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What Do You Know About Non-Fungible Tokens And How Do They Work?

If you are actively involved and spending time on Twitter, Instagram, YouTube, LinkedIn, then you would have heard something called NFT (Non-Fungible Tokens). Non-Fungible is made of two keywords, i.e., non-fungible and tokens. Let’s start with non-fungible. If you need to express it, then, to replace the word fungible, you should use the word replaceable. This means non-replaceable. Now, if you take the example of a book, you know that there are millions of copies. This is because the book has been produced several times. Naturally, every copy of the book is the same, which means you procure a book from any online store or e-commerce website on a particular day. After that, if you visit an offline bookseller and get another duplicate copy on day 16, then you will notice no such difference between these two copies. 

This is because you have paid the exact amount in both places, which is why you have got similar articles, which means the book can be replaceable. So, you replace any article with another thing at any point in time, making it an asset that can be easily replaceable. 

However, the same particular book can be made unique. For instance, if you have highlighted multiple things in the book with a pen, you may mark many scribbles done on the book, which means that the particular copy you have owned is not replaceable. No one can buy this particular copy anywhere in the world, and this is because the book contains your notes, highlights, and scribbles, which makes it non-replaceable. This thing has become the only piece of its kind. And now you can use this theory for anything. You can think of a car or bike like mass-produced cars. 

What Is A Token?

The word token reminds us of something that can be exchanged to procure any goods, and the token is just another term for currency. You may have once in your life purchased a thing in exchange for a ticket. It is quite surprising how a token can help you to avail any product you like. Now the receipt sits on Blockchain technology. 

So, let’s try to know what blockchain technology is. Suppose if anyone buys something from you, allows retake the example of a book. Assume that the value is 100 dollars. You open the payment option in your smartphone, insert your pin and the transaction is done smoothly. The whole process may look simple from the outside, but multiple things are going on in the background. Just when you scanned the QR code and inserted your pin for paying the required amount, and at that very second, your bank confirmed whether you have 100 dollars or not. 

After confirming the amount, your bank approves the transaction. When the transaction is approved, those 100 dollars were transferred to your bank, and the bank registers that you have received 100 dollars from someone, and this whole transaction is recorded. However, all this process is happening at the bank level. This is known as banking in a centralized way. Secondly, your copy of the money is available in an unlimited quantity. The government can print the money you have as many times. But the truth is that the value of your money can get low at any given point in time because a large quantity of money is being printed, or just as it happened during the demonetization. 

What Do You Know About Blockchain Technology?

During the demonetization in India, the note itself was rejected or invalid, as somebody decided to stop it. And this is known as centralization. It is good because someone is creating all the rules and regulations, but it is not so good that one specific person has a lot of power. In 2009, this centralized system could be transformed into a decentralized world. This means when a buyer gives a 100 dollar to a seller to buy a particular article, this thing can be recorded publicly. This means the currency you paid is not under the jurisdiction of any financial institution but is owned publicly. And this whole process of decentralized transactions is known as blockchain technology. So, when you give 100, actually not rupees but 100 tokens, then someone first has to check whether the buyers have 100 tokens or not, and this someone is not a single person or an institution; it is the entire public.

How much is NFT safe?

In this process, hundreds of computers are involved across the world, and they are working simultaneously and checking whether the buyer has 100 tokens or not. The transaction will be disproved and approved based on the number of tokens you have in your account, and the transaction will be recorded permanently and cannot be erased forever. This transaction cannot be manipulated or edited by anyone.

How Is Blockchain Technology Associated With NFT?

Now let’s come to the example of the book again. The book you have owned is unique because you have done your editing job, including your highlights, notes, scribbles, and much more, and this is why you have only one of these kinds. Suppose you want to sell this particular book. Let’s say you would sell it for 100 dollars. If someone has to own this book, there has to be a way to prove that you have acknowledged this. This is a physical entity, but what if it was a painting, poster, movie clip, or song. So how do you prove the ownership of those unique digital assets? Now, this is done by creating NFT.

NFT is an excellent way to hand over the ownership of a digital entity so that your request will always be documented and it will be proven. And this record cannot be erased or edited. Now someone can say that digital assets are readily available on the internet and can be easily downloadable, so why does it even matter? You are, to some extent, right and wrong as well. This is because there is an original and fake article. There is an original poster of some famous film poster, and now its digital copy is available on the internet. And someone like a director, artist, or producer is the owner right now, and they are planning to sell it. When you purchase it, it drives the most basic human psychology element of scarcity.

When something is rare, then people wish to avail it even more. It is convenient to prove to the public that you possess something that someone may have duplicated several times but would never be its valid owner. In layman’s terms, the more times the asset will be duplicated, the higher the value of the original digital assets. 

Should You Invest In NFT Or Not?

Many people think that NFT is an excellent way to invest, but some people suggest that it is an early move and too risky. So, you should only invest in NFT after knowing the entire concept of digital assets NFT investing. Dealing with NFT is something you should try once. It is a new world and technology. If you find it interesting to become an active participant in such technology, you may give it a shot. 

You can try to sell an NFT, especially if you are an artist, or a digital maker, not for the sake of money but to gather experiences. But before proceeding, you should understand the concept of NFT. This is because blockchain technology will bring a revolutionization in the lifestyle of humans. Through blockchain technology, you record the ownership without any problem. There will be no doubt of the ownership of a house or any property in the distant future. There will be no chaos over the fact whether you have received a genuine degree from a particular college or not. All this dispute will vanish away because technology has a concrete solution through which you can outline your contract forever and ever. In short, NFT is built on the concept of blockchain technology. 

What Are They Used For?

Blockchain technology and NFT help to allow artists to sell their belongings to others through a hassle-free process. For instance, digital content makers do not have to count on galleries, museums, or auctions to sell their work. Instead, they can sell their art to the customer directly, allowing them to enjoy more profits. Moreover, the original content creator can claim royalties that authorized them to get a specific part of the sales whenever their work is sold to a new client. It is a fantastic feature as the original content creator has not undergone any future proceedings to claim the profit.

The above information talks about the concept of NFT and how it is related to blockchain technology. If you gather more information on such innovative technology, then you can bookmark this page. Before investing in NFT you can take the suggestion of an expert who has already invested in such technology. 

Am Content Writer at Newswire Club, Here am sharing my ideas about blogging, business latest trends and tips.

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