Explore the digital art scene and learn why nft is so expensive.
Why NFT Is So Expensive?
NFT is an acronym for Non-Fungible Token. NFT is used to refer to a special type of crypto token. The token is not fungible as it can be linked to a real-world asset with a unique identity.
Using this unique identity, you can track the token and verify its authenticity. The blockchain is used to verify the authenticity of the asset. Fungible tokens are very similar to the collateral assets used in the real world.
You can’t guarantee the uniqueness of each token in a group. This means that you can exchange one commodity with another just like you can exchange a one-dollar bill for another dollar bill. This also means that you can’t link each coin to an individual entity and track them.
Such assets have no identity and therefore cannot be verified. The degree of fungibility depends on the type of asset used in the transaction. Some assets have high fungibility while others have low fungibility. For example, fiat currencies have low fungibility while diamonds have high fungibility.
Some Examples of Non-Fungible Tokens
Cryptokitties is a game that rewards you for breeding and trading digital cats. These cats have unique identities. They can’t be exchanged across platforms but can be traded on the Ethereum blockchain. Each cat has a unique identity and it can’t be exchanged with other cats on the platform.
CryptoKitties are an example of non-fungible tokens. CryptoPunks is a game that rewards you for breeding and trading digital punks. Each punk has a unique identity and can’t be exchanged with other punks on the platform.
Cryptopunks is an example of non-fungible tokens. CryptoPunks Tokens are ‘ERC 721’ tokens. So, it means that they’re built using smart contracts on the Ethereum blockchain.
NFT Tokens
There are three types of tokens: 1) fully fungible, 2) partially fungible, 3) non-fungible tokens (NFT). Fully Fungible Tokens are indistinguishable from each other. Therefore, this is interchangeable without any consideration for their identities.
They are used as currency or collateral assets such as USD or gold or bitcoin or Ethereum or Litecoin etc. They can be exchanged across the platform. So, it cannot be traced back to a single entity or owner due to their high degree of anonymity and lack of identity. There’s no need for tracking individual coins or tokens.
This makes them cheaper although they are highly volatile due to market forces. Partially Fungible Tokens are interchangeable but not indistinguishable from each other like the ERC-20 tokens. Since it was created using Ethereum’s smart contracts technology.
These have little identity since they all carry the same value. But they are traceable back to an individual entity or owner such as a real estate property or artwork, So, it was purchased at auction and then digitized via blockchain technology.
Non Fungible Tokens cannot be exchanged across platforms due to their unique identification. It is tied to a single entity or owner such as a piece of artwork, a physical property. This is such as land, home, car, etc. that was digitized using blockchain technology.
