What is NFT Token?

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While NFT tokens gain value as they are collectible and unique, the network of exchangeable tokens gains in value as the number of users increases.

I prepared a flood in which we will talk about many issues such as what NFT Tokens are, what they do, their historical development, technology, usage areas, which we have started to hear recently and which I think we will hear very often in the future.

The English word literally means Non-Fungible Token, meaning simply a limited edition, unique, unique token. It can also be described as Collectibles Tokens, ie collectible digital assets (Collectibles).

Before we begin to examine NFTs in detail, it is important to understand what the differences are between Coin and Token.

What are the Differences Between COIN and TOKEN?

The most important difference between Coin and Token is that Coins are developed in their own blockchain network. BTC - Bitcoin blockchain, ETH - Ethereum blockchain, AVAX - Avalanche blockchain as a good example for coins. If a coin is Proof of Work (POW), it can be earned by mining, and if it is Proof of Stake (POS), it can be earned by staking. Peer-to-peer networks of these blockchains are open to everyone and are secured by mining or staking , depending on the blockchain consensus used .

Tokens are developed on a 3rd party blockchain. Hundreds of tokens such as DAI, COMP, BAT, etc. are examples. These tokens do not have an independent block chain and users can send their tokens to another person on the condition that they pay a gas fee in the ETH network for the transfer of these tokens. In addition, most tokens cannot be produced by mining or staking, they cannot be earned, but instead have a fixed supply and can be bought by trade.

Proof of Work (PoW) ve Proof of Stake(PoS)

Coins are always exchangeable and exchangeable with another coin on the same blockchain for the same price as "Fungible" in English. 1 BTC is always equal to 1 BTC. Tokens, on the other hand, can be exchangeable or non-exchangeable. ERC-20 tokens are the most common of exchangeable tokens, while ERC-721 tokens are the most common example of immutable tokens.

WHAT IS FUNGIBLE and NON-FUNGIBLE TOKEN (NFT)?

What are the differences between Fungible Tokens and Non-Fungible (NFT) Tokens?

Let's try to explain this with examples by simplifying it.

Example-1:

Let's say you have a 100 TL bill in your pocket and you lend it to your friend. Do you have to buy the same 100 TL banknote you gave when your friend repaid his debt? Of course no, instead of giving you a different 100 TL banknote that he bought elsewhere, or giving 2 50 TL banknotes, he will have paid his debt to you and as a result, there will be nothing left between you.

Example-2:

Let's give another example from the car. Let's say you borrow your friend's 100,000 TL worth X Brand car. After you finish your job with the car, you have to return the same car as delivered to you. You cannot return the Y Brand car worth 100000 TL instead of the X Brand car you bought from your friend, right?

As it can be understood from the examples, Example-1 is Fungible, ie it can be changed, Example-2 describes the Non-Fungible (NFT), ie unchangeable tokens, very clearly.

NFTs are unique and each has different values ??or properties.

While tokens gain value as they are collectible and uniquely, the network of exchangeable tokens gains in value as the number of users increases.

HISTORICAL DEVELOPMENT PROCESS OF NFTs

NFTs first appeared in a blog post in March 2012 as "Bitcoin 2.X (aka Colored Bitcoin) - First Features".

Colored Bitcoin has been promoted as the ability to represent property, coupons, company shares, subscriptions, digital collections, and more on a public blockchain.

But at that time, the technology worked better on the traditional database in permitted environments than on the public blockchain. In short, the reason this is the case is because the Bitcoin Script programming language was not designed for NFTs (immutable tokens). For these tokens to work as designed on the Bitcoin blockchain, all users in the chain had to agree on a generally accepted value for each unit. So if one person objected, the whole system would not work because of that token. This triggered the developers to improve the current functionality of the Bitcoin blockchain.

In 2014, a peer-to-peer platform, an open source internet protocol distributed across the Bitcoin network, was developed. The platform included trading card games, followed by Spells of Genesis (April 2015), Force of Will (August 2016) and Rare Pepes (October 2016).

