Introduction to NFTs (1) – Why use NFTs?

Since the beginning of cryptocurrencies, there have constantly been new topics emerging, and the focus of everyone’s attention recently is probably on the development of NFTs. In fact, NFTs are not a new product that suddenly came out of nowhere this year. As early as late 2017, CryptoKitties, which was all the rage, was an NFT made according to the ERC-721 protocol.

cryptokitties

NFT is the abbreviation of Non-Fungible Token. Let me first explain what “fungible” and “non-fungible” are. The cryptocurrencies used in general transactions are fungible tokens. Take Bitcoin as an example, the value of one Bitcoin is equal to another Bitcoin, and a Bitcoin can be divided into 0.1, 0.01Bitcoins, or even smaller. That is to say that fungible tokens can be divided, and each token is equal in value, so most of the coins that can be used for transactions are “fungible”.

In contrast, NFTs are indivisible, and each one is unique and has different values. These traits make them suitable for applications in artwork or collections. A token represents a complete entity, and an NFT cannot be divided into two 0.5 NFTs to sell, just like a famous painting worth ten million cannot be split into two sold for five million each. A more famous example is Beeple, an American digital artist, whose digital paintings released in the form of NFTs at the end of 2020 set the highest auction price record in NFT history at US$777,777.

beeple

NFT is the abbreviation of Non-Fungible Token. Let me first explain what “fungible” and “non-fungible” are. The cryptocurrencies used in general transactions are fungible tokens. Take Bitcoin as an example, the value of one Bitcoin is equal to another Bitcoin, and a Bitcoin can be divided into 0.1, 0.01Bitcoins, or even smaller. That is to say that fungible tokens can be divided, and each token is equal in value, so most of the coins that can be used for transactions are “fungible”.

In contrast, NFTs are indivisible, and each one is unique and has different values. These traits make them suitable for applications in artwork or collections. A token represents a complete entity, and an NFT cannot be divided into two 0.5 NFTs to sell, just like a famous painting worth ten million cannot be split into two sold for five million each. A more famous example is Beeple, an American digital artist, whose digital paintings released in the form of NFTs at the end of 2020 set the highest auction price record in NFT history at US$777,777.

 In the past, for creators or distribution companies, because digital products were easily copied after they’re issued, it was difficult for creators to be fairly paid for what was rightfully theirs. After products are issued as NFTs, purchasing translates to obtaining ownership. In the future, buyers of these NFTs can also resell the products, and because of that, would also be willing to pay more for them. If the creator wanted to, they could even mention in the NFT contract, that when the product is resold again, the original creator gets a certain percentage of the profit. So therefore, even if the product is sold, the creator can still profit from every additional transaction.

We talked about the nature of NFTs and its suitable application scenarios above. Readers who are interested can refer to the next article “Introduction to NFT (2) – Games on Chains?” (link), where we will introduce the integration of NFTs in the game industry.

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