in a game to get to levels, ranks, and get some great gear, you’ll really be disillusioned when the game company prompts you. who really is the boss.
Online games stop working due to receiving updates – which will nerf certain skills or mechanics, or just be boring.
Blockchain-based games allow players to have perpetual ownership and full control over their in-game assets with the help of NFTs. It’s a graphics card, outfit, equipment, or in-game character, which the player is free to use as he or she wants, and is guaranteed that no one can alter or nerf a owned asset.
Alternatively, NFTs can allow you to take all of your crypto collectibles out of a game you’ve been playing for a while and into another game that connects within the same blockchain. So you won’t have any problems if a server is down or you just want to try something new.
Dislaimer: This information is provided as a personal blog, not general information or investment advice. We are not responsible for your investment decisions.
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