What is NFT? Everything you need to know about non-convertible tokens


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What is NFT?  Everything you need to know about non-convertible tokensNFT stands for Non-Processing Label. NFT opens a new level of control for content creators, especially in the world of digital art and collection. As assets of a certain value, NFTs can be used in an increasingly decentralized financial (DeFi) space, combining two aspects of a new avalanche-favored blockchain ecosystem.

In the article you will learn, among other things:

NFT – What is a non-convertible token and how does it work?

Simply put, the NFT blockchain is a type of cryptocurrency token that operates on the basis of smart contracts. This is usually an Ethereum blockchain, although others are acceptable. The concept was created in 2015 and the first NFT projects were commissioned in 2017 in the ERC 20 standard, and several other projects were created over the next two years. NFTs are currently developed on the ERC-721 protocol in the Ethereum blockchain due to their uniqueness, which is not provided by ERC 20 tokens.

The non-convertible token gained popularity in 2020, attracting the attention of major media outlets and investors outside the blockchain technology enthusiasts group.

NFTs are different from cryptocurrencies such as Bitcoin (BTC), Ether (ETH) and Cardano (ADA), which act as digital coins. NFTs are symbols that represent a digital or physical asset – such as a work of art, music, or even potential real estate – and contain additional information that a cryptocurrency cannot contain. NFT can be used to verify the authenticity of works of art and other collections.

The NFT token is also a currency unit. A non-convertible token is a token that cannot be exchanged for anything else. To clarify: the banknote can be exchanged in the sense that it can be exchanged for other banknotes of the same value, and the ticket is not convertible, because it contains unique information and can not be used instead of another passenger’s ticket. NFT works in a similar way, it is a unique sign used for distribution and property verification through blockchain.

How to use NFT?

Now consider the use of NFT. NFT projects are used as a tool to sell exclusive items online and can be potentially used to test anything that may be valuable in your proof of ownership. See the chart below for examples:

Even tweets can be sold as NFT. An example of this is Jack Dorsey, the co-founder of Twitter, who posted his first tweet for sale in March 2021 for $ 2.5 million, converting the proceeds into Bitcoin and donating it to charity.

XTB

capital.com

NFT and decentralized finance

NFTs have great potential for use in the rapidly expanding world of decentralized finance (DeFi). For example, they can be used to represent works of art, real estate or other valuable assets as collateral for loans or as financial contracts for insurance, stock options or bonds that can be sold as a product in secondary markets. They can also be used as control marks for NFT markets.

Although NFTs have existed in the world of cryptocurrencies for several years, it is likely that the development of DeFi will make them more attractive as digital assets with a wide range of applications.

So what is the meaning of NFT?

Adoption of NFT could change the future of the music industry, which is struggling to make money from content in times of declining flows and physical sales. As a digital rights management platform, RAIR sees the potential of musicians to use NFT to license and distribute their content. The use of smart contracts in Blockchain will allow artists to earn royalties after each distribution of their work.

Please note that the transfer of ownership of NFT does not transfer the trademark or copyright to the owner. In addition, the creator can submit several versions of each song, each with its own NFT, so the technology does not impose any additional restrictions on it.

NFTs are attractive to investors because, like any other value asset, they can be bought and sold profitably in the NFT market if their value increases. Institutional funds take advantage of this opportunity, and cryptocurrency investment firms acquire digital collections to create value for their clients.

NFTs are just entering the market, but they have great potential for application in the digital economy. Their popularity exploded in late 2020 as cryptocurrency prices rose to new heights.

An analysis by NonFungible.com shows that total oil sales, including sales and financial transactions of 2020, increased by 299 percent from $ 62.9 million in 2019 to $ 250.8 million. The number of active portfolios has almost doubled compared to 112,731 in 2018, reaching 222,179.

Analysts expect the trend to continue, as more and more artists and brands use NFT to bypass traditional sales routes and make money directly from buyers of their products.

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