Making sense of NFTs – What are they and how are they used?

April 24, 2024, 3:10 PM | The content is supplied by a Guest author

The cryptocurrency market is arguably the most interesting and vibrant trading environment out there, constantly changing and improving, bringing innovation and developments for investors from all over the world. But in spite of the appeal that this should theoretically bring to any investing community, the crypto area has remained largely on the fringes of the financial world, and although it has definitely become more well-known over the past few years, it remains a niche area compared to its more traditional peers in real estate, precious metals, stocks and bonds. Apart from the fact that the market is considerably more volatile compared to these other assets, it is also its complexity that keeps many people away. You need to be quite adept at keeping up with new technologies if you want to be successful in the crypto world.

What’s more, it’s not just about the crypto itself but the other tokens and projects associated with them as well. Out of them, the non-fungible tokens are arguably the most visible and well-known out of the whole bunch. If you’ve been thinking about diversifying your portfolio by including them in your trading ventures, here’s how to make better sense of what they are.

What are NFTs? 

A non-fungible token is a unique asset that is recorded on the blockchain and allows the owner to have full ownership of the asset it represents. It can also stand as proof of authenticity, making it highly coveted across the crypto ecosystem. The NFTs typically represent digital assets but can also be used for real-life items, including music, books, artwork and film. As of 2023, a new category appeared the Ordinals, which investors initially likened to the standard non-fungible tokens except located on the Bitcoin blockchain. However, things are more complex than that.

The Ordinals are inscribed on the Satoshi, the smallest Bitcoin units currently available on the market. They are also located directly on the main blockchain, a feature which increases their safety and reliability, characteristics that are essential for safe trading and transactions given the decentralized nature of the crypto space. As such, the Ordinals act similarly to BTC itself, enjoying its scarcity and high value. This naturally makes them more attractive to the average investor.

Brands 

Although crypto is not yet on par with traditional assets, several brands have begun incorporating it into their procedures, pointing to the fact that the digital currency ecosystem is becoming increasingly popular and that business owners understand its appeal to consumers. The non-fungible tokens can be used to help companies stand out from the crowd and withstand the pressures that come with dealing with numerous competitors. For instance, well-known fashion brands have already begun incorporating the technology by creating collections that are entirely digital.

Some are also coming up with exclusive collections for shoppers who have been with the brand for years or who are interested in trying something different. If progress and adoption rates in this area seem small, it’s important to remember that online shopping is also a relatively new thing and that it takes some time for a breakthrough to happen and shake things up. Brands who believe this tech will be beneficial for their business by attracting new customers and keeping the loyal ones engaged in the business proceedings can start by releasing collectibles and by tying the digital tokens to their core products and their brand personality.

Web3 games 

If you want to add NFTs or Ordinals to your own portfolio, you should use a reliable, official platform such as https://magiceden.io/ethereum in order to protect your capital. Since there’s no central authority overseeing the transactions, safety can be a problem in the environment, but any potential risks are easily mitigated with the use of a trading platform that takes the security of its customers seriously. Apart from hands-on investing, there’s also the option of acquiring these assets through means such as Web3 games, which are hosted directly on the blockchain and can be modified depending on voting consensus.

The Web3 gaming arena offers self-sovereignty similar to that of the crypto world, and users are given free rein over all of their in-game assets and collectibles such as NFTs. In fact, the assets are an integral part of the gaming experience, and many different games support their use and integration. The design space for using them in games is also essentially limitless, as the NFTs can stand for characters, skins, weapons and any other resources that require non-fungibility.

Supply chains 

Another use case for the NFTs is as supply chain validators, which can seem quite surprising given their presence in the world of gaming. However, this is a testament to the asset’s versatility and ability to lend itself well to several and often starkly different mediums. Across supply chains, particularly those dealing with luxury goods, the issue of counterfeited items remains of paramount concern, as nobody wants to spend a lot of money on what is essentially a fake product of much lower quality and inferior craftsmanship.

Tokenizing products with the help of non-fungible tokens allows brands to ensure traceability, authenticity and transparency. This way, they can always be confident that their products are what they claim to be and that breaches in the supply chain are immediately identified and resolved. Company reputation receives a boost and a larger number of investors remain loyal, all with the use of a single technology.

The bottom line 

The use of non-fungible tokens in the world of trading is not yet commonplace, and a large part of that is due to the fact that many people are not familiar with what the marketplace actually entails. But it’s worth learning about it since many predict that it will become increasingly noteworthy and famous in the future. From individual investments to helping companies establish themselves as leaders in their particular market niche, there’s no shortage of use cases for NFTs. If you’ve been thinking of including them in your own portfolio, there’s no time like the present to start.

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This author could be anybody, but he/she is not a member of TradingBeasts.com staff and the opinions in the article are solely of the guest writer and do not reflect the views of the TradingBeasts.com operator. Readers should do their own research if they want to take any action based on the information in this article.
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