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What is NFT?

June 8, 2023

NFTs have become a hot topic recently, with many people outside the crypto industry wondering what they are and why they have become so popular suddenly. In simple terms, NFTs are unique digital assets that are stored on a blockchain.

Each NFT has a unique identification code that sets it apart from others, making it easy to transfer and verify ownership. These tokens are bought and sold on specialized platforms, and their value is determined by market supply and demand, which explains the astronomical prizes of some NFTs today.

What Does Non-fungible Mean?

NFT stands for non-fungible tokens, where non-fungible means that they cannot be mutually interchanged, replaced by another identical item, or divided into smaller parts to use. Put more simply, NFTs are unique and indivisible, whereas fiat currencies and cryptocurrencies are not. To confirm and protect its uniqueness, every NFT has a unique digital signature that protects it from being copied.

Another way to look at fungibility is value. Fiat money, coins, and tokens are considered equal in value, meaning that one U.S. dollar is the same as another U.S. dollar, and one ETH is the same as another ETH. This characteristic makes them perfect for transactions. NFTs are unique and differ in price. Therefore, they are unfit as a means of making payments.

Non-fungibility makes NFTs highly useful for creating and trading unique digital assets, including original artworks, rare memorabilia, and collectibles. NFTs can prove the provenance of such sought-after assets, whether they are digital or real-world based.

Moreover, they can facilitate the trade of real-life assets, such as paintings and houses, by acting as an efficient tool for transferring and proving ownership. Tokenizing tangible assets in this way is expected to reduce the risk of fraud while making the trading process more efficient. 

NFT Standards

Nowadays, most non-fungible tokens (NFTs) are created on the Ethereum blockchain, using the ERC-721 token standard that outlines the rules that all NFTs must follow and the minimum features they must have. All NFTs created using the ERC-721 standard are compatible with each other and the Ethereum ecosystem in general.

In addition to the ERC-721 standard, there are two other notable Ethereum standards: ERC-998 and ERC-1155. The ERC-998 standard allows NFTs to be composed of multiple assets, making it ideal for creating portfolios and transferring all components simultaneously. The ERC-1155 standard enables users to register both fungible and non-fungible tokens using one address and a smart contract, which is useful for games and in-game collectibles.

Two other ecosystems that support the creation and management of NFTs are Flow and Tezos. However, they are far less prominent. 

Use Cases

NFTs have many possible uses. The most common one currently is digital art. NFTs can be an art in itself or represent ownership of real, fully digital, or generative art created using computers, algorithms, mathematics, chemistry, biology, data mapping, and more. Even internet memes can be sold as NFTs, allowing creators to profit from their popularity.

In addition, NFTs can be used in the media, entertainment, and music industries to sell artworks linked to a particular film, album, or celebrity. For example, production companies can sell limited digital posters or film-themed art collections to help with film promotions, and musicians may sell covers or first versions of their songs to celebrate an important milestone or promote their recent work.

Furthermore, the gaming industry may benefit from utilizing NFTs, which can be used to represent in-game assets and collectibles such as digital plots of land, personalized clothing, rare weapons, and more. NFTs enable users to have complete control over these items, facilitating their selling or buying on specialized marketplaces.

Lastly, due to their non-fungibility, NFTs can be used to build decentralized communities and ensure fair voting. By creating unique NFTs and distributing them among the community members, projects can empower users to participate in their development while eliminating the possibility of any malicious acts. Each project can decide on what conditions NFTs may be distributed to guarantee that only those with passion for the wellbeing of their project receive them and can vote. 

Final Thoughts

NFTs have already demonstrated their exceptional ability to validate and verify the uniqueness, scarcity, or ownership of various types of digital and real-world assets. As a result, it is becoming increasingly evident that NFTs have enormous potential that extends far beyond the realm of digital art, and we may expect a significant increase in their utilization across a wide range of sectors and industries in the future.

The Kinetex team has been involved in the crypto industry for many years, creating solutions to improve network interoperability and make blockchain technologies accessible to everyone. Kinetex DAO has created a unique NFT collection to reward users participating in the Kinetex Network Ambassador and Testnet Programs. These NFTs will give voting rights to their owners, helping to grow the community while ensuring that only devoted users have power over Kinetex’s future. All NFT holders will be able to suggest ideas and products that may help the development of Kinetex, vote on various proposals, collaborate with other DAO members, and more.

Learn more about the Kinetex Ambassador Program here, and do not forget to join the whitelist to be the first to get access to the tasks!

Kinetex Network: Website | Kinetex dApp