An NFT is a digital asset that can come in the form of art, music, in-game items, videos, and more. They are bought and sold online, frequently with cryptocurrency, and they are generally encoded with the same underlying software as many cryptocurrencies.
Creation of NFT
A non-fungible token is created by an artist, creator, or license-holder through a process called minting.
Minting is a process that involves signing a blockchain transaction that outlines the fundamental token details, which is then broadcasted to the blockchain to trigger a smart contract function which creates the token and assigns it to its owner.
Under the hood, a non-fungible token consists of a unique token identifier, or token ID, which is mapped to an owner identifier and stored inside a smart contract.
When the owner of a given token ID wishes to transfer it to another user, it is easy to verify ownership and reassign the token to a new owner.
Smart Contract
A smart contract is code that is executed deterministically in the context of a blockchain network; each participant in the network verifies the state-changing operations that a smart contract’s code makes.
Smart contracts are the primary means by which developers can create and manage tokens on a blockchain.
Smart contracts can store small amounts of data in common data structures, which is a critical component of tokenization use cases that map token identifiers to owner identifiers to track who owns which token.
Features of NFT
- NFTs exist on a blockchain, which is a distributed public ledger that records transactions.
- An NFT is created, or “minted” from digital objects that represent both tangible and intangible items, including graphic art, videos and sports highlights, collectibles, music, etc.
- NFTs can have only one owner at a time, and their use of blockchain technology makes it easy to verify ownership and transfer tokens between owners.
- The creator can also store specific information in an NFT’s metadata. For instance, artists can sign their artwork by including their signature in the file.
Difference Between NFT and Cryptocurrency
NFT is generally built using the same kind of programming as cryptocurrency, like Bitcoin or Ethereum, but that’s where the similarity ends.
Physical money and cryptocurrencies are “fungible,” meaning they can be traded or exchanged for one another. They’re also equal in value like one Bitcoin is always equal to another Bitcoin. Cryptocurrency’s fungibility makes it a trusted means of conducting transactions on the blockchain.
Whereas, NFT has a digital signature that makes it impossible for NFTs to be exchanged for or equal to one another (hence, non-fungible).
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