NFT – What is It and How is It Used with Blockchain?

Peter Smith

When you use Bitcoins or other Cryptocurrencies, you trade one for another. These are known as fungible assets, which simply means they are the same. Non-fungible assets are items considered one-of-a-kind. For example, your newly-created piece of EDM using Cubase. You can attach an NFT blockchain entry to your creation as a means of ownership. Other benefits of NFTs include:

  • Blockchain security
  • Transparent transactions
  • Traceable ownership
  • Easy authentication

Because NFTs use blockchain, they are secure. Yet blockchain entries also record ownership records that are easily authenticated. Therefore, the risk of fraud is significantly reduced when using NFTs as a means of transferring ownership of digital assets because no two NFTs are the same.

What Exactly is a Non-Fungible Token?

Non-fungible tokens (NFTs) are a relatively new concept in the also new world of digital asset trading. Associated with cryptocurrencies like Bitcoin and Ether, because of their digital nature, that’s the only thing they have in common. While cryptocurrencies cater for the trade of like-for-like assets, such as Bitcoins, NFTs are quite the opposite. 

Digital Trading

In a nutshell, you can use NFTs as a means of digital trade for one-of-a-kind digital assets. Such assets include artwork, music, and in-game items. With an associated NFT, you become the attached asset owner. However, NFTs can also be bought and sold with Crypto.

Uses for an NFT

The rise of NFTs has been phenomenal. They are being traded for large amounts of money in just a few years. From small transactions of a few dollars to millions, people worldwide are seeing massive benefits to the technology. 

Verified Ownership

The benefits of NFTs vary, but for the most part, you can use NFTs as proof of ownership via blockchain authentication built-in to the system. Because of this, NFTs are commonly used for transferring ownership of coveted digital assets like viral videos, digital files (such as MP3s), and virtual worlds by trading another NFT of perceived equal value.

One of a Kind 

But NFTs also provide a means of immortalizing physical assets in digital form. For example, an artist could create a piece, take a digital photo and then destroy the original artwork, therefore significantly increasing the value of the digital version of the artwork.

How NFTs Use Blockchain

Currently, NFTs are built using the Ethereum and Ziquilla blockchains. NFTs are stored on the blockchain platforms, ready for use when required. Because of this, there is inherent security in using tokens. 

Open Transactions

While Crypto shields transactions from scrutiny with anonymity, NFT blockchain transactions are transparent and traceable. Therefore you can verify the authenticity of content, such as original artwork, without taking the seller’s word for it.

Ownership Retention 

Additionally, because blockchain ledger doesn’t allow the overwriting of digital information, digital creators retain ownership of original work. So, for example, musicians can sell as they wish rather than be cheated by streaming sites who greedily retain the majority of royalty profits.

Summary

NFTs are built on the Ethereum blockchain, which they use as a means of recording ledger information. They are primarily used to transfer ownership of one-of-a-kind, original digital assets rather than trading equally valuable ETH coins. Because of the built-in blockchain features, NFTs are excellent for tracing ownership since all transactions are transparent on the blockchain ledger.