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You may have heard about NFT tokens or non-fungible tokens. Today we will tell you all about them. These tokens are the solution that allows us to create objects on the blockchain with unique, indivisible and unrepeatable qualities.
These tokens, in a nutshell are special cryptographic tokens that are responsible for representing something unique. They are not exchangeable unlike other cryptocurrencies such as Bitcoin and most fungible tokens.
As I said, NFT tokens are unique, transferable, indivisible and have the ability to prove their shortage. Therefore, one of their main functions is to create provable digital scarcity. They can provide a digital property and enable cross-platform file operability.
History of NFT Tokens
Most users think that the origin of NFT tokens began with the creation of Ethereum, however its origin is in Bitcoin. This is because during the years 2012 and 2013 in Bitcoin began the development of Colored Coins. This was a special type of token that offered the possibility to use BTC coins and the network to represent other assets, unique objects or tokens.
The creator of this idea was Yoni Assia and it all started with the presentation of a paper where he explained his idea. As a result of this presentation, projects such as OmniLayer, Bisq, CounterParty and RSK among others were born. With this, the first NFT token known as Rare Pepe was born. It is worth noting that this token is still active today in the CounterParty and Bitcoin network, accumulating its value.
However, not everything is idealized. The Bitcoin programming language known as Bitcoin Script is not configured for tasks such as NFT tokens. This causes designing highly interactive NFT platforms to become challenging. This is where Ethereum’s role in its development comes in.
Thanks to Ethereum’s ability to make smart contracts it is possible to create more complex NFTs. Because of this feature Ethereum managed to become the largest NFT platform in the entire crypto network. They are expected to get even better with the use of ERC-20 and ERC-1155 standards. These allow creating much more powerful NFT tokens easily through a shared standard and highly integrable to various services.
Ethereum and Bitcoin are not the only platforms capable of creating NFT tokens, as blockchains such as TRON, Solana, Tezos and EOS also have this capability.
How does an NFT token work?
NFT tokens do not have a fixed operation, as this may vary depending on the platform where they are executed. It all depends on the blockchain, since each one has capabilities that condition the tokens in one way or another.
To see it more clearly, let’s take the example of the Ethereum network. The NFTs of this network present differences with respect to the NFTs of other networks such as TRON at the internal level. These differences are not very noticeable, as they are mostly small adjustments to ensure the compatibility of smart contracts with the structure of the blockchain where they are executed.
Otherwise, the tokens follow a certain functioning dictated by some parameters, rather standards that follow the structure of ERC-721 and ERC-1155. After the creation of these two standards Ethereum developed tools that make it easier to develop NFT platforms.
This is achieved by providing both standard smart contracts with certain functions that every NFT needs for its control and development. Therefore, all ERC-721 and ERC-1155 can create, modify, transfer or destroy NFTs.
Use of NFT tokens
The uses of NFT tokens are countless. Currently many of them are used in game development or for digital collections. Yes, they are collectible. Many are interested in their rarity and have a high value to their owners.
Over time, the gaming industry has become more and more interested in this field. To understand it better, if we investigate about some Role Play Game we may be making use of NFT tokens for the representation of objects within the game. The idea is that such objects are extremely rare or unique in the game, as this makes it more valuable to the player.
The best thing is that the games of this class have a market where we can exchange these objects. Thanks to this capability, an in-game economy can be created with valuable objects. This would be the real application of these tokens in the gaming industry. Thanks to this, the game developer company could earn large amounts of money.
Regarding collectibles we can talk about chromes, paintings, curious images and even memes. All these collectibles can be represented by an NFT and can be worth millions of dollars. They can be traded or sold in markets that offer these transactions.