Non-fungible tokens (NFTs) are unique assets that range from an image or video to audio and game assets. However, unlike banknotes, these cannot be exchanged or replaced with a another item.
Abhay Aggarwal, Founder and CEO of Colexion, while chatting with Mumbai Live, explained more about them and said, “Their uniqueness comes from the fact that they are backed by blockchain technology and a cryptographic code is assigned to them. Blockchain technology makes it impossible for someone to hack into the database and tamper with data or transfer ownership without permission from the owner.
Aggarwal breaks down the much talked about concept for the everyday citizen and brings this guide to NFTs.
What are NFTs?
NFTs allow us to symbolize art, collectibles, and even real estate. Ownership data is recorded on an immutable ledger on the blockchain and cannot be changed. NFTs can be stored and accessed through a digital or hardware wallet. Users can use this wallet to hold, receive and purchase NFTs. The security of digital or online wallets relies on a long password or seed phrase. It is the private key that authorizes the transaction.
How do NFTs work?
Since blockchains are publicly distributed and immutable, all NFTs can be stored transparently, allowing anyone to verify the authenticity of any NFT at any time.
Each time an NFT is transferred or created, the action is recorded on the blockchain and timestamped, so it can be traced back to its origin, making it easier to verify the authenticity of your NFT.
How to buy NFTs?
One can buy NFTs on different NFT markets. Most marketplaces currently use the Ethereum network to power their transactions. Before buying, you must first set up a crypto wallet. After opening the wallet, you will need to send the ether you purchased from the exchange to the wallet address.
The next step is to choose the market in which you want to buy your NFT. The next step is to create an account in the market that you want to continue with. Once registered, you can now connect your wallet to the market and browse different NFT options. Choose an NFT of your liking. After successfully selecting, you need to complete the transaction and the necessary amount will be debited from your wallet. You may also have to pay market transaction fees which vary from platform to platform.
Why are NFTs popular?
From ownership of digital assets to providing various monetary benefits, NFTs have shaped how digital assets are used and distributed. This makes NFTs potentially useful in any industry that distributes information or digital assets and can also serve as an investment opportunity since some NFTs increase in value over time.
Since NFTs are based on smart contracts, ownership transfers become easy by integrating the use of smart contracts. Transfers of ownership can be made once the specific terms of the smart contracts are met. Additionally, NFTs bring content creators from all fields together into a single ecosystem, providing new avenues for growth and development.
What are the roles of NFTs in the Metaverse?
NFTs work in the metaverse the same way real world elements do in the real world, every metaverse effort, whether gaming or business, should blend the two. In the metaverse, NFTs are useful in a variety of ways, from owning assets to powering interoperable blockchain games.
The viability of NFTs in blockchain games is the main reason for their popularity in the Metaverse. Complementing the virtual environment, interoperable games accelerate the development of Metaverse gaming. NFTs also play the following roles in the Metaverse:
- Through NFTs, Metaverse gives users access to their digital avatars, each avatar is tokenized to establish character ownership.
- The NFT ticketing system is used to distribute tickets to the intended audience during Metaverse events such as music concerts and live events.
- The buying and selling of in-game collectibles and accessories is done using the NFT system, which provides ownership and transfers ownership to the secondary market for exchange.