Almost everyone knows or at least heard about NFT, which is becoming increasingly popular. Usually, non-fungible tokens are associated either with multi-million dollar sales and great success or with major cyber attacks. While many are obsessed with digital art, fashion, music, and paintings, physical NFTs have also found their way into crypto. We’ll take a closer look at how physical tokens evolve, what they mean, and how they’re used.
What do non-fungible tokens mean?
Before we tell you what NFT is, you need to understand the decoding of this abbreviation – non-fungible tokens. Fungible items are those that can be exchanged for something else with the same value. A great example of fungible things is money since one $5 bill can be exchanged for a bill of the same value or for smaller ones that will cost the same amount in total. Non-replaceable items are unique and cannot be exchanged for something of equal value.
Thus, NFT is a type of digital asset that is unique and not fungible because no other non-digital or digital asset can have the same value. For this reason, such tokens are called non-fungible. Usually, a record of the uniqueness of the token is stored in a securely encrypted blockchain.
Often, NFT refers to a digitized version of a digital or physical asset. An artist can create copies of any of their physical works of art, such as paintings or sculptures, and sell them as non-fungible tokens on NFT marketplaces. Very often, non-fungible tokens can be found in games, but their applications can be much wider: from digital art to music. Over time, the potential uses will increase, and more people will become aware of these tokens. Now we will look at the main characteristics that define a non-fungible token.
NFTs are unique digital assets, so merchants can produce a limited number of non-fungible tokens, keeping them in short supply and only increasing their value. For example, such popular NFT collections as CryptoPunks and Bored Ape Yacht Club rise in price over time because they contain 10,000 unique NFTs.
Proof of ownership
By purchasing digital tokens, you receive the rights to the digital artwork you purchased, including ownership (although there are exceptions). Blockchain technology allows you to establish and fix the ownership of a digital asset, which cannot be faked, changed, or stolen. In addition, you can check an asset at any time due to public availability. By the way, all this applies to physical NFTs.
NFTs can have a wide variety of functions and be transferred using smart contracts implemented using blockchain technology.
The information stored on the blockchain cannot be faked or changed. This allows digital NFTs to be a transparent and trustworthy technology.
Do physical NFTs exist?
NFT is associated with digital art for many people, but tokens also exist in real life. For example, for collecting sports items or antiques, NFTs can act as a guarantee of ownership of the actual physical item. This is because some want to have a physical version of their possession. Based on this, it can be concluded that a physical NFT is a token associated with an asset. While physical NFTs are not as common, famed digital artist Beeple decided to release a physical object related to his work. A physical NFT can be traded in the same way as a digital one or exchanged for the physical item it is associated with.
Benefits of Physical NFTs
The biggest advantage of physical assets is the ability to easily prove their origin and authenticity. Physical tokens can be a good and valuable tool in the fight against the $500 billion counterfeiting market. Thanks to blockchain technology, information about digital or physical NFT cannot be changed, faked, or stolen, which ensures security and reliability. Another advantage is that thanks to smart contracts, no transaction intermediaries are needed. Also, physical assets can be tied to recurring royalties, and the seller can get his share when the asset changes hands.
Let’s consider this process using physical painting as an example to understand how NFT can be tied to a physical object. You should start by creating a digital twin of the painting. This can be done by photographing the picture with a camera. After that, you must ensure that all the metadata attached to the photo is correct. You can use the OpenSea marketplace to mint a picture.
Most of the tokens are based on the Ethereum blockchain, where smart contracts determine the ownership and make it possible to transfer NFTs. Any information related to digital assets is stored on the blockchain. In this way, you will be able to link your digital painting (NFT) with work from real life. It is also worth considering that NFTs cannot be modified once created, so it is best to clarify all the details before creating and linking digital assets to physical ones.
Disadvantages associated with physical NFTs
Like many other things, physical NFTs also have their downsides. Copyright issues may arise in the first place, as the purchaser of the NFT may not have access to the actual copyright. Therefore, in some cases, the buyer will not be able to distribute, share or display NFT publicly. In addition, you can create a token and a physical object by selling them to different buyers without linking them to each other. There are also some problems with fake sales, hackers, and unscrupulous sellers, which marketplaces do not always successfully try to fight.
NFTs in the modern world have a huge range of applications for assets. Physical NFTs extend to the real world, such as the supply chain, where blockchain can play a very important role and provide traceability and security. In addition, pegging tokens to assets is one of the strongest arguments in favor of using NFTs for many.
The NFT token is a unique asset. Is it feasible to make artwork into NFT? It is easy for artists to create a tangible piece that sells online through NFTs.
NFTs are assets that have been backed by physical assets like real estate and metals instead of assets like artwork. An NFT can bridge the gap in the virtual world with the digital world and increase the potential of the NFT.
NFTs can be any digital material (such as drawing or musical instruments, which your brain downloaded and converted into AIs). Still, the interest in using technology for selling artwork has been growing.
Among NFTs most popular are OpenSea, Rarible, Superrare, and Foundation. Alternatively, other niche marketplaces are focused on certain asset types. The NBA Top Shot also sells NFT-style player performances from the NBA and owns its shares.