NFTs were a great hit during the previous year’s bull run. You must have heard of the popular NFT collections like Bored Ape Yacht club and Crypto Punks. Jack Dorsey’s tweet was also in talks because of its NFT association. But Do you know what these NFTs are and how do they function?
In this article, we will cover everything that you need to know about NFTs and their use case of NFTs.
What is an NFT?
A token on the Ethereum network is actually a smart contract which allows users to trade them on the blockchain. Users can create as many types of Ethereum tokens as they want with smart contracts. Other developers then can use these contracts ( tokens ) to implement them in their contracts. Similarly, NFTs are also smart contracts that can be used to introduce elements of scarcity in our contract.
For example, if a developer is building a car race game on the blockchain and he wants to make each car unique, he can make the cars non-fungible.
Let’s understand this with the help of a simple example of a painting. A painting can only be sold as a whole because it is not Fungible. On the other hand, bitcoin can be sold in fractions because it is a Fungible coin.
Therefore, NFTs are those tokens that cannot be traded in fractions. This ability of the NFTs to be sold as a whole opens the door to many new use cases.
An NFT is also technically known as an ERC 721 token.
Use cases of NFTs
- Art – NFTs are widely used for portraying artistic objects or paintings. NFTs have the potential to save millions of dollars worth of paintings that are subject to wear and tear or robbery.
- Collectables – We all have played the Pokemon card game once in our lifetime. We had to collect all the cards in order to gain the maximum advantage. Similarly, NFTs can represent these collectables.
- Supply chains – NFTs are also used in Supply chains to represent products. NFTs can prevent forgery or scams that happen due to the irregularities of the current supply chains.
- Games and Metaverse – Many times, we have bought some special advantages or skins in various games. Such special abilities are limited to the game they belong to. For instance, you cannot sell a skin outside of the game. That’s when NFTs come in. NFTs increase the liquidity of these skins and characters by allowing them to be traded outside the game.
How to buy NFTs?
NFTs can be bought on various marketplaces such as Opensea and Rarible. No registration or login is required for buying on these platforms. We just need to connect our wallet to the marketplace and can place our order.
One thing that should be considered in mind is that while minting or trading NFTs, we have to pay the network fees. Even while minting free NFTs, we have to pay the gas fees. This is due to the fact that the blockchain has to update the ownership status of that particular NFT. Therefore, even if it is free, the blockchain will take the fee in order to update the same on the public ledger.
NFTs (Non-Fungible Tokens) were a great hype during the previous year’s bull run. Bored Apes and Crypto Punks are some of the most hyped NFT collections in the world. However, most of the users don’t even know the mechanism behind these NFTs. Moreover, many people think that the use cases of NFTs are limited to art and collectables only. Therefore, NFT’s use cases should not be limited to art and collectables and its other use cases should be acknowledged.