Non-Fungible Tokens, or NFTs, are one of the most recent technological developments. This phenomenon has become a huge success, with some NFTs achieving astronomical highs. It is still unclear if this bubble will become a Dot Com bubble or a viable technological option. NFTs offer use cases that are relevant to today’s digital world, regardless of market dynamics.
What are NFTs? NFT now includes non-fungible tokens. NFT can be defined as “a cryptographic asset on blockchain with identification codes that differentiate them from one another.” They cannot be traded or exchanged at the same value as cryptocurrency and fungible tokens.
These are the two key terms you should be aware of.
- Fungibility is a property of a product or commodity whose individual units can be interchangeably and each of which cannot be distinguished from another.
- Token is a digital asset which can be used to transfer ownership rights to the owner.
NFT, which is a token or digital asset, is not transferable. Each NFT can be distinguished and unique, so they cannot be traded.
Let’s look at the different features of an NFT.
- Each NFT is unique and has its own personality. These attributes are documented in the token information.
- It has the ownership details that can easily be verified over a blockchain network.
- It cannot be divided into smaller denominations, and it can’t been transferred or purchased in parts.
- It can still be transferred in a fraud-proof way, as it is as secure as its blockchain host.
This brings us to a common question. What is the difference between a non-fungible token and a crypto currency. It’s not.
Below is a summary of the differences.
|Non fungible Tokens||Cryptocurrency|
|NFTs cannot be traded or exchanged because they are unique and different from other currencies. They can also change in value frequently.||The cryptocurrencies can be traded and are fungible. They are also equal in their value. They are trusted to conduct transactions on the blockchain.|
|NFTs create unique tokens that can be used to prove ownership or convey rights to digital assets||Cryptocurrencies can be used as currencies, storing and transferring value, or allowing one to buy or sell goods via a blockchain.|
Colored coins were the first non-fungible tokens. These were small bitcoin units with specific attributes that were coded into metadata by Bitcoin’s scripting language. Quantum was the first NFT known to have been minted by Kevin Mccoy back in May 2014. It was sold for $1.47 million in June 2021.
With Ethereum’s launch and introduction of a set token standards, a new era in NFTs was born. This allowed developers to create tokens. NFT began to spread rapidly through NFT gaming, and metaverse projects. Decentraland was the first Ethereum-based VR platform that gamers could use to build, play, and collect items.
Technology’s evolution has a significant impact on the evolution of NFTs. NFTs were made possible by many technology enablers. Here is a list of the most influential technology enabling factors.
Distributed Ledger The core of the blockchain revolution is the concept of a distributed leadger. A distributed ledger can be described as a decentralized repository that is stored and maintained at multiple locations.
Blockchain Technology A distributed database that can be shared between nodes in a computer network. This is different from a traditional database which has a central repository. The blockchain technology is directly responsible for the evolution of NFTs.
Smart contract is a program that triggers legally tenable actions based on pre-defined business logic.
Cryptocurrencies Digital currencies or virtual currencies that are secured by cryptography. They are virtually impossible to counterfeit and double-spend. Digital Wallets for crypto currencies allow NFTs to be traded.
NFTs are similar to blockchain technology and can be used in multiple industries. There are many possible use cases for NFTs, but these are some examples.
- To verify their authenticity, NFTs can also be used. NFTs can be used to verify their authenticity.
- NFTs can be used to transfer ownership or keep track of value changes over time with timestamped NFTs. NFTs are also a great way to speed up transactions and protect sensitive data.
- NFT tokens can also show certification proof and other important information that can stored on the NFT chain. They can’t be modified.
These are only a few examples. There can be many other applications. The lack of creativity and costs associated with scaling up infrastructure will limit your options.
But, as with all technology and assets that hold value, there are always challenges.
- The potential for cyberattacks and fraud will increase as more value is transferred to blockchain. This is because these technologies are still in their infancy.
- NFT ecosystem is currently facing a major challenge in ensuring that smart contracts are robust and viable. Smart contract security was inadequate in many cases that have led to hacking of NFT networks.
- The NFT market faces many challenges due to the absence of a standard for determining the value of NFTs, as well as the fluctuation in crypto currencies.
- NFT owners often have no copyright rights in works. They merely acquire ownership of specific copies. NFT owners are generally not permitted to display or deal with the works in public.
- NFT investment remains a gray area in financial regulation. Financial institutions are still struggling to define NFTs. Regulation of NFTs is still a problem.
NFTs, just like a blockchain need a multi-dimensional validation framework. There are three main components to the testing program.
- Functional testing is used to validate API Validation, User Acceptance, System Integration, and App Interface.
- Blockchain testing is centered around the four central pillars immutability (transparency), security (security) and consensus.
- Non-Functional Test with key focus areas like Consistency Validation and Fault Tolerance Database Failover, Resilience System Performance, Latency and Synchronization.
- Security Testing includes Identity Theft, Static/Dynamic testing 3rd party gateways and Network Penetration.
For a successful validation program, we need to pay special attention to specific elements of blockchain testing, such as configurations that address Data Integration and Transparency and Privacy, Network Security and Identity Management.
Snapsmileshare is among the few IT service providers that has invested in several of its own blockchain Sandboxes. These sandboxes can be used with different blockchain technologies. These sandboxes can quickly produce a prototype for any business application and provide a test environment to determine its viability and effectiveness.
Snapsmileshare offers targeted testing services for applications that include comprehensive validation methods across API testing, functional/non-functional testing, integration testing, security testing, compliance testing, and performance testing and also includes specialized testing features, such as peer/node testing and smart contract testing.
Need assistance? Need help? Talk to our Blockchain Testing Expert for more information about how NFTs are redefining the digital world and how Snapsmileshare is able to assist with blockchain compliance.