In today’s world, Blockchain technology is one of the great technologies that is expanding drastically.
Every entrepreneur and the business owner uses blockchain technology in the form of cryptocurrency, NFTs, tokens, and mining.
They provide platforms where platform owners and individuals both can make money.
Non-fungible Tokens (NFTs) are one of the faster-growing sectors in Blockchain technology.
Every individual can make money from NFTs.
If you are looking for the best guide on Non-Fungible Tokens (NFTs) to take your knowledge to the next level. Then this blog is for you
Here, What You Will Learn
- All about Non-fungible Tokens (NFTs)
- The working of NFTs
- Pros and cons of NFTs
What are Non-Fungible Tokens (NFTs)?
NFTs mean non-fungible tokens, which means they are unique and cannot be interchanged with any other asset. NFT is a Blockchain-based technology that helps to prove the ownership and authenticity of unique assets.
But NFTs are not fungible or divisible. Also, We can’t send a small part of NFT.
Blockchain uses smart contracts to transfer the ownership of the Token. All the transactions are transparent and highly secure.
Cryptocurrencies (Bitcoin, Ethereum, Dogecoin, etc) are Fungible tokens. Because the price of cryptocurrency fluctuates. Also, you can divide one bitcoin into many parts.
Did You Know? The trading of Non-Fungible Tokens (NFTs) increased 700% in Q3 2021, as compared to the previous quarter. The volume hit $10billion. Know More…
Why do we Need NFTs?
NFTs provide lots of benefits to the users.
- NFT usage Decentralized Marketplaces that help to eliminate middlemen. And all the benefits go to the artists.
- NFTs are unique, nobody can copy them.
- Blockchain uses smart contracts to transfer the ownership of NFTs.
- All the data is transparent and immutable.
- The account is accessible from anywhere.
The Working of Non-Fungible Tokens (NFTs)
In starting, We use Ethereum blockchain technology to buy NFTs. But now Solana, NEO, Tezon, EOS, secret Network, and Tron Blockchain-based cryptocurrencies also support NFTs.
Blockchain and Smart Contracts help to keep secure the identity of the owner and provide full transparency.
When a creator lists an NFT on the marketplace. All the people can see this NFT and they can buy it.
Here a smart contract is used to transfer the ownership securely.
Buyers pay money in the form of cryptocurrency. And once payment is done, NFT is completely owned by a buyer.
Top Advantages of Non-Fungible Token (NFTs)
The Ownership of non-fungible tokens (NFT) is completely owned by its creator. When he sold this NFT then the ownership is completely owned by the buyer.
NFTs are owned by an indivisible and NFT could not be distributed in multiple owners. Anybody can sell a picture on the NFT marketplace.
For example: Downloading a picture from the website does not make you its owner.
Here, NFT plays an important role: it shows you the real owner of the picture. NFT marketplace uses blockchain technology to securely transfer the ownership of NFTs easily.
Another benefit of NFT is that we can transfer it easily. A wide range of options is available for trade NFTs on particular markets. We can also transfer the NFT character in the game. Players purchase these NFT characters to improve the gaming experience.
Also, game developers could issue in-game characters as NFTs. So, the player could hold it in their digital wallet or could sell it on the NFT marketplace.
The player can transfer the ownership of the NFT character. The player can easily transfer ownership after fulfillment of specific conditions between seller and buyer that are outlined in smart contracts.
3. Highly Secure:-
NFTs are totally based on Blockchain Technology that is highly secure. You can’t remove or changed after adding a block of information in the Blockchain Network.
All the information is highly secure and transparent. We can easily see the previous and current owners of a particular NFT.
Buyers and sellers use smart contracts to securely transfer ownership of NFTs. That reduces the scams and fosters a level of confidence.
As we know that the primary benefit of non-fungible is their uniqueness. If we add NFTs on a blockchain network it means they are linked to unique data.
Blockchain-based NFTs are always unaffected by removal, changes, or replacement.
Therefore, the creators always have the authenticity of the NFTs. The authenticity of the NFT is also transferred to the buyer once it is sold.
Disadvantages of Non-Fungible Tokens
1. Illiquid and Highly Volatile
The market for NFTs is not very stable. NFTs are not widespread, it has a limited number of potential buyers and sellers. This means NFTs can be very difficult to trade. Also, we use cryptocurrency for buying NFTs. The cryptocurrency and NFT markets are also too volatile.
2. Do Not Generate Income
NFTs do not offer any type of income potential to their creators like stock, internet-bearing bonds, and rent-generating real estate. The return on investment of NFTs is totally based on price appreciation. So, you avoid it.
3. Can Be Used For Fraud
As we know that blockchain-based NFTs are highly secured and transparent, still NFTs can be used to perpetrate fraud.
In fact, a number of creators have recently reported their work for sale on NFT’s marketplace – without their consent.
4. Harmful to Environment:
Blockchain-based NFTs and cryptocurrencies need a significant amount of computing energy to create a blockchain record and this can be harmful to the environment in the long term.
According to the researcher, at present time the carbon emissions from mining cryptocurrency and NFTs will exceed the entire city of London in the upcoming years. So, blockchain can be a major cause for our environment.