Non-Fungible Tokens (NFT) – what are non-interchangeable tokens

The development of the cryptocurrency market is in full swing. Its influence on modern economic trends is constantly growing. The volume of transactions on crypto exchanges reaches hundreds of millions of dollars, and the dynamics suggests further development. There are new tools that are actively involved in the work of cryptocurrency users in various industries. One of such tools is Non-Fungible Tokens –NFT) – non-interchangeable tokens.

What is NAT and why are they considered not interchangeable

Any assets in the economy can be divided into two main types:

  • interchangeable;
  • non-interchangeable.

For example, the national currency can be replaced with the currency of another state. The same is true with the denomination of the bill. A simple exchange. But most assets are not interchangeable. For example, names in social networks do not change, points on a savings account in one store with another store.

The ability to manage non-interchangeable assets is provided by the blockchain. Due to this, you can not only own, but also dispose of.

Properties of NFT tokens

The main properties include:

  1. Variability of programming. The desired parameters can be changed as many times as required.
  2. Liquidity. Due to the free sale, assets can be sold very quickly and profitably.
  3. Freedom of bidding and features. Due to its properties, you can place a lot in any market. This is a noticeable improvement over the original criteria, under which NET objects were traded only within the original ecosystem.
  4. Provable scarcity and immutability of criteria after graduation. It is achieved through the use of smart contracts. Developers have been given the opportunity to set restrictions on the supply of objects. And their properties cannot be changed. This is especially true for works of art.
  5. Standardization. When storing NFTs on a common chain, it is possible to apply uniform rules for their distribution. A standardized form of basic functionality, transfer and management of objects is used.

Experts can identify a number of common properties, but the listed five are among the most important properties that distinguish NFT from other variations.

What are NFT tokens for and where are they used

The use of NFC tokens allows us to standardize the main problems of ownership, use and disposal of art objects, digital objects, collections, and other assets that cannot be disposed of by alienation in the classical sense. As a result, such property rights acquire transparency and clarity.

Main areas of application:

  • art collections;
  • vehicles;
  • real estate;
  • gaming platforms;
  • domain names;
  • collecting.

The above list is open. It cannot actually be restricted due to the properties of non-interchangeable tokens.

How to make money on NFT tokens

There are five main ways to earn money on NFT tokens. These include:

  1. Purchase of individual NFTs for the purpose of subsequent resale for profit. Assets are acquired on various marketplaces and later, due to price adjustments, they are sold at a higher cost. The final benefit is obtained.
  2. Lending in the NFT market. A loan is taken as collateral for the asset. The maximum loan threshold is lower than the asset value.
    In case of non-repayment of the loan, the collateral becomes the property of the lender.
  3. Acquisition of management tokens.
  4. Purchase of insurance policies under NFT. They insure the profitability of tokens. In case of reduction, the insurer compensates for the loss.
  5. Acquisition of index funds. This is a special protocol management token.

The value of each individual NFT is different. There is no one right way to store an asset and earn money. Depending on the subjective criteria, one or another method of storage and disposal is applied to each type of asset.

Where to buy and store NFT tokens

The purchase of tokens takes place on exchanges of decentralized currencies – DeFi. The main cryptocurrency used in transactions is Ethereum. The main method of conducting the sale is the organization of a Dutch auction. It is used to sell low-cost assets. With a higher starting subjective price, the English auction system is used.

NFT market today and development prospects

During the spring season of 2021, the volume of NFT markets amounted to about $ 500 million. Entrepreneurs, media and creative people, collectors, and politicians have actively joined the trade. Interest in new types of earnings has increased considerably against the background of the impenetrable coronacrisis stage of the survival of our civilization.

The platforms on which the auctions are held are experiencing an ongoing growth of new users. The statistics of the main exchanges constantly show an increase. In a few months, the number of active market participants has increased by tens of thousands of private accounts.

Taking into account the peculiarities of modern economic indicators, the prospect of the development of this market has only a positive direction. According to experts, sooner or later the market of non-interchangeable assets will equal the degree of influence with the currency exchanges of the traditional direction.

Published: 15 August, 2021

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