Written by the CoinEx Institution, this series of jocular and easy to understand articles will show you everything you need to know about major cryptocurrencies, making you fully prepared before jumping into crypto!
NFT is known as the Non-fungible Token. In the real world, everyone is unique and irreplaceable. So is this cryptocurrency. Before explaining the “non-fungible”, let’s first talk about what is “fungible”.
For example, you and I each have 100 dollars, and it makes no difference if we exchange the money with each other. For another example, we both buy a set of the latest Apple 12 from the official site, and no matter which one we receive, they are actually the same. The same is true for cryptocurrencies. I trade my Bitcoins for yours in the same amount, and there is still no difference. All of these we mentioned above are fungible.
Now let’s talk about the non-fungible.
Many things are non-fungible, such as collections and Van Gogh’s paintings, which are unique. Another example - CryptoKitties, because each of these tokens have a unique appearance and price. That is unlike such currencies as Bitcoin and American dollars but similar to NFT.
In fact, NFT’s fame was first credited to CryptoKitties in 2017. Each of CryptoKitties corresponds to an NFT token on the chain, and, with its own unique ID and gene, has a unique image and temperament. Its price has once peaked at hundreds of thousands of dollars, which unveiled an exciting prospect of being “unique” and “scarce”.
So what makes NFT unique? One of the most important reasons lies in ERC721 related to NFT, which endows each token with some unique data.
Indeed, the two most popular protocols for NFT at present are ERC1155 and ERC721.
Before introducing these two protocols, let’s talk about the well-known ERC20.
Ethereum is still the most prevailing platform for issuing tokens. Tokens issued on ERC20 are fungible because tokens issued in one contract are all the same.
However, ERC721 is a set of standards used to issue NFT, and the tokens are different from each other. ERC721 allows users to hold or trade NFT. The uniqueness of NFT is derived from the unique data that each token carries. For example, the token corresponding to each CryptoKitties is equipped with its DNA information.
ERC721 was originally created by CryptoKitties and is also the first standard for non-fungible tokens. It is an inheritable Solidity smart contract standard, and can be easily inherited from the OpenZeppelin library and used to program NFT-based projects.
At the same time, derived from CryptoKitties, ERC721 is the most familiar NFT standard for people who know about NFT. It defines metadata such as ID and NAME, and is easy to use for it has a protocol interface quite similar to that of ERC20.
Here is some information about ERC1155:
ERC1155 is an improved version of ERC721 proposed by Enjin. ERC721 has a fatal flaw that a contract can only issue one kind of NFT assets, and as a result, it is seldom used in games with diverse props. By contrast, ERC1155 can issue any kind of NFT in a contract, and has adjusted many settings of metadata. It was once accepted by the Ethereum team as the Ethereum token standard.
More generally speaking, NFT represents unique blockchain projects with blockchain management rights, for example, collections, game items, digital art, event tickets, domain names, and even ownership records of physical assets. Of course, NFT can also be simply considered a concept, so it can be issued in all blockchain projects, not just in Ethereum.
NFT has the following characteristics:
1. Standardization: NFT has some standardized functions that all non-fungible tokens have, including ownership and transfer. With this feature, any developer can build his own NFT.
2. Universality: NFT is universal. In other words, it can be used by any application that wants to use it. The blockchain is publicly accessible, so everyone can read the smart contract that deploys the NFT.
3. Liquidity: Encrypted assets have a huge liquidity market where people can easily exchange the assets for cash or other cryptocurrencies according to their needs. Therefore, NFT enjoys high liquidity.
4. Immutability: Blockchain is famous for its immutability. NFT is implemented through smart contracts, which makes NFT immutable as well, that is, users cannot change their NFT to other NFTs. Its ownership will be permanently recorded in the blockchain unless the user decides to transfer it to other users.
5. Programmability: NFT is realized through smart contracts. NFT tokens can be enhanced to contain other complex functions.
Before we finish this article, let’s discuss the use of NFT. What practical use does the popular NFT have?
The most obvious one is digital collectibles. For example, a token of CryptoKitties, a piece of equipment in a large game, or a piece of an art. NFT can correspond to all unique digital collections, and guarantee the permanent ownership of the collections.
Another example is the ownership of various certificates or physical assets. NFT can identify the only certificate issued to individuals or digitize physical assets. Physical assets such as cars and houses can be reflected in NFT and correspond to individuals.
The world of cryptocurrency is embracing more and more NFT projects with distinct functions. Beyond doubt, NFT heralds another boom in this field. Young as it may be, NFT boasts infinite possibilities.
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