Non-Fungible Token (NFT) is one of the encrypted tokens representing a unique asset on the blockchain. Unlike other tokens, NFT can be used to prove authenticity or ownership in the digital domain because it is Non-Fungible. For example, an NFT can represent a painting of an artist due to its non-fungibility.
If an asset is fungible, it means that the asset is replaceable. For example, a dollar can be easily replaced. The fungibility enables free exchange of traditional currencies. However, fungibility forces people to focus on quantity rather than value. NFTs are special because each NFT has unique identifiers that make them distinct (Non-Fungible).
There are various standards for creating and issuing NFTs. ERC-721 standard is the most widely used, and is tradable on the Ethereum blockchain. Recently, the standard has changed to the ERC-1155 model, which allows both fungible and non-fungible tokens to be included in a single contract, opening a whole new realm of possibilities. With ERC-1155 model, NFT is now interchangeable between applications without losing its uniqueness. The value of NFT derives from people who perceive them as valuable. In other words, it is the shared belief that makes NFT valuable.
Investment Opportunities in NFT Asset
Nowadays, NFTs are treated more as a target for investment. More and more people are willing to invest in the NFT market. Recent data shows that the market transaction in the NFT industry has reached 300 billion last year, which is approximately 260 times the transactions happened in 2020.