NFTs are non-fungible tokens that represent a unique asset on the blockchain and can’t be replicated once owned. These can be digital or real-world items, although the most popular NFTs are often avatars or collectible digital artworks. In blockchain-based games, NFTs are in-game items created by players themselves and can collect, sell, or trade with others to continue playing. Some NFTs can be worth millions of dollars because the scarcity and exclusivity drives up the value, or the creators of them are highly popular. Pretty much anything can be an NFT, and there’s even an NFT for the first tweet ever made!
Physical money and cryptocurrencies are fungible, meaning they can be traded or exchanged for one another because they are of equal value. On the other hand, NFTs have unique digital signatures that make it impossible for one to be equal to another and are not interchangeable, making them non-fungible.
Some people might think, “can’t someone just screenshot the NFT and they’ll own it too?” Not quite. Owning a copy of something is not the same as owning the actual item. That’s what makes some NFTs worth so much money, is that people are willing to pay a premium to have the original work and be the verified owner of it.
Features of NFTs
As mentioned above, each token is unique and irreplaceable. One NFT is not equal to another because there is metadata within them to distinguish each one. This helps with the verification of authenticity and ownership of each NFT, and along with the security of blockchains, it makes fraudulent and counterfeit activities difficult.
Another thing about NFTs is that it removes the need for intermediaries. It opens up a larger market for artists and audiences to connect directly without geographical boundaries getting in the way. It provides a new way for artists to monetize their work and keep more profits, instead of paying agents or galleries. Some NFT marketplaces also allow artists to program their NFTs so they can earn royalties whenever their work is being sold to a new owner.
Creating, buying, and selling NFTs
Depending on the blockchain the NFT is built on, there may be specific token standards for NFTs. For example, Ethereum uses the ERC-721 token standard in order to create an NFT on the blockchain. Your wallet (such as a MetaMask or Coinbase wallet) will need to be compatible with this token standard as well as enough ETH to pay for the gas fee.
Some of the most popular NFT marketplaces are OpenSea and Rarible, which are also Ethereum-based. Since NFTs are not bought or sold on centralized or decentralized exchanges, online marketplaces are where these transactions happen. After connecting your wallet on one of these platforms, you’ll be able to upload the image you want to turn into an NFT.
NFTs are created through minting. It’s where a new block is created on a blockchain, the information of the NFT is validated, and this information is recorded on the block. As the tokens are minted, a unique identifier is assigned to them and they are linked to a blockchain address. This makes the ownership information publicly available and traceable, and it makes NFTs indestructible.
To buy or sell an NFT, some marketplaces may accept certain cryptocurrencies over others. You’ll have to make sure your wallet is able to connect to these marketplaces and fund the wallet with the right cryptocurrency needed to buy an NFT.
Examples of NFTs
Some NFT collections made a huge impact in getting people to notice generative art. These works may not have immediately sold for millions, but as time passed and NFTs became more popular, early NFTs are now in high demand.
- CryptoPunks: 10,000 uniquely generated characters from this collection were given away for free when it was first launched in 2017. What started as an experiment quickly gave way to prestigious collectible images worth hundreds of thousands, if not millions on the NFT marketplace. No characters are the same, and the rarer their attributes, the more expensive they become.
- CryptoKitties: Created in 2017, the blockchain-based game allows players to adopt, raise, breed, and trade the adorable kitties. Rare attributes can be unlocked through breeding, increasing the value of the cats. CryptoKitties received attention from mainstream media, driving the popularity of the game through the roof while also bringing the public’s attention to NFTs.
- Beeple’s Everydays – The First 5000 Days: Beeple, a digital artist, created a new piece of art every day from 2007 to 2021, and this NFT is the collection of the 5000 pieces of art that he’s made. From Day 1 to Day 5000, Beeple’s evolution as an artist can be observed in his medium, skill, and themes. In 2021, it was placed on auction at Christie’s with a closing bid of $69 million, a historic moment for the auction house.
This isn’t to say everyone has to take part in the NFT craze. This post gives a very brief look at NFTs for those who aren’t familiar. If you’re looking to get into it, do your research and understand what it is you’re getting into before committing. Like all things crypto and Web3, there seems to be limitless room for growth and new information is introduced all the time. So be diligent and do your homework!