BlockchainDeFiNFTs

What Are NFTs – The Science Behind Non-Fungible Tokens to Create Buy or Make Money With

NFTs have taken over the world of the internet and we all want to know what NFTs are, how they work and how they are different from coins and so on. 

Non-Fungible Tokens or NFTs are tokens generated on any blockchain Solana, Ethereum, Polygon or any other cryptographically for unique identification and ownership of digital assets that cannot be changed or altered. A unique signature or hash represents NFT’s uniqueness. The NFTs are different from traditional crypto coins or tokens as their prices may vary that’s why they are termed as Non-Fungible. 

Take an example of Weird Whales NFTs, you will notice all of these NFTs are priced differently. 

We see NFTs are the most talked about on forums, social media and other resources. From Nike to Pepsi, all have dived into this digital collectible field. Technically, digital artists start building NFTs solely on Ethereum ERC-721 token standards but now other blockchains also provide users to mint them like BSC, Solana and Polygon etc on the same standards. For instance you can mint NFTs on Binance’s BEP-721 standards. 

What Is A Fungible Cryptocurrency?

We say an asset is fungible when its price or value does not change while exchanging for other similar assets. Let’s say I borrow a $10 bill from someone, later when I payback I don’t necessarily need to pay the same bill but its value as all $10 notes have the same value. Same goes for 1 BTC or ETH but not for the NFTs. NFTs, on the other hand, represent distinguishable price and characteristics. They are distinct in any form, shape and value just like contemporary art pieces or precious stones. 

So the fungibility of a token determines its unchanged value and nature. We can see in the above example ETH or BTC are fungible tokens as their value remains unchanged no matter who owns which. We can always exchange 1 BTC/ETH for 1 BTC/ETH. 

What Makes Non-Fungible Tokens Non-Fungible – Characteristics Overview of NFTs 

Scarcity – The true value of an NFT directly comes from its rarity. You might see tons of similar NFTs offered but at the same time they also limit their number to maintain their value.

Immutability or Indivisibility– NFTs have to be indivisible into sub-units. One can either purchase a digital asset or even an entire number of digital assets or nothing at all. 

Distinctiveness – NFTs have to be very distinctive and unique, that’s the fundamental requirement. As NFTs have a separate detailing tab about their distinctiveness which authenticates them. 

Benefits of NFTs

NFT’s popularity has just made it possible for artists, musicians and so on to get rewarded for their work. 

  1. Tradable – NFTs are tradeable and you can exchange them with others, transfer or buy/sell in general. They are market specific and have typical market types that allow their sales that can be DEXes like Binance, Coinbase or sole NFT marketplaces like OpenSea and Rarible etc. 
  2. Authenticity – NFTs are powered by the blockchains that make them unique by generating fingerprints or hashes on immutable ledgers that cannot be changed, stolen or counterfeited. 
  3. Ownership – Once an NFT is minted or sold to someone the ownership cannot be altered by anyone unless it’s traded for another digital asset or cryptocurrency. So the ownership remains yours once you buy, mint or trade an NFT. 

What are the uses of NFTs?

Gaming

One of the popular uses of NFTs these days is in games. They are extensively used in different games. For instance popular games barr selling characters or avatars but if you use them as NFTs you can trade or porter them to other games. This is adding a big economy feature to games like Fortnite etc. 

Digital Assets

NFTs allow us to buy digital assets by minting them on the blockchain. For instance if you have ever played Decentraland, you will notice that you can actually buy land or other properties. You can use its native token to do so and do many more wonders with it. That we have discussed in the post about Metaverses. Besides, ENS or Ethereum Name Service uses NFTs for all the .ETH domains to make the trade of assets possible. 

Identification 

Identification is one of the great features of NFTs. You can fight identity theft with NFTs due to their unique digital footprint. The most popular uses include in the academic fields, medical records and elections etc. Besides, the artists can copyright their. In order to counter fake game tickets, the tickets can be converted into NFTs for physical games like Soccer, Rugby etc. 

Collectibles

One of the biggest reasons NFTs have gained immense popularity is due to the collectors this way the artists also get paid well. 

What is ERC-721 NFT Standards?

An ERC-721 token roughly represents NFT standards minted on Ethereum similar is the case with others BEP-721 for Binance etc. So ERC-721 means NFTs in a nutshell. Not just Ethereum the NFTs can also harbor others such as EO and NEO etc they all follow 721 standards. 

