Blockchain is one of the most quickly growing technologies in recent years. Initially developed for validating cryptocurrency transactions, the technology evolved into numerous networks that serve different purposes from all sectors. Today, these solutions are useful not only in money transfers and the banking sector. They serve as development networks for unique projects.
The industry of digital art doesn’t stand aside from the growing adaption of decentralized solutions. Today, we can see numerous pieces of art developed on blockchain capabilities, which are commonly referred to as non-fungible tokens. Let’s learn more about this new paradigm in digital assets.
Key Concepts Explained
A non-fungible token, NFT, is an innovative form of virtual asset that utilizes the capabilities of a decentralized chain. Despite the fact that these are virtual assets, their nature differs from the one represented in crypto coins. Crypto coins are fungible, meaning the creation of new units is regulated by the algorithms.
Different tokens can be considered pieces of digital art, which is why there are no reasonable factors to determine their values. In simple words, if somebody really wants to buy a unique digital picture for a big amount of money, no market conditions will stop them from doing this.
Non-fungible tokens are represented not only in the form of digital images. You can find video and audio NFTs as well, or create your own ones and sell them on special marketplaces or auctions.
What makes many users hesitant about NFTs is that they don’t understand how they can own something if it’s not their physical property. Here is the point when blockchain enters. Due to the fact that NFTs are developed on blockchains, each ownership of a specific token is recorded and stored in blocks forever, regardless of how many times it will be sold to other users. This approach helps to ensure the authenticity of digital artworks, which accelerates their value growth.
Benefits of the Format
- A new form of Intellectual Property: Thanks to the integration of blockchain, ownership of the virtual piece of art is easy to track and record. This makes NFTs one of the most reliable forms of intellectual property.
- Collectibles: Similar to physical works of art, NFTs can form personal collections. This opens a lot of new opportunities for creators. Artists can easily reach a wide audience and sell their intellectual property via special NFT marketplaces or at auctions where some digital works of art are worth thousands of dollars.
- Representing Real-Life Assets: Modern enterprises can distribute their real-life products to investors in digital form. This enables a secure record of ownership and seamless access to their digital property.
- Decentralized Apps: They are frequently used as in-app assets for different purposes. For example, in games, rewards and in-game goods can be represented in the form of valuable collectibles. This innovation makes games and other decentralized applications more inviting and user-friendly.
- Decentralization Opportunities: Non-fungible tokens can be used to distribute voting rights within decentralized organizations. This can facilitate efficient decision-making within those organizations boosting their overall productivity.
Types of NFTs
The classification of non-fungible tokens heavily depends on the purpose of creation and use. Below, we’ve revealed some key features of the most frequently used types of NFTs:
- PFP NFTs: These are Profile-Picture tokens that are used as avatars in social media. Understanding PFP NFTs is important to users who want to participate in promotional campaigns for their NFT projects. For this, they might be rewarded with other collectibles of unique rights within the community. All this depends on the project’s policies and goals.
- One-of-one artworks: This type of NFT is for real digital art creators. Usually, one-of-one NFTs are the most valuable in marketplaces. The reason is quite prosaic — they are unique. This uniqueness is expressed in the fact that one-of-one NFTs are assets that have a single edition without any changes in the token’s ID. So, if we talk about real art in the digital form, we mean one-of-one NFTs.
- Collectibles: This type of NFT became especially popular among celebrities and sports clubs. In a nutshell, they create their unique NFT collections through which their fans and followers can support them and get special rewards. This showcases that in recent years collectibles have become great and efficient means of social networking and communication.
Key Findings
To sum it up, here are our key findings about this new paradigm in digital assets:
- Similar to cryptos, NFTs are digital assets but they are created differently and are used for different purposes.
- NFTs are effective means of decentralization.
- The growing popularity of NFTs contributes to the growth of the digital art sector.
- PFP, collectibles, and one-of-one tokens are the most popular types of NFTs.
We hope that with this quick guide, you now understand more about this promising concept and its future prospects!
