Web3, an initiative by tech leaders and blockchain aficionados to develop a decentralized iteration of the internet, is fully employing the potential of NFTs (Non-Fungible tokens) to provide its users with an unmatched level of security and efficiency unavailable in prior iterations. Today, NFTs are one of the most significant building blocks of web3, with a reported 139% year-on-year growth in its market cap. As the list of applications for NFT technology continues to strengthen the decentralized web, industries are rushing to establish their position in the growing web3 marketplace. Before you consider your business’s entry into the web3 landscape, we thought we help you understand NFTs, their features, and how they could transform how your company operates in the catalyzed paradigm shift from web2 to web3.
What is an NFT?
An NFT is a non-fungible digital cryptographic asset stored on the Ethereum blockchain. The term is non-fungible implies that NFTs cannot be replaced or interchanged for another asset holding the same value. Each NFT consists of unique metadata and identification codes that safeguard it from replication and theft.
Fungible assets such as cryptocurrencies and physical currency tend to have equivalents. For instance, a dollar note can be directly interchanged with another note because although they are different notes, they are identical and hold the same value. On the other hand, a non-fungible token is not interchangeable or replaceable with another. Fundamentally, no two NFTs are the same and are considered unique entities that cannot hold the same identification codes on the blockchain.
How do NFTs work?
NFTs are entirely digital assets ‘minted’ or created on the Ethereum blockchain, representing both tangible and intangible assets as code on the blockchain. This code contains the digital asset’s valuable information, metadata, and ownership details replicated across all nodes on the blockchain, transparently viewable by stakeholders. Unlike other forms of assets, barring situations of fractional ownership, most NFTs have only one owner. Hence, providing the collectors market digital brag rights for their NFT holdings.
Why are NFTs important?
In May 2014, New York City artist Kevin McCroy created the first-ever NFT art called ‘Quantum’ depicting an octagonal animation. Since then, NFTs have evolved to represent digitized virtual assets such as art, music, real estate, gaming collectibles, intellectual property, and more. Here are some of its most sought-after characteristics that are actively contributing to its irrefutable value, importance, and potential:
Security
While duplication and fraud are subjecting most real-world assets, NFTs are encrypted tokens that offer a stable and secure form of asset ownership that is securely verifiable without divulging sensitive ownership information. Your NFT investments are now safer than ever before due to the immutability nature of every blockchain record.
Ownership
Unlike the complexities and hidden costs of purchasing fungible assets, purchasing NFTs boils down to following a few simple steps. Begin by creating your cryptocurrency wallet and buying the desired amount of Eth (Ethereum’s native crypto token) required to make your first NFT purchase. Coinbase, Binance, or WazirX are examples of popular cryptocurrency exchanges where you can buy ETH. Next, transfer your purchased Ethereum from the exchange to your unique cryptocurrency wallet. Lastly, link your crypto wallet to an NFT marketplace of your choice like OpenSea or Rarible and proceed to purchase your first NFT. It’s a simple, transparent process with significantly lesser associative costs than fungible assets. Upon every successful purchase, your ownership details are replicated across all nodes in the Ethereum blockchain, providing immutable proof of sale.
Enhanced Authenticity
During NFT trading, their unique identification code, metadata, and ownership data are securely registered as entries on the Ethereum blockchain. The legitimacy and authenticity of all blockchain records and transactions are periodically verified and validated by external validators and ownership verification tools. Thus ensuring the blockchain system’s integrity is continually maintained.
Market efficiency
The marketable quantity of any NFT depends entirely on its creators. If you wish to create your own publicly tradeable NFT, you can choose how many you want to release, with their value and demand determined by their uniqueness and desirability. A crucial factor heightening an NFT’s value is its ownership exclusivity, as tokenized assets are usually valued depending on the market demand for the information they store and its rarity. For instance, the value of an art NFT may increase if its stored information contains the artist’s digital signature within its metadata.
How NFTs are powering the development of Web3.0
As we move into the world of decentralized finance, blockchain instruments such as NFTs are becoming increasingly valuable for giving total control back to the people. Web3 recognizes the value these digital tokens hold for the future of web3 and is taking active steps to leverage NFTs to increase overall transactional security and efficiency. Here are some of the crucial characteristics of NFTs that are helping power the ongoing development of web3 in the right direction:
Decentralization
The rising public distrust towards the heavily centralized web2 and its potential privacy, security, and efficiency issues are leading to the paradigm shift toward blockchain and its robust applications, cryptocurrencies, and NFTs. NFTs powered by blockchain technology help users eliminate the need for third-party intermediaries, transaction fees, governance, and transactional limitations posed by traditional centralized financial institutions. They are giving users complete control over their assets in the web3 ecosystem.
Ownership of data
Web3 now allows its users to create non-transferrable NFTs housing their sensitive user data. The demand for user data privacy has never been more relevant, and web3 users can choose when, how, why, and to whom their information is shared. Hence giving users back control over their data that was previously not adequately afforded to them in the web2 environment. Alongside the NFT technology, smart contracts, and the blockchain network comes increased data privacy, security, and efficiency with a lessened risk of data loss or breaches. Web3 developers are using the possibility of data tokenization to enable users to digitize passport details, healthcare records, and other forms of sensitive information on the blockchain.
Removal of intermediaries
The need for intermediaries has been integral to almost all transactions through traditional finance. In web3, buyers and sellers can transact their tokenized digital assets directly, eliminating the need for intermediaries while avoiding any associated costs. Users can now market any form of NFTs like recordings, text, pictures, and collectibles directly on exchanges without requiring intermediaries or shareable P2P without go-betweens. Most NFTs in the trustless blockchain network automatically pay creators their due royalties every time an NFT is traded without needing third-party physical intervention.
In conclusion, NFTs continuously evolve and display endless industry-wide possibilities beyond helping artists and content creators. These possibilities could potentially mean web3, and NFTs can help transform your business as it migrates towards web3. If you feel you don’t have enough knowledge or experience in blockchain and web3, don’t worry. A good web3 studio should be able to guide you through all that you need to transition into the new age of decentralization.
Kreatorverse: Web3 Product Studio & Corporate Innovation Partner
Kreatorverse is one such transformative web3 product studio that has partnered with multiple companies on live web3 projects. We specialize in everything in the decentralized web3. We help companies and entrepreneurs build innovative applications rooted in blockchain technology across industries. We’re working on exciting projects, including a crypto payment solution and an NFT marketplace that reimagines fandom, bringing fans closer to their favourite celebrities in the metaverse. We also specialize in cloud and edge computing, augmented reality, virtual reality, cybersecurity, artificial intelligence, machine learning, and the Internet of Things. Want to know more about our web3 services? Contact us today.
