What is NFT? - Part 1

Disclaimer: These are my views on the said topic and does not represents any individual or any company.

"Empowering people through knowledge and knowledge sharing is the biggest giving."

I'll divide this article to 3 parts. In part-1, we'll cover three common questions asked by people who are enthusiastic to understand NFTs.

1. What is NFT?
2. Why my current holding items are not NFT? Is Fiat Currency or Gold I'm holding can be considered as NFT !!
3. What are different types of NFT available and can I create more categories?

What is NFT (Non Fungible Token)

Before, we understand Non-Fungible Tokens, let's understand what is a meaning of "Fungible" and "Non-Fungible".

Fungible are items or goods or commodities which can be replaced or interchanged by another identical or similar item or it can be mutually inter-changeable. For example, Dollars bills or any fiat currency like Rupees, Euro, Yen etc., Commodities, common shares, cross-listed stocks are some other example of fungible items. Even gold, considered as fungible item as one gram of gold is equivalent of another gram of gold. Even if gold or money is having the identical properties but is differentiated with the different identification numbers by federal reserves, then also, these items are considered as Fungible goods.

Non-Fungible are items or good which have the unique qualities. For example, Diamonds are non-fungible items because every diamond is unique w.r.t size, color, cuts, grade, clarity which is making them undistinguishable. Another example we can take is land or house, which is again different w.r.t location, size, designs, direction of air, heights etc., making them unique from each other.

Now, we have understood the basic difference between Fungible and Non-Fungible items. Let's now focus on what are Non-Fungible Tokens?

Tokens in the world of blockchain are considered as Cryptocurrency. Non-Fungible items are tied up with the Tokens to create the value on the blockchain network. NFT (Non-Fungible Token) can be created with almost any blockchain asset which can provide value to these items and should be transferable to anyone. We can compare the items available on existing internet with the NFT as mentioned in the below chart.

The ownership of NFT is defined through a single owner and is managed through the unique address. The NFT created with one blockchain algorithm for example Ethereum can be transferred to the owners under the same platform. The owner cannot transfer their NFT to some other blockchain algorithm or platform. Currently, NFT have the limitations of interoperability between different blockchains.

Now, let's proceed with the categories in which NFTs can be distributed.

1. Digital Artwork - Digital version of physical paintings, drawings, photographs etc.
2. Music NFTs - By selling music in the form of NFTs, artists can benefit from reaching their fans directly, avoiding concerns about music piracy and intermediaries.
3. Video clips & GIFs - These NFTs are the motion version of paintings and digital drawings.
4. Memes - You can mint them, trade them or own them and prove ownership.
5. Avatars / PFPs (Profile Picture Collections) - Unique avatars that vary in rarity according to their traits
6. Video Games Items - Blockchain games allow players to buy, collect and trade NFTs in multiple forms, such as characters, creatures, virtual weapons, skins and many other accessories.
7. Trading Cards - traditional collectable cards. These can be both be played in the games and used for collection. Have the uniqueness and ownerships can be defined. Even these cards can be traded online.
8. Metaverse Land - Metaverse allow users to interact with a virtual ecosystem, where they can buy, sell, trade and own virtual real estate.
9. Virtual Fashion - You can find anything to wear for you Avatars like sneakers, hoodies, sunglasses, even new skins for you avatar and many more.
10. Domain Names - Decentralized domain name services let you register a domain name and sell it on the NFT marketplace.
11. Text-Based NFTs - Anything written can be minted as NFT
12. Ticket & Membership NFTs - Entry Tickets for events within metaverse. Commemorative tickets for physical events like concerts or sport matches.
13. Real-World Assets - Anything physical can be represented by an NFT. This tokenization of real-world assets introduces flexibility and record-keeping of ownership.
14. Transcripts & Certificates - These assets can be converted to NFTs which can provide authenticity later helpful in verification and validations through different organizations.

In this article all the three primary questions mentioned in the starting of the article has ben covered. In the next part we'll cover what NFTs are available in the market and how we can buy or sell it through internet.

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