How Do NFTs Work?
Non-fungible token is different from ERC-20 tokens like DAI or LINK because each token is completely unique and cannot be split. It gives the ability to assign or claim ownership of any unique traceable piece of digital data using Ethereum’s blockchain as a public ledger.
Immutable tokens are minted from digital objects as a representation of digital or non-digital assets.
An NFT can only have one owner at a time. Ownership is managed through unique identity and metadata that no other token can replicate. They are issued through smart contracts that assign ownership and manage the transferability of these tokens.
When someone creates or prints an NFT, it executes the code stored in smart contracts according to different standards such as ERC-721. This information is added to the blockchain where it is managed. The process of minting money from a high level consists of the following steps it goes through:
- Creating a new block
- Verification information
- Recording information on the blockchain
Some of its special features are:
- Each minted token has a unique identifier directly linked to an Ethereum address.
- They cannot be directly exchanged for 1:1 other coins. For example, 1 ETH is exactly the same as any other ETH. This is not the case with immutable tokens.
- Every token has an owner and this information can be easily verified.
- They live on Ethereum and can be traded on any Ethereum-based NFT market.
- Usage Areas of NFTs:
- NFT Usage Areas
- Its usage areas are very wide. It can show itself in many areas, from works of art to sports, music, games, movies and fashion.
Why is NFT Technology Important?
Although NFT technology is being used in different areas day by day, it is mostly preferred in the creation and sale of digital artworks. For this reason, they can be considered as modern time collections.
The main motivation behind NFTs being a multimillion-dollar market is that they are found to be much more reliable than conventional art collecting.
Although there are many copies of the Mona Lisa all over the world, only one original work is found. However, every NFT has a digital signature created by encoding, which makes it impossible to copy exactly. NFT technology takes collecting a step further as it helps assign ownership of the original piece.
For artists, being able to sell artworks digitally directly to a global audience without using an auction house or gallery allows them to retain most of the profits from sales.
Also, because copyrights can be programmed into digital artwork, the artist continues to receive a percentage of the sales profit each time the work is sold.
NFT Art technology, which also attracts the attention of Turkish digital artists, helps to reach the whole world. One of the remarkable examples in Turkey is digital artist Refik Anadol’s NFT collection called “Machine Hallucinations”, which was sold for $5.1 million at an auction organized by Sotheby’s.
The usage area of NFTs in the world has gone beyond digital collecting. Global brands such as Taco Bell have created their own NFT Art assets to collect donations for nonprofit charitable activities.
A record number of offers were received for these digital assets, which were exhausted within minutes. Twitter announced in June 2021 that it was preparing its own NFT collection. The developments about NFT Coin are increasing day by day all over the world.
What Are NFTs? Explained!