A non fungible token is a digital asset with unique properties. Non-fungibility means that each token instance cannot be replaced by another identical one of the same type and value. It can be challenging to determine which non fungible tokens are worth investing in, so we have compiled this list of a few qualities that every good NFT should have.
- Unique:
The token must be unique and cannot be replicated. This is perhaps the essential quality of a good NFT. If two passes are identical, they have no value because they can be used interchangeably. The uniqueness of a token can be ensured in many ways. One standard method is to use a random number generator to create a one-of-a-kind ID for each pass.
This ID can then be stored on the blockchain or another distributed ledger. The nft creators can also use the ID to encode information about the token. For example, if an nft is representing real-world assets like gold or diamonds, then it can record on the blockchain that this specific asset has been certified and appraised by an accredited third party such as Sotheby’s.
- Define a Real World Use Case:
A token must have a real-world use case. This is as simple as it sounds, and yet there are many tokens available that don’t provide any utility to their users. Any good NFT should be helpful in the physical world by representing something with value or can do something for you.
For example, if your business sells rare sneakers, then issuing an ERC-20 sneaker token would make sense because customers could buy them directly from your website without having to transfer fiat currency back and forth between themselves and the company’s wallet address every time they made a purchase. Furthermore, since each shoe has its individualized serial number on this smart contract, you can ensure that nobody else can counterfeit them either.
- Identify the Token’s True Value:
A token must be valuable to its owner. The value of an NFT can determine whether or not it should even exist in the first place, so you have to ask yourself what makes your token worth anything at all. If it doesn’t represent something with intrinsic value, then chances are nobody will want it.
For example, imagine if there were a single-digit decimal non fungible asset representing ownership over one square inch on Mars’ surface – how much do you think people would pay for this? An ERC20 token representing ownership rights over virtual land sounds like a great use case but owning fractions of other planets seems farfetched and impractical at best.
- Provide Security:
An NFT’s Security is essential for several reasons. First of all, if someone can steal your tokens, they are not yours to begin with, which defeats the entire purpose. Secondly, since non fungible tokens are valuable, people will try to take advantage of that by hacking into other peoples’ wallets or stealing their private critical information to gain access to them.
If you don’t protect your assets adequately, it could lead to tampering with records on the blockchain itself, and so an attacker might attempt a double-spend attack after they’ve stolen one of these ERC20s.