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    Explained | What are Nested Non-Fungible Tokens?

    Explained | What are Nested Non-Fungible Tokens?

    Explained | What are Nested Non-Fungible Tokens?
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    By CNBCTV18.com  IST (Published)

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    Nested NFTs are digital assets embedded with other assets and tokens. The embedded assets could be liquidity tokens, social tokens, utility tokens, interest-bearing assets, etc. Hence, a nested NFT is a basket of other assets.

    Since their inception, Non-Fungible Tokens (NFTs) have found several use cases across various industries. They have been implemented in finance, art, music, games, the metaverse, sports, and most recently, even aviation. Given their mainstream popularity and demand, developers are always trying to bring something new to the fore. This constant experimentation has led to yet another development in the NFT space -- it is called the Nested NFT.
    What are Nested NFTs?
    The concept of nesting is very similar to the famous Russian Matryoshka dolls. These are a set of wooden dolls of varying sizes such that each doll fits inside a larger doll and the biggest one encompasses them all.
    Similarly, nested NFTs are digital assets embedded with other assets and tokens. The embedded assets could be liquidity tokens, social tokens, utility tokens, interest-bearing assets, etc. Hence, a nested NFT is a basket of other assets.
    Nested NFTs can be traded like any other NFT on a marketplace, and their value is derived from all the other tokens, coins, NFTs, etc., that are encased within it.


    How is nesting beneficial?
    AI and blockchain firm Accubits explains some use cases of nested NFTs so that their true potential can be better understood.
    Like a mutual fund consisting of multiple equity stocks, a nested NFT could consist of multiple tokens. This allows owners to manage a crypto portfolio through one single NFT. When the nested NFT gets created, it is moved straight into the owner’s crypto wallet.
    In this case, smart contracts are employed to execute trades, and the parent NFT updates as and when new assets become a part of it. Other users can also replicate the portfolio of tokens within the nested NFT. This may be the case if the portfolio is doing well and others want to mirror your kitty of cryptos.
    Again, smart contracts are deployed to record mimicking trades. This ensures that the first creator of the nested NFT gets a cut when somebody copies the same strategy or trades.
    If yield-bearing assets are attached to the parent NFT, owners can also earn interest over time and keep expanding the implicit value of their portfolios.


    Moreover, it becomes easier to control an extensive portfolio through one NFT. Let’s say you have a nested NFT of several oil-based stocks; if the present times require you to exit them all at once, you can do so with the click of a button.
    Nesting is also very beneficial to artists and digital creators. A nested NFT can be created by assembling the artworks of multiple artists. When this nested NFT is traded, all artists get royalty payments every time the NFT changes hands.
    Similarly, the music industry can reap benefits too. An album-based NFT could be minted with individual song-NFTs nested within it. Every time the album-NFT changes owners, all singers and artists associated with the nested songs get a royalty cut from the transactions.
    Projects like Charged Particle and Nested.Fi are already working on allowing users to mint their own nested NFTs. Once minted, they can be used to nest governance tokens, liquidity protocol tokens, other NFTs, etc. Nested NFTs can unlock many possibilities across sectors, and many more use cases may be discovered as the technology progresses.
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