Tokens and NFTs

• Tokens and NFTs

Crypto Coin vs. Token

• A token usually represents an asset or a utility and is not a currency.
• A token possesses transactional, intrinsic, or market value.
• A coin is a cryptocurrency that operates on its own blockchain.
• Most new digital currencies are developed on existing blockchains and are technically tokens, not coins.
• The purpose of a coin is purely financial.

Token Analogy

• Tokens can be compared to those used at Dave & Busters.
• USD is replaced with a token that games recognize, accept, and process into a transaction.
• They are like money earned by video game players while fighting monsters, which they then use to buy in-game gear.
• Blockchains enable tokens usage to extend beyond single-game systems.
• Tokens can be earned in one place and used in many others.
• Basic Attention Token (BAT) is used to buy ads in the Brave browser.

Token Use Cases

• Tokens can represent a fiat currency like USD within the Ethereum ecosystem.
• Reputation points in an online platform can be tokenized.
• The skills of a character in a game can be represented as tokens.
• Lottery tickets and financial assets can be tokenized.
• Even physical items like gold can be represented by tokens.

Crypto Token Types

• Payment tokens are commonly used for transactions.
• Utility tokens provide access to blockchain-based products or services.
• Security tokens represent traditional securities like stocks and shares.
• Governance tokens distribute power and responsibility to users who are seriously committed to a project's success.
• Privacy tokens ensure that only the sender and receiver know the transaction details.

Non-Fungible Tokens (NFTs)

• Fungible items are fully interchangeable can be traded or exchanged at a 1:1 ratio.
• Non-fungible items are unique and irreplaceable.

NFT Definition and Properties

• NFTs are versatile digital certificates of authenticity.
• NFTs are unique cryptographic tokens on Blockchain that prevent counterfeiting.
• NFTs can represent real-world items like artwork and real estate.
• Tokenizing tangible assets makes buying, selling, and trading more efficient, reducing fraud.
• NFTs can represent individual identities and property rights.
• NFT ownership details facilitate the easy identification and transfer between token holders.
• NFTs like tokens representing coffee beans, can be classified as "fair trade."
• Digital representation of assets are stored in passports.
• Each token has a unique, non-transferable identity to distinguish it from others.
• NFTs are extensible; one NFT can be combined with another to "breed" to create a third, unique NFT.

NFTs vs. Verifiable Credentials (VCs)

• Non-Fungible Tokens and Verifiable Credentials are often used interchangeably to identify entities in the digital world.
• NFTs are a type of token that is unique and not interchangeable.
• VCs are tamper-proof credentials that can be verified cryptographically to prove an entity's identity.
• NFTs publicly display digital rights while VCs store privately-held digital facts.
• NFTs derive value from scarcity, whereas VCs are not driven by scarcity.
• NFTs are platform-specific, while VCs are not.
• NFTs are implemented only on blockchain.
• VCs can be implemented with and without blockchain.
• NFTs prove the ownership of an object and grant exclusivity.
• VCs prove the identity of an entity.

NFT Importance

• They increase market efficiency by streamlining processes and removing intermediaries.
• NFTs also enable artists to connect directly with consumers.
• They improve business processes as with diamonds, where they track provenance, production, and sale throughout the entire process.
• Physical assets are able to be converted into a digital state.
• NFTs remove the need for agents and allow artists to connect directly with their audiences.
• NFTs simplify interactions within a supply chain, as in the case of wine bottles.
• NFTs help track provenance, production, and sale throughout the entire process.

Examples of NFTs

• Digital artwork
• Unique sneakers in limited-run fashion lines
• In-game items
• Essays
• Digital collectibles
• Domain names
• Tickets that give access to an event or coupon
• Real-world goods
• Music royalties

Explore tokens, their use in representing assets or utilities, and their transactional value. Compare tokens to coins, highlighting their distinct roles in blockchain ecosystems. Understand token use cases, such as representing fiat currency or powering advertising in the Brave browser.