NFT (Non-Fungible Token)
What are NFTs and how do they work?
NFT is the terminology that stands for Non-Fungible Token which is a non-interchangeable data unit on blockchain. It is an Ethereum-based asset to represent anything unique and create more power for the content creators than ever before. The smart contracts on the Ethereum blockchain are to power the NFTs. Basically, NFTs are the tokens that represents the ownership of unique items and tokenize the things such as art, collectibles, real estate, etc. They are secured by Ethereum blockchain and have officially one owner at a time.
NFTs and Ethereum jointly solve many of the internet problems today. As everything is becoming digital, there need to replicate the properties of physical items such as uniqueness, proof of ownership, and scarcity. No two NFTs are the same but digitally unique and every NFT must have an owner that is a public record for anyone to verify. The content creators can sell their work anywhere and access the global market. They can also retain ownership rights over their own work, and claim resale royalties directly.
Some special properties of NFT
1. Each created or minted token has a unique identity linked to the Ethereum address directly.
2. NFTs are not interchangeable directly with other tokens 1:1.
3. Each token has an owner that can be verified easily.
4. NFTs are live on Ethereum for trading on any Ethereum-based market.
What is Ethereum?
To understand the concept of NFT at complete, it is important to know about Ethereum. Ethereum is the technology to home digital money, applications, and global payments. It is a blockchain-based platform that enables, creates secure digital ledgers and maintained publicly. Moreover, it is a decentralized blockchain with smart contract functionality. It delivers a fairer financial system that never discriminates and any user can send, receive, borrow, and fund money throughout the world just with an internet connection.
Relation between smart contracts and NFTs
A smart contract can be termed as a program that runs on the Ethereum blockchain. The code and data of the contract reside at a specific address on the Ethereum blockchain. NFTs are powered by smart contracts to handle the transfer and verification of the ownership. The NFT standards such as ERC-721 provide the functionalities for smart contracts.
NFTs are the way to represent anything unique by the help of smart contracts on the Ethereum blockchain. However, the minting done with the help of smart contract assigns NFT ownership and manage its transferability. On the creation and minting of NFT, the stored code is executed in smart contracts that conform to different standards such as ERC-721. This information becomes the part of the blockchain where NFTs could be managed.
In conclusion, proving an NFT is quite similar to proving an ETH in your account, and NFT based token is important to prove that the digital file is original. On the creation of NFT, one can easily prove that he is the creator, determine the scarcity, earn royalties, sell it on any NFT market or peer to peer. In conclusion, the creators couldn’t restricted to any platform and it also doesn’t requires any intermediary.