DeFi and NFTs (Non-Fungible tokens)

What are NFTs? And what can you do with them? In this post I’ll try to answer these questions.

DeFi and NFTs Non-Fungible tokens

Guide by u/Fantastic-Cucumber-1

What is an NFT?

If you want to understand the concept of NFT, you must first know what a Fungible token is. NFT stands for Non-Fungible token. An important property of a fungible token or “normal” token is that they are interchangeable – You can exchange bitcoins with each other, the value is equally divisible for everyone – bitcoins can be divided into parts and you can exchange them. For example: 0.003240000 BTC.

An important difference with the Fungible tokens is that the NFTs have a unique aspect and cannot be replicated. This unique aspect is encoded in the token’s metadata. Think of it as a certificate of authenticity.

Some features of NFTs:

  • They are unique, this allows you to identify items with them.
  • They are not divisible.

The latter has the advantage that you can only claim right to a certain product, service or other object such as an art object. Compared to a real-life example; a football ticket for the match is for one person. You cannot share this ticket with multiple people. There is one seat available for you in the grandstand.

What can you do with NFTs?

The NFTs have already entered the gaming industry. However, there are plenty of applications to come up with in other situations as well. Think of; birth certificate, diploma, or ID. All these unique items can be “tokenized”. Tokenizen is digitizing a certain asset and linking it to the blockchain, such as art.

NFTs vs normal tokens

Another difference between normal tokens and NFTs is the protocol they run on. The normal tokens run on the Ethereum protocol: ERC-20.

For Non-fungible tokens there is a choice of two protocols: ERC-721 and ERC-1155. Of which ERC-721 is the most used. ERC-1155 is slightly newer and less used.

The ERC-1155 protocol has been developed to enable developers to implement this protocol in a smart contract in a smart and efficient way. This can then be used to generate unlimited fungible (identical) tokens and non-fungible (unique) tokens.

The ERC-721 protocol, on the other hand, is used to generate non-exchangeable tokens, forcing developers to implement a new smart contract for each new token.Non-fungible tokens and gaming:

Crypto Kitties

A well-known example using ERC-721 tokens is Crypto Kitties. Each ERC-721 token in that game is a unique digital cat.

You can breed these with the help of another digital cat and create new cats. The new cats can then be bought and sold on the platform.


Another good example of a platform that utilizes NFT’s is Decentraland. The name already gives it away: it is a (virtual) world that is completely “built” on blockchain. It can be compared to Simcity: you buy a virtual piece of land, on which you can build and develop whatever you want. Nobody decides what you can build, you are completely free. In addition to buying virtual land, you can also trade other unique assets with other players in the form of NFTs.

Ethernity chain

Ethernity Chain, a new player to the game, is developing a community-centric platform for digital artists to create limited edition NFT lines. Ethernity Chain enables users to own unique digital artifacts and artwork, which are tokenized and traded on the blockchain. This is of particular appeal to the gaming, music and sports industries. However, the scope for NFTs is unprecedented. Ethernity Chain addresses this with the use of Authenticated non-fungible tokens (ANFTs).

NFTs in the future: What can you expect from them

One development in which NFTs can play a major role is DeFi. Decentralized Finance. This topic has been growing in popularity in recent years. And the Non-Fungible tokens can play a supporting role in this.

Let’s look at an example: a car accident. Two different parties. Two different insurance companies that have to sort everything out among themselves. They need to collect all data. This is a lot easier via the blockchain, because everything is linked. An NFT may contain data about an insurance policy or car. Link smart contracts to this, and you know: you don’t have to think about anything yourself. The blockchain will solve it for you.

Final words

In this post, you’ve learned that non-replaceable tokens are unique and have unique properties. This allows them to be associated with a specific item. In addition, items such as artwork, have different values ​​that make it interesting to use NFTs. Especially in the gaming industry, it is becoming more popular to use NFTs.

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