What are Non Fungible Tokens (NFTs)?

Marloes Vermeulen 05 May. 2022, 16:15
What are Non Fungible Tokens (NFTs)?

 NFTs (Non Fungible Tokens) are one of the most important building blocks of a new, blockchain-driven digital economy. Several projects such as the Decenda Network are experimenting with NFTs for different usage scenarios, such as online content, gaming, digital identity verification, licensing, certificates and visual arts.

An NFT is a cryptographic token on a blockchain that represents a unique asset. These can be fully digital assets or tokenised versions of real-world assets. Because NFTs are not interchangeable, they can serve as proof of authenticity and ownership within the digital world.

Where lies the value of an NFT?

But how can such things have value? As with any other valuable item, value is not inherent in the object itself, but is assigned by people who deem it valuable. Value is essentially a shared belief. It does not matter whether it is fiat money, precious metals or even a vehicle - these things have value because people believe they do. This is how every valuable item becomes valuable, so why not digital collectibles?

While virtual worlds are already thriving, another exciting use of NFTs is the tokenisation of real-world assets. These NFTs can represent fractions of real assets that can be stored and traded as tokens on a blockchain. This could introduce some much-needed liquidity to many markets that otherwise wouldn't have much, such as fine art, real estate, rare collectibles and more.

Projects that already use NFTs

Many different projects are already using NFTs as collection and exchange items. Examples are Decentraland a decentralised virtual reality world where players can own and exchange pieces of virtual land and other in-game NFT items, My Crypto Heroes and Gods Unchained.

Digital collectibles open up blockchain technology to entirely new avenues, beyond conventional financial applications. By representing physical assets in the digital world, NFTs have the potential to be an essential part of not only the blockchain ecosystem, but also the wider economy. Although these forms are still very limited, we at Decenda strongly believe in this new technology.

The usage scenarios are vast, and it is quite likely that many developers will come up with new and exciting innovations for this promising technology.

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