What are NFTs and Do They Have a Future?
Since the earliest civilizations, humans have always been attracted to collecting “special” objects to which they have assigned a certain value, for different reasons. In the past, this collecting mania could be reflected in any physical object, be it coins, artwork, vehicles, even rocks.
But we’re in the middle of the digital age and now, this collecting fever has a new exponent that’s causing a true sensation among lovers of the rare and exclusive: Non-Fungible tokens or NFTs.
But what exactly are NFTs, how do they work, what can you do with them, and most importantly for investors, do they have a future?
Take a look at this quick guide to find the answers to all these questions.
What are NFTs?
Non-Fungible Tokens (NFTs) are basically tokens based on cryptography that only exist on a blockchain. These tokens have unique characteristics that make them unrepeatable. These tokens can represent unique assets from the digital world or digitized versions of objects from the physical world.
In addition to this, NFTs can also be used to demonstrate the authenticity and ownership of different assets on a blockchain, acting somewhat like a digital fingerprint.
NFTs are different from fungible assets, that is, objects – both physical and digital – that can be exchanged with other objects of identical properties.
We have a good example to illustrate this in money; it doesn’t matter whether it’s physical like the dollar, or digital like Bitcoin (BTC): you can easily exchange one Bitcoin for another Bitcoin. This is possible because 1 BTC keeps the same value when you exchange it for another BTC; they’re equivalent and have exactly the same properties.
Non-fungible assets can’t be substituted in the same way as fungible assets because they are unique, unrepeatable, and have different characteristics.
Another good example of this is in artwork from famous painters.
You can see each of those paintings as a non-fungible token because although they’re all paintings, they’ve different properties and value; they’re unique, and you can’t exchange one of these paintings for another because there is only one original painting.
The good news is that these assets can also be represented in the digital world in the form of crypto tokens; thanks to information technology, it’s possible to “imprint” special marks that make each one of them unique.
The basis of NFTs are smart contracts
Today, virtually anything can be represented digitally, and the Ethereum blockchain is perfect for it. In fact, it’s this blockchain that has the highest percentage of NFT tokens on the market, due to the use of smart contracts.
A smart contract is a small program that can be created within a blockchain, which allows you to tell the network that it should store certain information and perform certain actions. In this case, anyone with the necessary knowledge can create a smart contract for an NFT token, assigning it the characteristics they want with enormous creative freedom.
In this way, it’s possible to store anything within an NFT token, and the smart contract within the blockchain will ensure that it works correctly at all times.
What can I do with NFTs?
Although NFTs began essentially as objects for entertainment and collectibles – KryptoKitties – today the market has expanded enough to find practically infinite uses for this technology. Let’s take a look at some of these use cases.
Digital Art
It’s possible to store information from artwork, jewelry, and other artistic objects on the blockchain in the form of NFTs.
This not only helps in motivating updates, circulation, and sharing through several markets, but it also helps in tracking unique digital art in the form of NFTs to verify its provenance, authenticity, and scarcity.
In fact, NFTs are already being developed for artwork such as paintings and sculptures that include professional certificates. The owner only has to show the unique information stored in the corresponding NFT to demonstrate that he is the owner of such work.
It’s easy to trace this digital certification because the ownership of these assets is already registered in the blockchain.
Video games
The creation of NFTs for different virtual objects from videogames allows you the in-game exchange of such accessories for points or digital currencies, and even for real money. This is something that we’ve already seen in the past, but blockchain and NFTs are doing a great job in creating and improving this online ecosystem or virtual economy.
When you play one of these games, you can obtain items such as weapons, clothes, skins, etc. These items will have their own related NFT, and they’ll be stored on the blockchain.
In this way, all the operations and properties related to such items will be registered in a public database, avoiding the possibility of cheating by malicious users. Some examples of such NFT-based games include:
- Sorare: In Sorare, you can purchase NFT tokens that represent professional soccer players. You can later use these tokens to play online fantasy games.
- Decentraland: A virtual world pretty similar to Second Life, where you can buy, sell, and exchange ERC-721 tokens and participate in different in-game events such as art shows, games, concerts, etc.
- Gods Unchained: A turn-based collectible card game where you can compete against other opponents.
Digital tickets
Many companies are using NFTs to represent digital tickets for different types of events, such as musical concerts and sporting competitions. These NFT tickets represent your unique permission to participate in those activities at a specific time and place, and you can’t convert this right into something else.
Using NFT technology ensures that each ticket is unique and valid at the time of use so that this will prevent the use of false tickets.
Identity tests
NFTs are also being used for identity authentication to help in keeping a complete record of personnel in public and private organizations. The technology can be applied to birth certificates, passports, and driver’s licenses, just to give you an idea.
