What are NFT tokens: how to use, buy and store
An NFT (non-fungible token) is a special blockchain asset that is used to link to another digital asset. The key difference is its irreplaceability. For example, Bitcoin or Ethereum cryptocurrencies are fungible - any 1 BTC is equivalent to any other 1 BTC. In turn, each NFT token is unique.
Non-exchangeable tokens are actively used in a wide variety of industries, but the technology has penetrated most deeply into the areas of gaming and digital collectibles. The most common NFT standards are ERC-721 and BEP-721 (on Ethereum and Binance Smart Chain blockchains, respectively). Profinvestment.com editors have prepared an overview of the features of non-exchangeable tokens (NFTs).
What are NFT tokens and what are their features
Interchangeable assets, such as bitcoin, ether, ruble or dollar, are distinguished by the fact that each unit is completely similar to another unit and can be exchanged for it. There is no distinction between them. This feature is a characteristic of all assets that are used as payment instruments.
Non-exchangeable tokens (NFTs) are unique and indivisible. They also work on smart contracts like other cryptocurrencies, but these contracts contain additional information that is different for each particular NFT. Thus, one token cannot be replaced by another. These are provably scarce assets with a specific digital identity. There are plenty of opportunities to use such tokens, which is what we will talk about.
Reason for popularity among users
NFT tokens have become very popular among users and development companies alike, due to their revolutionary impact in gaming and virtual collecting. According to NonFungible.com, more than $280 million has been spent on such assets by users since 2017, including $117 million in the last month alone.
Blockchain technology has allowed gamers and collectors to secure the secure right to own certain unique assets and sell them, earning real money. Some projects, such as The Sandbox and Decentraland, allow users to create and monetise their own structures or sell existing unique items on the secondary market.
Examples of use
A few examples where NFT tokens play an important role:
The total market value of NFT tokens is growing by around $7-9 million every day, which suggests that collectible assets have already moved from a mere hobby phase to a serious financial (and not just financial) instrument phase.
What are ERC-721 / BEP-721 tokens
Today, the most common blockchain to create NFTs is Ethereum, as such tokens usually conform to the ERC-721 standard. This standard describes a set of mandatory features that each non-exchangeable token must include, but imposes no restrictions on additional attributes that can be added by the developer.
Each ERC-721 token is unique and different from other tokens from the same smart contract. The differences can be anything from age, rarity, or even appearance. The point is that all NFTs have a variable tokenId, so for any ERC-721 contract there is a contract address + uint256 tokenId pair, which makes it unique. The dApp then allows you to put some kind of image as the tokenId, be it a weapon, a skill icon, or a kitten.
BEP-721 tokens are built in a similar way, the only difference being that they reside on the Binance Smart Chain blockchain - it is already catching up with Etherium in terms of decentralised project and asset development.
Projects with NFT tokens
Here are a few specific examples of the use of irreplaceable tokens in applications. We've already mentioned Decentraland and The Sandbox, but here are a few more apps:
Aavegotchi is an online game supporting DeFi collectibles, which is based on working with avatars (in this case it is NFT), generating aTokens and interacting with the Aavegotchi universe.
Aavegotchis are pixel ghosts that 'live' on the Ethereum blockchain and meet the ERC-721 standard. The value of each ghost is determined by its rarity, which in turn depends on various nuances (base traits, number of aTokens, items worn). To increase his Aavegotchi level, the player can participate in various events and mini-games, as well as buying additional items. Rare items are well worth it on the secondary market, and their owners are also rewarded with GHST tokens.
From February 20-23, the Binance exchange will distribute rewards as part of the Binance NFT education promotion campaign to those who fill out a google form, subscribe to Binance News/Binance Novini and Aavegotchi, and make purchases/sales of at least $100 in GHST/ETH or GHST/ETH pairs. Rewards are distributed randomly: they are $1000 in GHST tokens and three high rarity NFTs.
In addition, there will be AMA sessions with Aavegotchi: February 22 in Binance Russian chat, and February 23 in Binance Ukrainian chat. There will be a prize fund of $1,000 in GHST tokens, which will be distributed between the winners of the quiz and the authors of the best questions.
CryptoKitties is a popular game based on the decentralised Ethereum protocol that lets you buy, sell and breed virtual cats. It was launched and widely advertised back in 2017, but is still a cult project with NFT.
CryptoKitties was the first significant case focused specifically on entertainment and hosted on the second largest blockchain. There was a lot of excitement around it, with the project being accused of clogging up the network, making transactions expensive and slow at the time. At the moment, CryptoKitties is not just an entertainment project, but also a centre of serious cash investment, including from major investors.
In 2009, Enjin launched Enjin Network, a community gaming platform. Today, the number of users exceeds 20 million. In 2017, Enjin integrated blockchain and various blockchain-based products that made the game economy easier and better for users.
One of the company's upcoming projects is a marketplace for NFT assets
Instead of the established ERC-721 standard for NFT, a new standard, ERC-1155, has been developed. It is not just for gaming, but for a wide range of industries, from entertainment and finance to industrial design, artificial intelligence, real estate and more. The basic concept behind ERC-1155 is that a single smart contract can manage an infinite number of tokens. The contract can contain anything from weapons and clothing to health restoration potions, magic spells, skills, etc.
Where to buy and store NFT tokens
The assets are traded on open markets such as OpenSea. Many NFT project tokens have been added to the Binance exchange listing. A special feature of these markets is the decentralised connection of buyers and sellers. The value of tokens is formed based on supply and demand. All assets are categorised - e.g., Collections, Sports, Art, Domain Names, etc.
The Trust Wallet is excellent for storing NFTs of the ERC-721 and ERC-1155 standards. Each asset unit has its own blockchain address. As we recall, NFTs cannot be replicated (in other words, the contents of multiple copies of an object cannot be synchronised). Also, even the issuer itself cannot move the token from the wallet unless it has the owner's permission to do so.
NFTs general Cons & Pros
Compared to 2017, the NFT industry has grown significantly. Assets have begun to be issued by many large companies, including the US National Basketball Association or computer game developer Ubisoft, among others. The potential of irreplaceable tokens is actively expanding beyond games as well. In fact, they can be used wherever clear proof of ownership and unprecedented traceability are needed. While NFT still has a number of unresolved compatibility and scalability issues, these are temporary difficulties. Experts are convinced that this is a major growth sector for the blockchain industry.