In order to host NFTs the blockchains are required to have a tool kit including smart contracts and so on to store metadata etc. There typically two major factors that have pushed the NFTs high and brought before common folks

Digital Art 

The artists have more importantly adopted this new phenomena of not just selling their art but also copyrighting it. A huge number of artists have gathered around these popular NFT marketplaces and gained much more traction. 

The data from CryptoArt, an analytics platform focusing on cryptocurrency art, shows that NFT artwork volume reached about 8.2 million in the last month of 2020 and in August 2021 it broke all the records reaching 700 million in volume alone this month. The entire NFT art market is more than $140 billion. As more hobbyists are adding up to that by July of 2022 it can reach unfathomable volume. 

The Peak NFT Selling Points 

NFTs have been around for some years from now however, they start picking up during the pandemic time 2020. According to Richard Chen, the founder of CryptoArt the main selling point of NFTs is picked up when people realised their potential to retain authenticity. 

  • The later half of 2020 showed a rise in NFT sales and some artists were selling them at hefty prices. In September 2020, one NFT was sold around 262 ETH ($101,100) of value back then. 
  • In October, one of the NFTs was sold for a good price of $131,250 which was the highest price for an NFT
  • Just two months down the ladder, a collection of NFTs was sold for $777,777.78.
  • Here is the list of Most Expensive NFTs ever sold. 

CryptoKitties 

The launch of CryptoKitties, the recreation of 90s classic Tamagotchi, was powered on ETH protocol in 2017. It allowed the trade of collectibles in the shape of virtual cats. It continued its bull run in the market. 

The mention of CryptoKitties is essential because it somehow laid the foundation of using NFTs for leisure and fun. It showed how the dApps can be used for recreational art and fun. But its huge popularity also happened to be the cause of slowing down the payment process that pushed the gas fees higher. 

On the other hand, they used Smart Contracts for trading virtual cats and brought in large sums of funds into the NFT arena such as OpenSea. Until now more than 70K ETH has been traded for this collection alone. 

You can also buy it if you happen to be a cat lover. You need to add the MetaMask extension into your browser, add some Ethereum and make your purchase. 

What Are CryptoPunks?

CryptoPunks were hidden gems of NFTs. They caught the general public eye by selling their NFT “Alien” for 605 ETH or $760,000 in early 2021. However, according to experts their NFTs have been groundbreaking that existed even before ERC-721 standards. Their NFT “Punk” number 2890 is only one of the 9 collections created by Lara Labs and it was sold for just 8 ETH in 2017. 

According to experts the new breed of young art lovers are more attracted to NFTs and they keep creating, buying and selling NFTs on a larger scale. This will certainly keep the ball rolling for both parties. 

In January 2021, CoinMarketCap partnered with The Sandbox for introducing their own breed of Heroes in the NFT marketplace. Their popular NFTs are 6 CMC Heroes with interesting names: Brawler, Sage, Liquifier, Hothead, Protector and CoinMarketCaptain. 

Yield Farming in DeFi and NFTs

When NFTs meet DeFi yield farming strategies are devised. A popular DeFi protocol Yearn Finance launched their insurance product Y.Insure for different types of digital assets. They used NFT standards ERC-721 to propagate their policies. If they used ERC-20 token standards it was fickle in that sense when defining characteristics of policies. 

Then more products come to the scene with the convergence of NFTs and DeFi such as MEME Bancor and Enjin etc. 

Individual Skills

NFTs standards can also be used to represent someone’s skills/efforts/time for monetary ends such as newsletters, videos/animations/music or podcasts. 

Shortcomings of NFTs

No doubt NFTs have opened new vistas for people with all types of skills while sitting on the blockchains. Sadly, the same is to their disadvantage. There are some shortcomings of NFTs. 

DeFi is still far from making sense to the common folks and its user-friendliness is still in doldrums. Although the developers are working day and night to overcome this issue and make it more user-friendly so that average Joe can understand it. The common problem arises when an average person has to mint an NFT. He finds it hard to verify, authenticate, sell or purchase as it requires some ground level understanding how blockchains work. 

In the case of NFTs the target group is only interested in them, without giving a thought to the technology they are built on. In any other form of crypto ecosystem the case is otherwise. 

Beeple, one of the successful artists who sold his NFTs for a huge sum that added new ventures to the world of blockchains. He is of the view,” the massive adoption of NFTs will only happen if the necessary infrastructure is in place” in order to enable UX seamlessly. 

Roadmap 

Although millions of people use blockchain in one way or the other, the need for popularising it as much as the internet or smartphone is, is still a big dream. Specially, in the case of NFTs people need the same level of understanding and seamlessness. We all know what NFTs can do for human development. The opportunities are boundless. These were the few of hundreds of use-cases we discussed. Miracles can be done with NFTs. It’s entirely important that the common folks should understand how to use it after understanding the underlying technology. 

