What Are Non fungible token ? An NFT is a unique digital token, with most using the Ethereum blockchain to digitally record transactions. It’s not a cryptocurrency like Bitcoin or Ethereum, because those are fungible — exchangeable for another Bitcoin or cash. NFTs are recorded in a digital ledger in the same way as cryptocurrency, so there’s a listing of who owns each one.
How do Non Fungible Token work?
Traditional works of art such as paintings are valuable precisely because they are one of a kind. But digital files can be easily and endlessly duplicated. With NFTs, artwork can be “tokenised” to create a digital certificate of ownership that can be bought and sold. As with crypto-currency, a record of who owns what is stored on a shared ledger known as the blockchain. The records cannot be forged because the ledger is maintained by thousands of computers around the world. NFTs can also contain smart contracts that may give the artist, for example, a cut of any future sale of the token.
Non Fungible Token and Blockchain
Let’s talk about Blockchain technology. It functions in managing and maintaining a growing set of data blocks, and this is by using the decentralized or known as the P2P (Peer toPeer) network. In blockchain, once a piece of data is recorded it cannot be edited or changed. To put it in simpler terms, it enables you to send a gold coin via email. The P2P network is a consensus network, which allows a new payment system and the transactions of new digital money. Cryptocurrency like Bitcoin consists of its own network of peers. Every peer has a record of the complete history of all transactions as well as the balance of every account. By the end of every transaction and upon confirmation, the transaction is known almost immediately by the whole network. A transaction includes a process where A gives X amount of Bitcoins to B, and is signed by A’s private key. After signed, a transaction is broadcasted in the network. The informationis sent from one peer to every other peer on the network.
What is a Token?
Token is just another word for “cryptocurrency” or “cryptoasset.” But it has taken on a couple of more specific meanings depending on context. The first is to describe all cryptocurrencies besides Bitcoin and Ethereum (even though they are also tokens). The second is to describe certain digital assets that run on top of another cryptocurrencies’ blockchain, as many decentralized finance (or DeFi) tokens do. Tokens have a huge range of potential functions, from helping make decentralized exchanges possible to selling rare items in video games. But they can all be traded or held like any other cryptocurrency. Tokens also helps to decentralized applications to do everything from automate interest rates to sell virtual real estate. But they can also be held or traded like any other cryptocurrency.
Types of Tokens
Here is a list of tokens:
- DeFi tokens A new world of cryptocurrency-based protocols.These protocols issue tokens that perform a wide variety of functions but can also be traded or held like any other cryptocurrency.
- Governance tokens These are specialized DeFi tokens that give holders a say in the future of a protocol or app, which (being decentralized) don’t have boards of directors or any other central authority.
- Non-Fungible Tokens (NFTs) NFTs represent ownership rights to a unique digital or real-world asset. They can be used to make it more difficult for digital creations to be copied and shared. They’ve also been used to issue a limited number of digital artworks or sell unique virtual assets like rare items in a video game.
- Security tokens Security tokens are a new class of assets that aim to be the crypto equivalent of traditional securities like stocks and bonds. Their main use case is to sell shares in a company or other enterprises (for instance, real estate) without the need for a broker. Major companies and startups have been reported to be investigating security tokens as a potential alternative to other methods of fundraising.
- Payment Tokenis is unique string of numbers a secure identifier generated from a PAN. Payment tokens are automatically issued in real-time to avoid to loose money during transaction. So that are used as a means to transfer value and are not connected to any specific venture.
- Utility Tokens i a form of cryptocurrency that is issued in order to fund development, and can be later used to purchase a good or service offered by the issuer of the cryptocurrency sold utility tokens as a method of fundraising for the start-up.
With this article we went a bit deep in what it means blockchain, tokens , and a bit on non fungible tokens, so that you can understand how they operate and avoid scams. We provide more articles that goes more in specific in some thematic. Here we will put a list of articles that we think it will help you to understand Cryptocurrency in great details.
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