What is NFT? Why NFT is an indispensable part of Crypto

Non-Fungible Tokens are completely digital assets or tokenized versions of real-world assets. Unlike traditional tokens, each Non-Fungible Token carries a unique characteristic that cannot be replaced by any other token. This property makes Non-Fungible Tokens an ideal tool for verifying ownership and authenticity of digital assets such as art, music, videos, game items, virtual real estate, and even digitized credentials.

Owning Non-Fungible Tokens is not just about collecting, but is also considered a new form of asset investment in the Web3 era – where digital value is increasingly closely linked to real assets. Join Allinstation in exploring Non-Fungible Tokens more deeply in the following article!

What is a Non-Fungible Token? Origin and Operation Method of Non-Fungible Tokens

Non-Fungible Token (NFT) is an encrypted token operating on blockchain, representing ownership of a unique, irreplaceable asset. Non-Fungible Tokens can represent digital assets (such as artwork, music, videos, game items) or digitized physical assets (such as real estate, credentials, documents).

Unlike fungible tokens (for example Bitcoin or ETH, which can be exchanged 1-1 with each other), each Non-Fungible Token is unique due to a specific identification code and accompanying metadata.

Origin and Name of Non-Fungible Tokens

The term "Non-Fungible Token" emphasizes the non-replaceable nature of Non-Fungible Tokens. The concept of non-replaceable digital assets first appeared in 2014 when Kevin McCoy minted the first Non-Fungible Token named "Quantum", a dynamic digital artwork, marking the beginning of the era of digitally owned assets verified on blockchain.

Initially, Non-Fungible Tokens were only known by the artist community and technology enthusiasts, but in 2017 with the CryptoKitties wave on Ethereum, Non-Fungible Tokens truly exploded in global recognition

How are Non-Fungible Tokens Created?

The process of creating Non-Fungible Tokens (also called minting) includes these steps:

• Convert artwork, audio, video, or any digital content into a digital file.
• Upload this content to blockchain through a smart contract, attaching an identification code and metadata.
• Uniquely identify the Non-Fungible Token, ensuring that each asset is unique, uneditable, and unforgeable.

Popular blockchains currently supporting Non-Fungible Tokens include: Ethereum (ERC-721, ERC-1155), BNB Smart Chain (BEP-721, BEP-1155), Polygon, Solana, and ImmutableX,…

Operation Method of Non-Fungible Tokens

Non-Fungible Tokens operate on blockchain platforms with 3 main features:

• Ownership Verification: Each Non-Fungible Token stores the wallet address of the current owner.
• Cannot be Copied: Because data is stored on blockchain, Non-Fungible Tokens are nearly impossible to forge.
• Open Trading: Users can buy, sell, or exchange Non-Fungible Tokens on marketplaces like OpenSea, Magic Eden, Rarible, Binance NFT Marketplace…

The value of Non-Fungible Tokens is determined by factors such as: rarity, cultural value, accompanying story, application potential, and market demand.

Classification of Notable Non-Fungible Tokens

Widespread interest in non-replaceable tokens has led to an explosion in the field of encrypted collectibles and Non-Fungible Token art. Non-Fungible Tokens are divided into 8 types (according to Binance) specifically:

Art Non-Fungible Tokens

This product is created when artists digitize and monetize their artwork on blockchain. The value of these art tokens comes from two main factors: the ability to digitally verify authenticity and prove ownership of a specific digital asset.

Collectible Non-Fungible Tokens

These are unique digital assets minted on blockchain that users can collect or trade. Some special collection tokens are limited editions and may be sought after by special collectors. These products are pursued for their rarity and the appeal of the theme, celebrity, or collection value that the owner wants the token to represent.

Music Non-Fungible Tokens

Similar to image or video files, Music Non-Fungible Tokens are created when you attach music or sound to a token. This token is a certificate of ownership for a unique sound or musical work that can be bought or sold.

Non-Fungible Token Video

Non-Fungible Token video is a digital asset in the form of moving images. This product is becoming increasingly popular due to the ability to own digital assets like videos and unique experiences from favorite creators, connecting with these creators, and even personal preferences and collections.

Non-Fungible Token Avatar

Non-Fungible Token avatar is an image of a "head and face" of a character in a digital profile format. No avatar is like another, and all are created by an algorithm with different characteristics. These tokens can be used to promote community awareness, represent digital status, and even serve as tickets to exclusive metaverse events.

Non-Fungible Token Game

Non-Fungible Token game differs from holding encrypted collectible items in a wallet. Encrypted items in the game will be used in player interaction rules, mechanisms, and activities. For example, a game might offer a rare in-game skin as a Non-Fungible Token, and the player who unlocks this skin first will have ownership of the skin.

This type of asset is becoming increasingly popular among gamers who are already familiar with the concept of valuable digital items.

Non-Fungible Token Trading Card

Tokens created from trading cards can be used as virtual versions of physical trading cards. The appeal of Non-Fungible Token trading cards may be due to the following factors: easy verification, especially when rarity is a decisive value factor, long-term ownership on the blockchain, and rare card types as an investment form.

Non-Fungible Token Meme

A phenomenon called the "meme gold rush," meme Non-Fungible Tokens can be a new way for meme creators to monetize their memes. The value of these memes will depend heavily on the meme's spread, uniqueness, and the originality of the digital asset.

Why are Non-Fungible Tokens popular and loved?

Non-Fungible Tokens are not just digital assets that can be owned, but also open up many practical opportunities:

• Artists can sell their works directly to fans without intermediaries.
• Investors seek profit opportunities from trading unique digital assets. Gamers own and trade game items freely.
• Organizations use Non-Fungible Tokens to issue event tickets, certificates, virtual real estate...

Non-Fungible Tokens are leading the way in transforming how we define ownership in the digital world, contributing to the decentralized Creator Economy of Web3.