Top NFT Firebrands That Rocket The World

We have seen in the recent past the explosion of NFT and they have become universally known to all the netizens. So has their networks increased, now they are being used in games, digital art, music and so on. Some of the hottest NFT passion projects currently making inroads into the world of internet are discussed below:

OpenSea

If we talk about NFT and do not mention OpenSea, we cannot move any further. The OpenSea NFT marketplace is one of the leading platforms offering equal opportunities to everyone, not just the artists. It has the widest range of digital products from ENS to virtual kittens, properties and so on. You can use DAI and ETH for trading items. Even people can mint NFTs for free by choosing Polygon blockchain from the dropdown menu. 

Async.Art

One other very popular marketplace is Async Art that allows users to also create NFTs apart from selling and purchasing. Besides, you can use their programming features to define characteristics of their NFTs. It also lets users customize the layers of artwork after buying a section of it which is amazing. 

Bored Ape Yacht Club

The most popular NFT collectibles belong to the clan of Bored Ape Yacht Club that harbours over 10000 Ape NFTs. They saw record sales due to their use on social media etc. Recently they launched their own Ape token. 

CryptoKitties 

CryptoKitties has been discussed in detail earlier. It deserves some more light as they added a new layer of dimension to the NFT universe by introducing their new use-case and bringing masses towards it. 

WeirdWhales NFTs

A 12-year-old Benyamin aka Benoni from London, UK shocked the world when he sold all of his NFT collection of WeirdWhales. He started learning to code at the age of 5. Since then he is active and has been interviewed several times. 

Ethereum Name Service (ENS)

This may sound strange to many but ENS Ethereum Domain Name Service started in 2017 on ERC-721 standards and can be purchased on NFT platforms. 

The Sandbox

The Sandbox project is one of the popular blockchain-based games that allows users to buy and sell digital properties. You can enter The Sandbox metaverse and earn rewards, build properties. We have discussed more in existing Metaverses today here. 

Where And How to Buy NFTs?

Many of us still wonder how and where to buy NFTs? You need to go to any of the popular NFT marketplaces such as OpenSea, Rarible, CoinBase or Binance. However, you need to add MetaMask to our browser that you are using, Brave, Chrome or FireFox. Add some Ethereum into it and connect the wallet with the platform. Then click the NFT that you want to buy. Many NFTs are sold at auctions. 

You should know which underlying currency you can use as most of them use Ethereum for that. If you want to buy solo or in auctions both cases can be used. They can also be bought in groups like Nifty Gateway offers and it allows tokens for the trade. Popular artists Pak sold his many NFTs on this marketplace. 

Here are some of the popular NFT Marketplaces:

  • OpenSea – offers tons of NFT services. Currently the only NFT marketplace that allows minting NFTs for free as well on the Polygon network. You can buy virtual art pieces, gaming items, animations and so on. 
  • SuperRare – This marketplace is solely artist-based and the transaction can work only with Ethereum. The artists are required to submit a profile to get accepted. 
  • Rarible – This platform helped Beeple sell his awesome art work. You can buy and sell mint NFTs here too. 
  • There are some sports-related websites that sell NFTs on their own websites. There are so many varieties of them like Top NBA shots etc. 

Conclusion 

NFTs have seen a big boom in the last year and in the first few months of 2022. We did not expect that for NFTs. But they outran our brains. However, many believe the NFT craze will fade away just like it started. There are many reasons for that. One of the biggest reasons is many NFTs are mere images and they demand high prices which is utter insanity. For instance, one of the CryptoKitties NFT price for virtual cat was set to 600 ETH coins, despite the fact there was nothing distinct and unique about it. 

On the other hand, even if you don’t want to give much thought to NFTs, just don’t ignore them from a business perspective. There is a huge venture potential in NFTs for everyone. There are few use-cases that we have seen, more could be done with NFTs just like DeFi. It looks like everything will be minted for authenticity and copyrights and that’s what makes them unique. 

The whole blockchain ecosystem keeps changing everyday. We never know what lies ahead for NFTs. Maybe they become even more useful than cryptocurrencies only time will tell. 

We have seen a whole new rush by the Teens and Young Adults towards NFTs which is a huge selling point for the entire NFT ecosystem. Besides, if millennials start spending their idle funds on NFTs things can take a huge turn in this sphere.

Finally, NFTs can be used for unimaginable types of things. Everyday we read about a new layer of items getting added to the fold. We need to wait a while and see where it takes us. 

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