In 2017, more projects started to turn to other networks outside of Bitcoin. Ethereum has already been in the most demand as it has already gained popularity with its support for the most common ERC-20 tokens and its support for fungible tokens.

For example;

Cryptopunks was launched in June 2017 as an ERC-20 and ERC-721 hybrid token. Later, in November 2017, the CryptoKitties project, undoubtedly the most popular NFT project in blockchain history, was launched as a full ERC-721 token.

A dragon character 600 ETH bought for $ 60 in CryptoKitties in 2018, yes you did not hear it wrong, so it was sold for $ 170,000 at that time.

In 2019, a virtual parcel of land was sold in Decentraland for 1.3 Million MANA, or $ 80,000 at its then-value. The buyer also put it on sale at a 56% higher price.

Again in 2019, the "F1 Delta Time Apex Race Car" in the digital Formula 1 racing game was sold for $ 113124 with its then-value of 415.9 ETH. Yes, a nice sports car could be bought with this money !!!

MOST POPULAR NFT STANDARDS: ERC-721 / ERC-1155 / ERC-998 (CNFTs)

In addition to the ERC-721 standard, which started to operate in 2017, the ERC-1155 standard was also started to be used in 2018. While still not as popular as ERC-721, the adaptation to ERC-1155 is also growing rapidly. The biggest reason the ERC-1155 standard adaptation is growing rapidly is that it provides developers with the ability to create interchangeable, semi-exchangeable tokens with just one token standard. Previously, developers had to choose between ERC-20 (replaceable) or ERC-721 (unchangeable) or use both contracts to create two different types of tokens.

In addition to these popular NFT standards, we can also mention the ERC-998 standard, which is an extension of the ERC-721 standard. Called Composable Non-Fungible Tokens (CNFTs), ERC-998 is an extension of the ERC-721 standard that adds the ability of non-exchangeable tokens to have other exchangeable tokens and ERC-20 tokens. Non-exchangeable tokens that implement ERC998 also follow the ERC-721 standard.

NFT ECOSYSTEM AND AREAS OF USE

1- Collectible Products

2- Online Games

3- Online Marketplace

4- Tickets

5- Identity and Certification

You can view the NFT Ecosystem from the chart below.

Apart from these, I share below the list of big brands and sports clubs that I can find, which are stated to have started NFT use.

NFTs Marketcap: As can be seen in the table below, which was made in early 2020, NFT Market Cap, which increased by 17% from 2017 to 2019, is expected to increase by 50% by 2020.

The significant increase in the number of NFT Contracts on the Ethereum Network is also remarkable.

You can see the increase in the number of addresses showing the interaction with NFTs from the table below:

HOW TO BUY NFT TOKEN AND WHERE TO STORE?

Buying and owning NFT tokens is not like other cryptocurrency trading. To purchase a digital collection or tokenized asset, you will need a cryptocurrency such as $ ETH, but you can also buy it from individual sellers using cash or exchange.

Since every NFT Token is unique, there is no exchange for NFTs. Instead, there are marketplaces connecting individual buyers with individual sellers. You have to set a price with the person selling NFT. You can then purchase directly from them.

If you buy an ERC-721 token, it will go to your Ethereum wallet address, just like an ERC-20 token. However, viewing it in a wallet client won't show you anything about its value, it just means you're holding it. Its value comes from the system of which the NFT Token is part. So a CryptoKitty NFT for example depends on a kitty drawing with specific features and this kitty can be listed in the open market if you choose to sell it.

To give another example, if you remember, Binance exchange distributed "Binance Collections" on the anniversary of its establishment, and gave the winning conditions and details as shown in the image:

LAST WORD:

In line with these details, when we consider the things that can be done with NFT Tokenization, I think endless possibilities emerge. This means that there is no doubt that NFT Tokens will enter our lives more both in corporate platforms and in individual terms as we progress. The ICO craze we experienced in 2017 and the intense interest in DeFi projects we are experiencing in 2021 (today) seem to come up with NFT Tokens in the next period. Based on these thoughts, having early awareness will be important in order to gain profit here as well as many values.