Just recently, the ever smart Binance announced an introduction of NFT to Binance. This simply means introducing Standard to Binance chain. Binance is always right on time. Well, I shall devote a different space for this in future.
A lot of people are in total black-out to what Non-fungible tokens are. Therefore these ones need proper education to be placed on the right side of event.
Someone once asked me to please tell him what NFT and Defi are about in a layman’s language. He asked this because he gets confused the more he reads about them, especially, NFT. This is the singular reason why I am dedicating this submission to the beginners who might be trapped in this intellectual maze.
DeFi definitely is quite easy to understand because it has been making wave in the crypto space for some time now. If one fails to comprehend it in theory, he will definitely understand it in practice. If you have ever swapped, farmed or staked for lending without the need of any intermediary, definitely, you are practicing Decentralized Finance (DeFi).
The purpose of this post is to explain the relationship between NFT and DeFi and to explain NFT elaborately. I shall explain Defi succinctly before delving into NFT and its various nuances. Lastly, we shall marry the two.
If you’ve been living in the crypto world for a while, you’ve likely heard of these two terms “Non-Fungible Token” (“NFT”) and Decentralized Finance (DeFi). Maybe you’re a skeptic, a believer, or a novice. In any case, this post is also for you!
WHAT IS DEFI
DeFi is short for “decentralized finance,” an umbrella term for a variety of financial applications in cryptocurrency or blockchain geared toward disrupting financial intermediaries. DeFi is distinct because it expands the use of blockchain from simple value transfer to more complex financial use cases.
All what we see done in our financial institutions and even more are now done on Blockchain Smart Contract via DeFi, and these are done in a very simplified way and without the use of any middle man or broker. This is just amazing!
WHAT IS NFT
Non-fungible tokens (NFT) are unique kind of tokens that are not interchangeable chiefly because they are not identical in Specifications.
In other words, they possess individual distinctive or unique Attributes that make it impossible for them to be replaced or exchanged.
In addition to their being unique, they are also indivisible and can be used to represent both tangible and intangible items.
Non-fungible tokens combine the best traits of decentralized blockchain technology with non-fungible assets to create provably unique, provably scarce, and provably authentic tokens utilizing blockchain technology.
NFTs are applicable in a wide range of use cases, including: collectibles, gaming, art, virtual assets, tokenizing real world assets. They also allow for a flexible way to store, control, and protect the information related to one’s identity.
What exactly do we mean by all these gramatic jargon about Non-fungible Tokens (NFT)?
To understand what NFT stands for, we will first of all understand what non fungible goods or assets are in the real life and also what fungible goods and assets are. Then we will come to know how the features seen in the non fungible goods or assets are replicated in the token.
In the real life, Fungible assets or goods are but not limited to commodities, common shares and your local currency. What make them fungible? They are fungible because they are identical to each other and can be interchanged with other individual goods or assets. This simply implies that they have equal values. Take for instance, $10. Every $10 is equal. When you lend $10, it’s not the same $10 you lent that will be given to you in return. It will be a different $10, but that won’t make any difference to you because you understand that they all have the same value and are equal. The same thing applies to shares (stock) and commodities. This also still applies to fungible tokens which includes bitcoin and all the altcoins and Smart Contract tokens without standard. If for instance, you send 1 Dogecoin to someone, while returning it, he or she won’t bother to return exactly the same Dogecoin you sent. Any Dogecoin could do as long as it has the same value with the one you sent.
In contrast, non fungible assets or goods are assets or goods like diamond, land, building, artwork, painting or football invitation card. If for instance, you lease your building or lend your diamond or artwork, there is no way the person while returning it, will give you a different thing other than the very thing you gave the person. There is no diamond that the person will give you that will have the same cut and shape as the diamond you gave the person. But if it’s a gold bar, the case will be different, because they are cut in a similar way and weighed to be equal. In this case, a gold bar can be said to be fungible. However, the gold bar ceases to be fungible when it is numbered or marked with any form of identity.
Just like the gold bar, a token or coin ceases to be fungible when it is marked with identity that differentiates it from other tokens or coins. This is actually what gave rise to NFT which is supposed to be a virtual representation of the real non fungible assets or goods.
In our next edition, we shall look at how NFT is created, the evolution of NFT and many more