Data Protection

Non-Fungible Token (NFTs) Vs Tokenization

What is an NFT?

An exclusive digital asset owned by an individual or organization is referred to as a non-fungible token (NFT). These materials reflect actual objects, ranging from works of art to tweets. Non-fungible tokens, such as the cryptocurrencies Ethereum and Bitcoin, have distinctive identification numbers. Each NFT has a unique digital signature that is kept in a smart contract and prevents equal exchange for another object. These signatures serve as evidence of an NFT’s ownership. In comparison to other blockchains that do not keep public transaction logs for each token, NFTs are a more trustworthy way to purchase and sell on the Ethereum blockchain market.

While purchasers have the chance to own original works of art that no one else has, creators have a fantastic opportunity to advertise their digital creations. This results in a finite supply of digital materials, as you can see. Indeed, this appeals to potential investors who want to fund artists and NFTs. This may, however, exclude those who need more cash to buy non-fungible tokens, which can cost anything from a few dollars to millions of dollars. 

Types of NFTs:

  • GIFs
  • Music
  • Real Estate
  • Artwork
  • Trading Cards
  • Tweets
  • Video Clips
  • In-game items
  • Photographs
  • Domain Names

What is Tokenization?

Unlike NFTs, which represent irreplaceable digital assets, tokenization refers to a method of protecting sensitive data. Particularly, a tokenization platform will trade sensitive data from clients for non-sensitive data, or “tokens.” The numbers are generated randomly in tokens and have no significance or connection to the original data. This is distinct from encrypted data, which a skilled hacker can decipher. Since there is no mathematical relationship between the token and the original data, tokens cannot be decoded. Tokenization is a reliable security method for defending sensitive consumer data from online threats like data leaks.

Whatever kind of business you run, you probably have some sensitive data that has to be protected from hackers. Your tokens can be securely kept and managed in a third-party database separate from your internal systems by working with a tokenization provider. As a result, your company can keep using the tokenized data for operational needs without having to worry about security risks from a breach or stringent compliance requirements for maintaining sensitive data in your internal environment.

Why are NFTs important?

Non-fungible tokens can be said to be a development of the concept of cryptocurrency. For many asset categories, such as real estate, artworks and lending contracts, modern finance systems include complicated trading and financing systems. NFTs advance the reinvention of this infrastructure by allowing digital representations of physical assets.

To be clear, neither the concept of using unique identification nor the idea of digital representations of real goods is new. But when these concepts are combined with the benefits of a smart contract blockchain that is impervious to manipulation, they become a potent force for change. The clearest benefit of NFTs is probably their market efficiency. A physical asset being transformed into a digital one makes the process easier and eliminates middlemen. Without the need for agents, NFTs that represent tangible or digital works of art on a blockchain enable artists to communicate with their audiences directly. Additionally, they can enhance corporate procedures.

Tokens that are non-fungible are also great for managing identities. NFTs can also be used for identity management in the digital sphere, expanding upon this use case.

How do NFTs work?

A variety of digital assets that reflect both actual and intangible real-world objects are used to produce or mint an NFT.

Owners of NFTs receive a digital file that they are completely entitled to own in place of a tangible object. There can only ever be one owner of a non-fungible token. Owners and creators can both add data to the NFT’s metadata. An artist could, for instance, digitally sign an NFT. This can increase brand recognition within the digital art community and aid in recognizing the artist’s work. People may easily authenticate and trace ownership as well as transfer tokens to new owners which is possible due to each token’s unique data.

Non-fungible tokens are additionally kept on a blockchain, which is a digital ledger that records transactions. The blockchain is used by buyers and sellers to determine who has owned a particular NFT. NFTs are normally kept on the Ethereum blockchain, however other markets may also accept them. The cryptocurrency Ethereum supports several tokens, including bitcoin, dogecoin, and NFTs.

How does Tokenization work?

A data security technique called tokenization includes replacing sensitive data with an identical non-sensitive piece of information called a token. The token includes illogically created numbers that were generated randomly and do not represent any original data. The strategy used by the provider and the requirements of the organization will ultimately determine which method is used to carry out this process.

  • Using hash function, which is non-reversible.
  • Use a number generated randomly or an index function

Regardless of the technique employed, the sensitive data will be swapped out for the token until the time comes when the original data must be utilized, such as when a merchant must make a payment. The original sensitive data will then be revealed when the token is returned, and it can then be utilized for commercial reasons.

Are NFTs safe?

Non-fungible tokens, which operate on the same blockchain as cryptocurrencies, are typically secure. NFTs are challenging to hack due to the distributed nature of blockchains, yet they are not impossible. If the platform hosting the NFT goes out of business, you could lose access to your non-fungible token, which poses a security issue for NFTs.


Non-fungible tokens are distinctive digital images of objects that exist on a blockchain. NFTs play a crucial role as the world investigates how distributed, immutable ledgers might make transacting safer and quicker. These assets are a pillar of the developing digital world, have their transaction history recorded, and can expedite commerce.

Tokenization has many advantages, including the level of difficulty attackers face when attempting to steal tokenized information. Since sensitive data that is tokenized without a token vault cannot be reversed, then this form of tokenization is completely safe from attackers. Even if the data is stolen, it cannot be reverted to back to its normal form, so it is useless to attackers. If the tokenization is done with a token vault, it is still extremely difficult for hackers to steal the information. Though the tokens are related to their plaintext, the data in the token vault still tends to be encrypted as well, just as a secondary precaution.

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About the Author

Prabhat Kumar Tomar is a Consultant at Encryption Consulting, working with PKIs, HSMs, and working as a consultant with high-profile clients.

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