A brief look into the principles of NFT
The fungible token can be easily replaced by an identical one. Any currency is an example, both fiat and crypto. A banknote of 10 dollars in your pocket or 100 satoshi in your crypto wallet — it doesn’t matter. If you had lent someone 10 dollars, it’s ok if a person returns another banknote to you, not the original one.
The non-fungible element is another matter. Although, at first glance the two elements may look the same, but each of them will have unique information or attributes that make these elements irreplaceable; impossible to find an equivalent substitute. In fact, each NFT token is a unique set of attributes.
Another important difference that needs to be mentioned is that the fungible tokens can be fragmented. This means that you can only send a part of one ERC-20 token, just as you can pay the bill with a hundred dollars and get the change. ERC-721 non-fungible tokens cannot be split and can only be bought or sold as a whole, like any collection item (baseball cards, vases, paintings). No one in their right mind would want to buy a half of Monet's masterpiece.
The use of NFT in practice
According to Wikipedia, non-fungible tokens are used to create a so-called “digital scarcity”, which is characterized by the uniqueness and the possibility of 100% verification. NFTs are used in applications characterized by unique digital items, such as crypto games and digital collectibles.
In addition, a big step forward for non-fungible tokens is the digitization of real collectibles and antiques. This industry has always faced a certain range of problems, including theft, forgery, the black market, etc. However, the emergence, development and implementation of the blockchain technology changes the situation. Digitization of unique items allows you to solve many problems associated with the confirmation of originality, logistics, storage. Moreover, with the help of NFT system, one can establish a whole ecosystem. There are some examples.
NFT can disrupt archeology, antiques and museums
The oceans is full of shipwrecks which are full of artifacts and similar pieces of value. According to Matthew ARNETT, co-founder and CEO of the PO8 project, this market is worth about $100 bln. Much of these precious items lie at the bottom of the Caribbean and in the area of Bahamas. There was a cargo traffic carrying valuables from America to the Old World during these long-forgotten days. So, the Bahamas are a paradise for archaeologists. Now, though the black market has always flourished, there seems to be a way to shed light on too many things. No wonder the Bahamas are becoming a paradise once again, but this time for the crypto enthusiasts.
Matthew ARNETT says that the utilization of NFT would increase significantly over the next 3-5 years. Thanks to them, one can establish a whole business ecosystem. Values which are extracted from the ocean will be digitized and sent to museums for storage. Anyone wishing to purchase an artifact or a similar piece, could invest in a digital token, acquiring the right of ownership. In this case, the artifact remains in storage at the museum, where it earns money to its owner: visitors can pay for tickets in digital currency, and that is to be tracked with the blockchain as well.
The basics of this ecosystem is the transparency and data availability. Each item is unique and has its own digital counterpart in the form of an NFT token. All acquired values are stored in proper conditions and recorded in the blockchain, which contains all the important data. Exchange, sale, purchase of unique items have never been perfect, but now this industry has a chance for an absolute order.
Image couertesy of Verdict.co.uk