Today i will be explaining what NFT is, try to break it down as possible because for some time i could not make sense of it either till i researched about it and watched some videos too.

• First of all,the process of verifying the ownership of both physical and digital assets is an integral component of most businesses and systems. Furthermore, throughout history, individuals have collected scarce and valuable assets such as art, jewelry, and land. Today that trend has extended into collectibles like autographed memorabilia, trading cards, and more. Traditionally, the ownership and authenticity of these assets have been facilitated by paper-based or centralized digital systems, which are often inefficient.

History Of NFT

What is NFT ??

NFTs are unique cryptographic tokens that exist on a blockchain and cannot be replicated. NFTs can represent real-world items like artwork and real estate. "Tokenizing" these real-world tangible assets makes buying, selling, and trading them more efficient while reducing the probability of fraud (reducing, not eliminate).

• In 2017, Dapper Labs launched a decentralized application on the Ethereum blockchain called CryptoKitties, which was the first true example of digitally verifiable and transferable non-fungible tokens. These non-fungible tokens, or NFTs, are collectible game characters with randomly assigned attributes that make each CryptoKitty more or less rare. Using the native digital signature scheme on the blockchain, it is easy to verify the authenticity of each CryptoKitty, its unique attributes, and its owner. Furthermore, the friction and risk of fraud in the transfer of these assets to a new owner is drastically reduced. Today, the foundational invention of non-fungible tokens (NFTs) made popular by CryptoKitties is being applied to a broad set of use cases from digital art and in-game items, to digital identity credentials and land titling. Reference

Characteristics Of a Non-Fungible token

Non-fungible tokens (NFTs) are designed to be :

• cryptographically verifiable

• unique or scarce

• easily transferable

How Does an NFT Work?

NFTs exist on a blockchain, which is a distributed public ledger that records transactions. Specifically, NFTs are typically held on the Ethereum blockchain, although other blockchains support them as well.

An NFT is created, or “minted” from digital objects that represent both tangible and intangible items, including: • Art

• GIFs

• Videos and sports highlights

• Collectibles

• Virtual avatars and video game skins

• Designer sneakers

• Music

Risks involved in the adoption of non-fungible tokens?

There are various challenges and risks that may affect the adoption of non-fungible tokens, including but not limited to:

i) Complexity: The technology and tooling behind non-fungible tokens and the decentralized applications (dapps) that underpin them are still nascent despite the increasing adoption amongst startups and enterprises alike; Many of the complexities associated with building NFT-related solutions are not yet abstracted by quality tooling.

ii) Regulatory/Legal Implications: With the introduction of new and innovative technologies, particularly ones that involve speculative or high-value assets, come distinct regulatory and legal considerations including but not limited to know your customer procedures, anti money laundering mechanisms, and securities law compliance.

iii) Rapid Innovation: The rapid pace of innovation in the NFT ecosystem and the blockchain networks on which they are issued presents challenges for those adopting the technology in the form of consistent change; agility and modularity are critical.

iv) Concerns Regarding Ecological Impact: Controversy continues in regard to the impact that energy-intensive blockchain networks that utilize the Proof-of-Work consensus mechanism have on climate change, and NFT-focused products have been a target for such criticism. However, solutions already exist to ameliorate this concern, such as the adoption of less energy-intensive consensus mechanisms and the use of “Layer 2” or L2 networks where transactions that mint NFTs can be validated more rapidly and efficiently outside of the main blockchain network. For example, the Ethereum blockchain network is well on its way to shifting towards the more energy-efficient Proof-of-Stake consensus mechanism in its Ethereum 2.0 launch, and Layer 2 solutions like Polygon and ImmutableX are already helping reduce the load today.