What are NFT and its use cases?

2021 was the year of NFT, and many believe that it will continually grow in years to come. In case, you do not have a clear definition of NFT and its use cases, this article might help.

NFTs are tokenized, collectible items valued for their uniqueness and rarity. The value of NFTs relies on their authenticity and scarcity.

What is an NFT?

NFT stand for Non-fungible token.

Fungibility is an asset’s ability to be interchangeable with assets of the same type. Non-fungible means that it’s unique and can’t be replaced with something else. An NFT is a crypto asset representing something unique and collectible using blockchain technology.

An NFT is a unit of data stored on a blockchain, which can be sold and traded. The NFT can be associated with a particular digital or physical asset (such as a file or a physical object) and a license to use the asset for a specified purpose. An NFT (and the associated license to use, copy or display the underlying asset) can be traded and sold on digital markets. The extralegal nature of NFT trading usually results in an informal exchange of ownership over the asset that has no legal basis for enforcement, often conferring little more than use as a status symbol.

NFTs function like cryptographic tokens, but, unlike cryptocurrencies such as Bitcoin or Ethereum, NFTs are not mutually interchangeable, hence not fungible. While all bitcoins are equal, each NFT may represent a different underlying asset and thus may have a different value. NFTs are created when blockchains string records of cryptographic hash, a set of characters identifying a set of data, onto previous records therefore creating a chain of identifiable data blocks. This cryptographic transaction process ensures the authentication of each digital file by providing a digital signature that is used to track NFT ownership.

A non-fungible token cannot be faked or copied. NFT could be in demand since it has been created by a famous artist or composed by a world-class musician. The token could also be helpful in a game or wanted to complete a collection.

NFTs come in all shapes, sizes, and even use cases. Purely collectible digital art NFTs are pretty limited in what you can do with them. Some NFTs have actual uses in games, like the famous CryptoKitties on the Ethereum blockchain.

NFTs are commonly used by financial platforms too. These NFTs all can be traded for different digital assets. This means you can buy or sell NFTs using ETH, BNB or other cryptocurrencies.

NFT use cases

The development of NFTs has brought us crypto art and digital collectibles, but it doesn’t stop there. From real estate to logistics, you can use NFTs to prove the authenticity of many unique and collectible goods.

Art NFTs

Non-fungible tokens have helped solve long-standing problems with scarcity in digital art. How do you keep virtual artwork rare when you can digitally copy it? While there’s fake art in the real world too, we’re usually able to authenticate them. Crypto art gets most of its value from verifying its authenticity and ownership digitally.

Collectible NFTs

There’s a massive demand for digital collectibles, whether it’s PancakeSwap Bunny, Latteswap Milk or NBA NFT collectible trading cards. Along with digital NFT art, these non-fungible tokens make up a significant proportion of sales on NFT marketplaces.

Finance NFTs

In decentralized finance (DeFi), NFTs also provide unique financial benefits. Most will have some artwork too, but their value comes from their utility.

Some NFTs act as a ticket to a liquidity pool, some give staker get more reward out of their stake…

Gaming NFTs

Gaming has a huge demand for unique items that are tradable and purchasable. Gamers are already familiar with the idea of valuable digital items.

Gaming NFTs can be cosmetic, but many have utility too. Each Axie pet has a set of abilities for battling. These abilities also affect the pet’s value when traded. A CryptoKitty can be extremely valuable just for its desirable breeding attributes. Determining the value of each pet depends on a combination of rare looks, features, and utility.

Real-world asset NFTs

Linking real-world assets with NFTs can digitize the way we prove ownership. By having an NFT associated with an item, owning the NFT can become just as important as owning the asset. You can even embed the NFT into an item with a physical cold storage wallet. As we see the Internet of Things develop, we will likely see more NFTs being used to represent real-world assets.

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