Non-fungible tokens (NFT) are one-of-a-kind assets that range from a picture or a video to audio and in-game assets. However, unlike banknotes, these cannot be exchanged or replaced with another item.
Abhay Aggarwal, Founder & CEO of Colexion while talking to Mumbai Live elaborated further on them and said, “Their uniqueness comes from the fact that they are backed by blockchain technology and have a cryptographic code assigned to them. Blockchain technology makes it impossible for someone to hack the database and tamper with the data or transfer the ownership without the owner’s permission.”
Aggarwal breaks down the much spoke about the concept for the common citizen and brings this guide to NFTs.
What are NFTs?
NFTs allow us to tokenize art, collectables and even real estate. The ownership data is recorded on an immutable ledger on blockchain and cannot be modified. NFTs can be stored and accessed via a digital or hardware wallet. Users can use this wallet to hold, receive, and buy NFTs. The security of digital or online wallets relies on a lengthy password or seed phrase. It is the private key that authorizes the transaction.
How do NFTs work?
Since blockchains are publicly distributed and immutable, all NFTs can be stored transparently, allowing anyone to verify any NFT’s authenticity at any time.
Whenever an NFT is transferred or created, the action is recorded on the blockchain and timestamped, so it is possible to trace it back to its origin, which makes it easy to verify the authenticity of your NFT.
How can one buy NFTs?
One can buy NFTs from different NFT marketplaces. Most marketplaces currently use the Ethereum network to power their transactions. Before buying, you first need to set up a crypto wallet. After opening the wallet, you will need to send the ether you bought from the exchange to the wallet’s address.
The next step is to choose the marketplace you wish to buy your NFT from. The next step is to register an account with the marketplace you wish to proceed with. Once you register, now you can connect your wallet to the marketplace and browse different NFT options. Choose an NFT of your liking. After successfully selecting, you need to complete the transaction and the necessary amount will be debited from your wallet. You may also have to pay a transaction fee to the marketplace that varies from one platform to another.
Why are NFTs popular?
From providing ownership of digital assets to providing various monetary benefits, NFTs have shaped the way how digital assets are used and distributed. This makes NFTs potentially useful in any industry that distributes digital information or assets and can also serve as an investment opportunity since some NFTs increase in value over time.
Since NFTs are based on smart contracts, ownership transfers become easy by incorporating the use of smart contracts. Ownership transfers can be completed upon fulfilment of specific conditions in smart contracts. Moreover, NFTs bring content creators from all fields into one ecosystem, providing new avenues for growth and development.
What are the roles of NFTs in the Metaverse?
NFTs function in the Metaverse in the same way that real-world items do in the real world, every Metaverse endeavour, whether gaming or business, must mix the two. In the Metaverse, NFTs are useful in a variety of ways from providing asset ownership to powering interoperable blockchain games.
The viability of NFTs in blockchain games is the primary reason for their popularity in the Metaverse. By complementing the virtual environment, interoperable games accelerate the development of gaming Metaverses. NFTs also play the following roles in the Metaverse:
- Through NFTs, Metaverse gives users access to their digital avatars, every avatar is tokenized to establish ownership of the character.
- NFT ticketing system is used to distribute tickets to the intended audiences at Metaverse events such as music concerts and live events.
- Buying and selling in-game collectables and accessories are accomplished using the NFT system, which provides ownership and transfers ownership to the secondary market for trading.