Robert Rogers
Non-fungible tokens (NFTs) represent a unique digital asset that is not interchangeable with any other token. In contrast to traditional cryptocurrencies, which are all built on a single underlying ledger, NFTs can be created on separate blockchains or protocols.
NFTs are also different from other tokens because they have unique attributes assigned to them. This makes nft creators more flexible than traditional cryptocurrencies and allows for a wider range of use cases beyond simple payments, such as transferring specific types of data or digital assets. Examples include collectibles like CryptoKitties, in-game items like World of Warcraft gold, or intellectual property rights.
This guide will look at the key terms and tools that a non-fungible token creator needs to know. We will also consider some of the broad distinctions between these new tokens, which separate them from their fungible counterparts, as well as look at how they might be used in real-world applications – such as intellectual property rights and gaming.
NFT creators will need to know the following terms and definitions:
ERC20 – Ethereum Request for Comment 20
A technical standard used for smart contracts on the Ethereum blockchain, which defines a common set of rules that can be followed by developers creating tokens.
ERC725 – Ethereum Request for Comment725
An extension to the ERC20 token standard allows NFTs to be stored and managed on-chain.
ERC1155 – Ethereum Request for Comment 1155
A new standard uses the “namespacing” technique to modularize smart contracts within a single token contract. It also allows NFTs to be stored and managed on-chain while allowing developers to define their metadata storage format in an off-chain database.
ERC998 – Ethereum Request for Comment998
An extension to the ERC20 token standard adds functions allowing NFTs to interact with other tokens in a trustless way.
How are Non-Fungible Tokens Used?
NFTs can be used for a variety of purposes, including the following:
- Digital Collectibles – NFTs can be used to represent digital collectibles, such as in the popular game CryptoKitties. These tokens can track the unique attributes of each collectible, as well as the ownership history and current location.
- Blockchain Games – NFTs can be used to create digital assets that are limited in supply or have other rare attributes, which can then be exchanged for virtual items with real-world value within a game. This allows players to monetize their investments into games and create a more immersive experience.
- Intellectual Property Rights – NFTs can be used to store and manage intellectual property rights, such as copyrights or trademarks. This allows for the tracking of ownership and usage history and prevents unauthorized use.
There are many other potential uses for NFTs, which will continue to be explored as the technology develops. However, it is clear that they present a new way of thinking about digital assets and have the potential to revolutionize a wide range of industries. As more people become aware of their possibilities, we can expect to see even more innovative applications in the future.
