NFT from 0 to 1: Will 2021 be the “Year of NFT”?
Preface: When the mature modern financial system is copied to decentralization, DeFi has swept the whole blockchain field with an irresistible momentum, and has brought unlimited flow and capital to the blockchain. At the same time, the Non-Fungible token of NFT track was gradually discovered under the hot light of DeFi.
What is NFT?
To understand non-fungible tokens (NFT), we first need to understand what fungibility is.The meaning of fungibility is that assets follow the same rule and can be freely divided or traded.Take the bills we use in daily life for an example, although each 100 dollar bill has a different code, they are all issued by the central bank, all have the same purchasing power while can be exchanged freely. Besides, 100 dollar bills can also be exchanged into two 50 or ten 10 dollar bills.
In the playground, same par value of game coins has the same purchasing power in the playground, and a large par value of game coins can be exchanged for several smaller value. The same is true for digital currency, where each bitcoin represents the same value at a given point and can be split into 0.5 or 0.01 bitcoins, which can also be exchanged. These are the features of fungible currency.
NFT is the exact opposite, it means complete uniqueness and cannot be divided or freely exchanged with each other. Though it might sound a bit abstract, but it’s not too hard for most of us to understand for we’ve been around non-fungible digital assets for a long time.
Like those skins that we buy when playing online game such as PLAYERUNKNOW’S BATTLEGROUND (PUBG), it can also be regarded as non-fungible digital assets cause they all have value, or the domain name ‘Fund.com’, which a company called Fund.com bought in 2008 for nearly $10 million in cash, they all are unique, indivisible and not interchangeable.
NFT is non-fungible digital assets based on blockchain background.
It originated from the Ethereum ERC 721 protocol, which was born in 2018. Under this protocol, NFT can then be created on the blockchain.
The world’s first blockchain game Crypto Kitties was developed based on the Ethereum ERC 721 protocol. In this game, players can own virtual cats, each of which is unique and cannot be copied or destroyed. These virtual cats are essentially non-fungible tokens, and some rare and popular cats have even been hyped up to hundreds of thousands of dollars.
Although they are still relatively niche compared to the mainstream market, they have become increasingly prominent in the past year or so, as tokens represent unique art, collectibles and virtual game items have become more popular. In the past year, NFT popularity has skyrocketed, with sales quadrupling, and Time magazine has embraced the blockchain digital art movement by auctioning off three irreplaceable tokens (NFTs) that are inspired by some of the most iconic covers in decades. Tesla founder Elon Musk is looking to sell EDM songs about NFT, Aston Martin is also releasing NFT products, and the Dvision team recently announced the release and sale of five new and limited edition NFT items, from social media to celebrities they all have accepted and gradually released their own NFT.
What is the value of NFT?
To answer this question, let’s look at the development of NFT.
Back in 2013, Color Coin started trying to create NFT on the blockchain when it was built on top of Bitcoin. However, NFT’s first technical standard appeared in 2017 which is called ERC721. It is different from ERC20 because ERC721 tracks the ownership and movement of individual tokens and it is what makes an irreplaceable token unique and valuable.
The cat breeding game Crypto Kittes mentioned above is the first successfully implemented use case for ERC721. Therefore, each ERC721 represents a unique digital kitten, and the most expensive CryptoKitty traded at $172,625 (600 ETH at the time) in 2017.
This has made big players like Google Ventures realize the potential of NFT.
Recently, Enjin, a blockchain startup, partnered with Microsoft to create a cryptographic collection called Microsoft Azure Heroes. We’ll use it as an example of how NFT works in the real world.
In the real world, NFT has some very promising use cases in the areas of art, antiques, retro, property ownership, etc. There are a number of reasons why games were the first industry to actually push NFT to the ground. This is because the stakes are low and gamers are already familiar with the concept of digital collectibles.
Future iterations of NFT will most likely link physical assets to these cryptocurrencies in order to enable a real-world transfer of mistrust. As an example, identification certificates and software licenses can be traded as NFTs.
Many projects are already proposing better NFT standards, such as ERC115, ERC875, and ERC998.
Characteristics of NFT tokens
1. They are exclusive to the owner.
2. They are not interchangeable with another identical NFT
3. Each NFT has its own unique characteristics
4. Each NFT represents ownership, rights, and privileges
5.NFT is indivisible.
The liquidity of the NFT is also being enhanced
Along with the NFT’s popularity came NFT index funds, known as NFTX, which are not real funds but platforms for generating ERC20 tokens backed by NFT collectibles. These tokens are called funds, which are a bit like synthetic assets, and their purpose is to effectively convert traditionally illiquid NFTs into liquid NFTs that can be traded on decentralized exchanges such as Uniswap, which is certainly a worthy experiment.
Actually when we just enter into the field of block chain, a lot of things are not possible, but with the emergence of the ethereum, we began to see that based on ethereum we can create a parallel world with the real one. A world that can even in one day devour all the existing world order, to build a more equitable and efficient world, especially in 2021.
With DeFi, we see the promise of changing traditional finance, and in 2021, NFT may change the way we think about games, art, and other assets. In fact, this day will not be too far away. In the future, for those of us in the blockchain business, we should be more full of expectations for NFT.
conclusion
Fungible cryptocurrencies have proven their importance in the digital asset ecosystem. NFT, on the other hand, are potential opportunities to tokenize the tangible assets with unique pedigree. All in all, NFT will expand the scope of blockchain in the real world, and together with DeFi, move the centralized stuff to the decentralized to achieve true fairness, justice, and openness.
