What are NFTs?
NFTs, standing for non-fungible tokens, are cryptographically unique tokens that express digital ownership of different items. These items can be anything from photos to videos to songs, and because NFT ownership is recorded via the blockchain, they can be traded, bought and sold via the blockchain. The information that identifies an NFT is recorded in smart contracts, and the info makes them unique, and thus non-fungible.
To understand what makes something “non-fungible”, consider what makes a bitcoin fungible, or exchangeable with another bitcoin. If you exchange a bitcoin with another person, you will still have 1 bitcoin with the same utility and the same value. NFTs, on the other hand, each represent a unique item.
How do NFTs work?
The protocol for trading and issuing NFTs is called ERC-721. Standing for Ethereum Request for Comment- 721, this is a smart contract protocol on the Ethereum blockchain that not only allows for a token to be traded and issued, but also for it to contain the qualitative information necessary to describe and store the information of an NFT in its smart contract. It is the first token standard to do so, and operates on the Ethereum blockchain.
Since ERC-721, other token standards such as ERC-1155, which allows for the description of fungible and non-fungible tokens and TRON’s own TRC-721, have arisen, allowing for more flexibility and interoperability for NFTs.
Marketplaces such as OpenSea and Nifty Gateway provide places where people can buy and sell their NFTs. Of course, because many NFTs exist on the Ethereum blockchain, which has lower throughput, the gas fees needed to mint NFTs can be quite high.
It is important to note that although the smart contract protocol of an NFT represents ownership, it is not an analog for copyright, and is not enforceable by judicial bodies.
Use cases
Because NFTs can describe digital ownership of unique items, one can think of all the unique items in the digital (and physical world) when considering applications of the technology. Ownership of concert tickets, art, music, in-game items, and even digital property can be expressed through NFTs. This is what makes them so exciting, and why platforms like Instagram are looking to integrate NFTs into their platform.
They are what can give gaming more dimensionality and allow people to truly own in-game items, allowing for their usage across games and for players to monetize their experience. When it comes to music, it allows for artists to connect more with their fans, such as allowing NFT holders to gain exclusive access to unreleased music or even perks at events. And of course with art pieces, artists now have another, more direct avenue to make money.
Art
NFTs have proven to be a great way for artists to more easily sell their works. On the buyer side, this has provided a more direct way to interact with and support a favorite artist.
Creators like Beeple have famously seen a lot of success from NFTs, and it is because of their massive success that other artists, and famous auction houses like Sotheby’s, have adopted NFTs and further proven their use case in the art world.
Music
As digital artists like Beeple have garnered huge success off of the sales of their art as NFTs, the rest of the creative world has certainly taken notice.
In the music industry, an NFT might not only express ownership of an artist’s music, but also tickets to a show, or even stems from the production of a song.
And then, like in any creative industry, there is a point to be made about whether this technology can bring about more equity. Because NFTs allow for artists to more directly connect with their fans, it also allows for a more direct avenue for profit, as entities such as labels don’t necessarily need to be present and take a cut.
NFTs in GameFi and the Metaverse
This is certainly one of the most exciting and talked about applications of NFTs.
With the rising popularity of Play-to-Earn games and gaming-centered metaverses like the SandBox, the use case of NFTs as a way to give gamers/users more ownership has risen in kind.
With projects such as STEPN, a Move2Earn game that utilizes NFT sneakers as a way for players to earn money by exercising, the market around in-game items has seen a lot of recent attention. NFTs called LAND, which represent virtual plots of land in the Sandbox’s metaverse, have garnered a lot of interest from popular brands such as Adidas and Gucci.
To explore a bit more about how NFTs can interact with GameFi and the metaverse, check out “Press ‘X’ to earn: the rise of GameFi” and “To the metaverse… and beyond!”.
Pioneers and leaders in the NFT space
CryptoKitties
One of the first famous NFT projects, CryptoKitties is an NFT-based game that is based around collectable and breedable digital cats. Created by Dapper Labs in 2017, it is an example of NFTs’ use case in the collectibles market. One of the reasons this project was so successful is that it integrated the use of NFTs with GameFi elements of collectibility and rarity.
Bored Ape Yacht Club
Bored Ape, which just issued their token BAYC this year, has exploded in popularity. The 10,000 unique ape NFTs issued by Bored Ape Yacht Club represent not only ownership of an art piece, but also membership to a virtual club.
Moreover, owners of the NFTs are entitled to any royalties due to the usage of their ape in other works of art. The craze over this project is also due to the fact that owning an ape NFT is seen as a sort of status symbol.
Decentraland
Metaverse project Decentraland, like the Sandbox, uses NFTs to represent virtual plots of land. And like the Sandbox, huge brands such as Atari, Samsung, and Miller Lite have bought plots of LAND, the NFTs that represent land ownership on the platform. And as social media companies like Meta shift focus towards virtual worlds, virtual land NFTs will become more and more popular, and of course, more pricey.
How does one make an NFT?
Marketplaces like OpenSea and Nifty Gateway, allow for users to “mint” their NFTs on their platform. Minting means converting whatever you’ve chosen as your NFT to become a digital asset traded on the blockchain. One major thing to consider is the payment of gas fees and possibly other platform fees in order to mint your NFT. When considering gas fees, it’s important to take into account which blockchains have lower fees. Popular blockchains such as Ethereum will have higher gas fees than TRON or BSC.
You will also need a wallet to link to the platform for payment purposes. A popular wallet is MetaMask. After linking your wallet, you will need to load it with the funds necessary to mint your NFT. You will need ETH, TRX, or BNB, depending on which blockchain you want to mint your NFT on.
Each platform is different, but with all of them you will need to describe your NFT and designate parameters for the sale.
was originally published in The Poloniex blog on Medium, where people are continuing the conversation by highlighting and responding to this story.
