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What are NFTs and how do they work? NFT is the short form for non-fungible tokens. When something is fungible, such as a dollar bill, it is equivalent to any other dollar bill and can therefore be exchanged for it. In contrast, a non-fungible token is a unique asset in digital form that cannot be traded for another NFT. It means that each NFT is a unique object. NFTs are transferred from one owner to another using blockchain technology, creating a digital trail from seller to buyer that verifies the transaction. This encodes the individual ownership rights to the buyer.
The NFT replaces the need for certificates of ownership. NFTs are stored on a blockchain, a database composed of various data blocks. These data blocks contain all transactions made on the respective blockchain. The blockchain, therefore, stores that the original file belongs to the user who created the NFT or the one who purchased it on a marketplace after its creation (read more about blockchain).
NFTs are primarily digital files, of which there is only one or a few. These include crypto artworks, virtual territories in virtual worlds, and digital trading cards or game pieces. But other documents such as ID cards, vaccination cards or electronic prescriptions can also be stored via the blockchain.
NFTs were first introduced in 2012 as “Coloured Coins” by Meni Rosenfield. These were initially intended to be issued via the Bitcoin blockchain. Their original purpose was to represent and manage real-world assets in Bitcoin (read more about coloured coins).
The first known NFT was coined by digital artists Kevin McCoy and Anil Dash on May 3, 2014. The NFT named Quantum was a short video clip created by McCoy´s wife, Jennifer. McCoy later minted this clip on the Namecoin blockchain and sold it to Dash for $4. (watch this video for more information about the first NFT”)
In 2015, technology slowly caught up with the world. The first NFT project called Etheria was launched as a result. It was then presented at DEVCON in London, a 3-day conference for software developers.
This first project happened three months after the launch of Ethereum, a decentralized global software platform powered by blockchain technology where anyone can create any secured digital technology. The term NFT gained prominence after the introduction of the Ethereum blockchain when the blockchain protocols introduced an ERC-721 standard that promoted the distribution of NFTs on the Ethereum blockchain.
In 2017, many new NFT projects were launched. Of these, Cryptokitties was the most notable, as it was the first glimpse into this new crypto asset for many NFT owners. Later, the growing NFT technology was integrated into several metaverses and gaming industries. These new NFT games provided a critical use case for NFTs to expand further.
Now you know What are NFTs and how they work, but this is just the tip of the Iceberg. If you like this article and want to learn more about NFTs in gaming, we recommend you check out this interesting article regarding P2E games (play to earn) HERE.
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