Non-fungible token

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A non-fungible token (NFT) is a way of proving that a digital item is the only one of its kind in existence and therefore cannot be copied or reproduced without the owner's knowledge and consent.[1] They can be thought of as a digital certificate of authenticity. NFTs can be considered modern-day collectibles. They're bought and sold online, and represent a digital proof of ownership of any given item. NFTs are securely recorded on a blockchain.[2]

Technology[change | change source]

NFTs use the same blockchain technology used by cryptocurrencies like Bitcoin to keep a ledger, a permanent record of all tokens and who owns them. Each entry is unique. At the beginning NFT used standards ERC-721, which was the first standard for non-fungible digital assets.[3] ERC-1155 brought the idea of ​​semi-fungibility to the NFT world and also provides an extended feature set for ERC-721,[4] which means that an ERC-721 asset can be built using ERC-1155.[5]

Usage[change | change source]

They are used wherever virtual goods can be collected and traded as one-off objects. Examples are collectibles, digital art, music and individual virtual objects used in computer games.

They differ from fungible tokens used in cryptocurrencies, which are exactly the same as each other and, therefore, can be used as a way of doing trade just as if they were money.[6]

Criticism[change | change source]

NFTs are predicted to become a valuable source of income in the future. NFTs have been criticized for their high energy cost and high carbon footprint, mainly because of how these tokens complete blockchain transactions. Many people also criticize that NFTs can often be used for art scams.[7] The structure of NFTs attracts new investors, which allows them to exploit those who can invest on the same product later, an example of a Ponzi scheme.[8] People make lots of jokes about NFTs, most commonly "screenshotting" an NFT to get it for "free".

References[change | change source]

  1. "Non-fungible tokens aren't a harmless digital fad – they're a disaster for our planet | Adam Greenfield". the Guardian. 2021-05-29. Retrieved 2021-06-02.
  2. "Where's the Future of NFT Headed?". Retrieved 2021-10-12.{{cite web}}: CS1 maint: url-status (link)
  3. "EIP-721: Non-Fungible Token Standard". Ethereum Improvement Proposals. Retrieved 2022-02-25.
  4. "NFT Marketplace Software Development | NFT Development Services". Merkeleon. Retrieved 2022-02-25.
  5. "EIP-1155: Multi Token Standard". Ethereum Improvement Proposals. Retrieved 2022-02-25.
  6. Sharma, Rakesh. "Non-Fungible Token (NFT)". Investopedia. Retrieved 2021-06-02.{{cite web}}: CS1 maint: url-status (link)
  7. Genç, Ekin (October 5, 2021). "Investors Spent Millions on 'Evolved Apes' NFTs. Then They Got Scammed". Vice Media. Retrieved November 9, 2021.{{cite web}}: CS1 maint: url-status (link)
  8. Kelly, Jemima (5 January 2022). "Matt Damon's crypto ad is more than just cringeworthy". Financial Times. Retrieved 26 January 2022.