Getting to Know Non-Fungible Tokens (NFT)
First of all, let's look at the keyword of the NFT name itself, "Non Fungible" which comes from two words, "Fungibility" and "Token".
Functionality is the ability of an asset to be exchanged for similar assets of the same value. For example, you exchange a Rp 100 thousand banknote with two Rp 50 thousand banknotes, which means the value is still the same. Furthermore, tokens are digital assets that can represent goods, services and forms of value.
NFTs are digital assets that act as proof of ownership of goods and can be purchased with cryptocurrencies. An NFT is a digital asset that represents a valuable item with a value that cannot be replaced or exchanged.
NFT transactions are recorded in a data set on the blockchain. This data contains information about the creator, price and ownership history of NFT. Most NFT investments are traded using ether or ETH which are Ethereum-made coins.
NFT itself became popular in 2017, when the NFT game, Crypto Kitties, was first launched. Crypto Kitties is a game based on the Ethereum blockchain where players can adopt, raise and trade virtual cats. Finally, NFT began to experience rapid development at the end of January 2021.
NFT is a new era as a digital collection medium where it can be used as a new way to support artists such as artists, athletes and musicians without having to go through third party intermediaries. However, the popularity of NFT today is still very limited to the arts, hobbies and entertainment industries.
Judging from its essence, this NFT is a growing asset from cryptocurrency. However, NFT has a different purpose, form and way of use from other crypto assets that also use blockchain technology such as Bitcoin.
NFTs are usually created with the same programming as cryptocurrencies such as Ethereum or Bitcoin. But the similarities between the two end there. The nature of physical money and other cryptocurrencies apart from NFTs has a commensurate value.
This means that other crypto assets such as Bitcoin and physical money have the same exchange rate and can be traded. An example is money worth Rp. 100 thousand will always be worth Rp. 100 thousand, the same as 1 Bitcoin which is worth 1 Bitcoin. These similarities make crypto assets a trusted tool for conducting transactions on the blockchain.
In contrast to NFT which does not have the same value. Each NFT has a digital signature that cannot be exchanged or equivalent to other NFTs. This means that one NFT clip will not have the same value as another NFT even if they are both NFTs.
Each NFT is created only once and cannot be exchanged or traded with other NFTs because they do not have an equivalent or equivalent value. NFT has unique data that works like a fingerprint, where it is easier for the system to verify ownership.
Ownership of the NFT itself is absolute. Anyone who currently owns these assets has full ownership rights. Please note that NFT cannot be divided into smaller denominations like other crypto assets.
As a digital asset, of course, NFT has its own uniqueness. Even many observers of the crypto world see the great potential of NFT assets to be used in many sectors. The following is an example of the use of NFT assets in several sectors.
1. Artwork Industry Sector
NFT provides the security required by works published online. The content of the work can be freely distributed and claimed easily if published without security, causing harm to the creator.
Meanwhile, NFT and blockchain technology provide guarantees to artists for ownership of their work. This technology is a very useful innovation for digital artists who find it difficult to fight plagiarism.
In NFT there is a smart contract system, where the artist can write a royalty percentage every time the work changes hands. Works that are NFT assets can be sold for up to very high numbers.
2. Hobby and Entertainment Sector
As previously mentioned, the first NFT, Crypto Kitties, where you can collect virtual cats, is an NFT marketplace for entertainment and hobbies. In fact, the NFT market is dominated by goods that are intended to be collected.
Items like these virtual cats from Crypto Kitties and avatars from CryptoPunks can cost up to millions of dollars. Another entertainment sector is the gaming market based on NFT and blockchain.
Many people play NFT games like Crypto Kitties or Axie Infinity to earn tokens that can be exchanged for other assets. Some people also think that NFT games are an investment that can be used to finance their lives.
3. Business Sector
In the business sector, NFTs can be linked to physical assets such as property certifications, assets and licenses. Users can store physical ownership certificates securely on the blockchain with an easy and fast verification process without having to worry about certificates being lost or stolen.
Another example is Nike which patented the Crypto Kicks authentic system in 2019. Owners of Crypto Kicks can combine several digital shoe designs that are used to create a new pair of shoes that can be purchased in physical form.