These types of NFTs cannot be exchanged, but it’s perfectly possible to implement access control to obtain the information stored in them. This is a very practical application because it allows the interaction with NFTs so that organizations can obtain information about any individual, such as their educational level, for example.
On the other hand, an individual can do the same, requesting identity information from a doctor to verify their professional level.
Digital certificates
NFTs can be used to store information about different types of documents such as contracts, patents, and other similar certificates on the blockchain. This is an efficient way to make these documents traceable and prevent counterfeiting.
These digital certificates can store attributes such as intellectual property values, copyrights, etc. When it’s necessary, you can verify the validity of these documents using electronic signatures.
Domains
Domains are unique and can be very valuable, so it can be very costly and time-consuming to find the most appropriate for you. It’s possible to link domains to NFTs to create a public record for tracking purposes. This can help avoid third parties in domain trading, which also contributes to reducing costs due to speculation.
Some NFT coins to keep an eye on
Enjin (ENJ)
Enjin is a platform that allows individuals and organizations to create their own NFTs. In order to mint these virtual tokens and objects, you must acquire and block ENJ, Enjin’s cryptocurrency.
Decentraland (MANA)
Decentraland is a virtual world similar to The Sims or Minecraft in which users can buy and sell digital real estate while exploring and interacting with this virtual world. The game uses two tokens: LAND is an NFT token that represents unique parcels of land within the game, while MANA is a cryptocurrency that facilitates the purchase of LAND, as well as other virtual goods and services.
Axie Infinity (AXS)
Axie Infinity is a Pokémon-like virtual pet world that runs on Ethereum. Players can fight, collect, raise and build a kingdom for their pets (Axies) and have the AXS token, which is used for the governance, staking, and payment system.
WAX (WAX)
WAX is a platform that allows its users to create virtual markets to buy or sell digital items, especially games. For these transactions you must use the internal currency called WAX token.
Cardano (ADA)
Cardano is a third-generation blockchain platform with a scientific approach that promises great improvements to the crypto ecosystem and that, thanks to the use of smart contracts and dApps, will offer an ideal environment for the development of NFT tokens. All this is governed by the use of its cryptocurrency ADA.
Origin Protocol (OGN)
Origin is a platform very similar to Enjin, but that not only serves for the development of NFT tokens but also allows users to earn money that supports the development of projects within the platform through a model based on DeFi. Its internal currency OGN has the function of regulating the economy and the future of the platform.
Do NFTs have a future?
NFTs are a very recent technology in the crypto space. Although they have existed almost since the beginning of Bitcoin – does anyone remember the Colored Coins? – It wasn’t until the beginning of 2020 that a real craze for these digital assets began.
So much so, that almost every day it was possible to read in the news about a new NFT created and sold for hundreds of thousands and even millions of dollars in a matter of hours.
The truth is that, according to history, when too much money moves around something new that generates a lot of hype, the risks also increase exponentially where scams and the risk of a bubble can be the order of the day.
However, even with all the madness surrounding NFTs, the reality is that this technology has many practical uses, as you may have read in a previous section.
The blockchain technology that makes NFTs work provides them with numerous possibilities to position themselves as digital objects of common use; as technology advances and matures, it is very likely that more and more people will become familiar with the use of NFTs.
The problem with this is that being such a “new” technological phenomenon, this maturing process takes time, and meanwhile, it seems that the bubble has already started to deflate, as we can read in the news.
So, as we always say, before jumping into the world of NFTs, you should proceed with proper education and caution before taking action.
Are NFTs halal?
Are NFTs halal? Yes. NFTs are nothing more than cryptographic tokens on a blockchain that have unique characteristics that make them attractive to collectors and investors or serve some purpose that the NFT can be used for. So long as the characteristics of the NFT do not convey or promote anything that is considered haram by the sharia such as, pornography, illegal drugs, cruelty to animals, anything that promotes hatred towards Islam, etc., then the NFT is permissible to create, use, and earn income from.
Another excellent article to read on the permissibility of NFTs would be, What are NFTs? by Mufti Faraz Adam.
Conclusion
NFT tokens are another technology option within the wide range of possibilities offered by blockchain. The number of practical applications to the real world is enormous, with all kinds of applications for identity, security, business, arts, and entertainment in the digital world.
Of course and as always happens, there are many people who simply want to make some money with new technologies as an investment, but like everything related to crypto-assets and with any investment in general, you have to take precautions before investing.
What we see now is just the tip of the iceberg of what can happen around NFTs – and maybe cryptocurrencies as well – but insha’Allah, in the future, surely non-fungible or NFT tokens will continue to surprise us with their enormous versatility and possibilities. There are a lot of people banking on that.
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