Non-fungible tokens are a unique and emerging form of digital property. They differ from fungible tokens because they cannot be replaced by another token with the same value in the market. These types of tokens can represent any asset that is not interchangeable, such as artwork or real estate. In this blog post, we will explore what non-fungible tokens are, how they work, and why you should care about them for marketing purposes. 

Non-Fungible Tokens Explained (And Why You Should Care)

Instead of having one singular token with the same or equal value as other tokens, non-fungible tokens (NFTs) are unique and have an unequal value. Because of their uniqueness, you cannot replace or exchange one NFT for another in the market with the same value.

Because of this difference from fungible tokens, NFTs are a new and enticing digital asset class.

A common example is Cryptokitties, which was essential to the NFT world what Clash of Clans is to mobile gaming. When Cryptokitties was first released in 2017 it dominated headlines as it became one of the most popular apps on the Ethereum network with more than 3.9 million transactions in the first two weeks on the market. This led to a backlog of over 30,000 unprocessed transactions called Gas Wars which were estimated to cost $15 million dollars in fees alone (keeping in mind that the average transaction costs around $1).

If you've never played Cryptokitties before, it's simple. Users can purchase various kitties that are stored on the Ethereum blockchain with Ether (ETH), a cryptocurrency token used to power the network. Like most digital assets, each Cryptokitty is unique and has a specific set of attributes that make it stand out from other kitties in the market. Some common attributes include:

breed, pattern, and generation. These attributes can be thought of as similar to how Pokemon cards have differences in their type, species, and number printed on them.

Today Cryptokitties is still one of the most popular games to play on Ethereum but they are not alone in this space. In fact, over 40% of all digital transactions on the Ethereum blockchain are NFTs which shows that this market is still growing.

How Non-Fungible Tokens Work (And Why You Should Care)

Non-fungible tokens work by storing information in an open and decentralized network. Because of this, any user can validate the transaction without a centralized intermediary to oversee it or verify the information. This means that NFTs are trustless, transparent, and immutable because they aren't controlled by a third party.

Because there is no centralized intermediary overseeing transactions they usually offer faster transaction times for processing and settle within minutes of being created - unlike traditional financial institutions which can take days to settle funds.

Like all other digital tokens, NFTs use the blockchain as a way to record and store user information. The benefit of using the blockchain for this process is that it creates an open ledger that anyone can access and validate without needing permission from a third party. While being recorded on the blockchain has benefits it also has drawbacks in that any change or alteration made directly affects the entire blockchain.

Because of this, the use of NFTs relies heavily on the immutability and transparency offered by the blockchain. Unfortunately due to its openness, it can make it more difficult to control how an asset is used as anyone with access can see how and when the information was changed. This makes them great for identifying ownership but less so for censorship and limiting information from being published.

Examples of Non-Fungible Tokens Today

Although Cryptokitties is still one of the biggest examples, there are many more NFTs that you can take advantage of today. Some common examples include: Cryptocelebrities - Using the same attributes as Cryptokitties, Cryptocelebrities allows users to purchase and breed digital representations of famous figures including Brad Pitt, Jane Austen, and Bill Gates. Crypto Beanies - Have you ever wanted a specific hat or beanie? Well, now you can get one with a .bit domain name (an extension for the blockchain) which holds detailed information about the type, hue, and size of your hat. CryptoPunks - Our favorite is CryptoPunks which allows you to create a .eth domain name for storing information about your punk. You can include any number of attributes such as Punk's name, symbol, birthday, birth order, etc.

Where Non-Fungible Tokens Can Go Next The use of NFTs in the future will likely be expanded on in many ways. As mentioned above there are already dozens of different assets created that you can purchase today and more are being created every day by developers looking to get into the digital asset market. Some ideas for where this technology could go next include: Blue-chip stocks - Due to how popular digital tokens are becoming it is likely we will see companies begin to release their stocks as digital assets. Smart property - Instead of using physical keys, smart locks, or even RFID chips you could simply use your digital key to unlock and lock doors, cars, and other belongings. Badges - College badges are already stored digitally but the information they hold is the same every time. With NFTs you could add new information to your badge when you attend a new class or even provide proof of attendance for employers. Ownership - This is already being used today but it will be interesting to see how this progresses over time. While we have yet to see more long-term use of Non-Fungible Tokens, Cryptokitties is a perfect example of how this technology can be utilized in the future. Through use cases such as these, we may see NFTs become more widespread in the coming years.

How to Get Started with Non-Fungible Tokens While there are already dozens of different assets you can purchase today you will need some way to purchase them. Unlike traditional tokens, there are very few places that allow users to buy and sell NFTs as most of the use cases today are for playing games or collecting digital representations of famous people, animals, and objects. Instead, you will need to go directly to a site where you can purchase an NFT and then store it in a wallet that is compatible with NFTs. There are a few different ways to do this including using:

Ethereums Mist Browser - This option is fairly straightforward but it can be difficult for newcomers to Ethereum and blockchain technology in general who may not know how or where to store their tokens. My Ether Wallet - A web-based wallet that allows users to store and manage their NFTs through a traditional web browser. Metamask - A Chrome extension that enables users to interact with Ethereum directly in their browser.

*NOTE: My Ether Wallet is highly recommended for storing any digital tokens as it has been around since 2014 and is the most secure option available. You can learn more about My Ether Wallet here.

Another great option for creating and storing NFTs is to purchase from Initial Coin Offerings that have released their own unique tokens. Some of these ICOs will be issuing Non-Fungible Tokens while others may only issue fungible tokens so you need to be careful when deciding on how you are going to purchase from them. While there are a lot of great ICOs out there issuing NFTs, we have found two that stand out from the rest as they offer unique tokens that you cannot find elsewhere.

Dragonchain - Dragonchain offers one of the most in-depth platforms to create your own blockchain applications. In addition to a marketplace, they are also creating a blockchain incubator to help developers create DApps. Etherbots - EtherBots is one of the most talked about games on Ethereum and allows you to purchase different types of bots with various abilities that can be used in battle.

In summary, Non-Fungible tokens are an exciting new technology that has already seen widespread use and adoption by some of the largest brands in the world. While we are still seeing the early stages of what NFTs can do, it is likely that this technology will be used more and more as time goes on. From educational badges to sports tickets, collectibles and even ownership Non-Fungible Tokens have the potential to change how we interact with the world.

If you have any questions about how NFTs work or what they can do for your business then please contact us today and we will be more than happy to answer all of your questions!