Getting started with digital assets, tokens and NFTs

What are tokens? digital assets? and cryptocurrencies?

Often, digital assets, crypto and tokens are used interchangeably and can be confused. A digital asset can be broadly defined as a non-physical asset which is created, stored, transferred and exchanged in a digital format. Crypto tokens and currencies are examples of digital assets that are stored and exchanged through the Blockchain.

In the context of the Blockchain, crypto refers to cryptography. Cryptography is an advanced encryption technique used to guarantee the authenticity of a digital asset by eliminating the possibility of counterfeiting or double spending.

Unlike cryptocurrencies, which are the native asset of a Blockchain (like BTC, ETH or SOL), tokens are created on top of the Blockchain, as part of a platform built on that Blockchain. For example, this is the case of the many ERC-20 tokens that make up the Ethereum ecosystem.

What about NFTs?

NFTs or Non-Fungible Tokens are one type of crypto tokens certifying that a unique version or copy of a digital asset is owned by a one or more entities. NFTs are unique and cannot be interchanged with other similar tokens.

NFTs can be used to represent digital assets such as images, audios, videos, as well as other types of digital files. Several token standards can be used for creating crypto tokens and in particular, NFTs. The majority of NFTs circulating today have been built on top of Ethereum using the ERC-721 standard (e.g. CryptoKitties).

NFTs can be designed to represent physical assets or more traditional digital assets, or a certain utility or service. For instance, there are crypto tokens that represent tangible assets such as real estate and art.

How do they link to the metaverse?

A metaverse is an immersiveinteractive virtual world accessible via a computer, virtual reality headset or smartphone(among others).

Metaverses are very likely to be poweredby the Blockchain technology and crypto-tokens (i.e.,cryptocurrencies, NFTs). That is what makes assets, interactions, and experiences earned inthe digital realms valuable.

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