What Are NFTs?
Updated: Jul 14, 2022
If you are reading this now, I'd like to believe you have a mobile phone, computer or some other internet-enabled device so there is a 90% chance you have seen one NFT post or the other while surfing the internet. NFT has gone from just being a project with some potential "I might invest in" to a full-blown community of collectors, creatives, A-list celebrities and the who-is-who in the business world. You might be wondering then, what are NFTs? Is it meant for those aforementioned people alone? Let's get right into it.
NFTs? What are those?
NFT stands for non-fungible token. Doesn't make much sense, does it? Well, tokens are tradable digital assets that are built on the blockchain. Non-fungible means it cannot be interchanged, copied, replaced or subdivided. Unlike fungible tokens which can be swapped, non-fungible tokens are only available in their indivisible original form; they cannot be directly replaced with another digital asset.
An example of a fungible asset is physical currency. A $20 note can be exchanged with ten $5 notes, they are the same amount so the exchange is valid but a person's name and DNA cannot be replaced with another person's name and DNA because the DNA is unique to only the owner of it; that is just the whole idea with NFTs.
They cannot be exchanged or swapped for other NFTs as if they were crypto coins because NFTs have their own unique features and identifiers which sets their values apart from every other NFT. It is for this reason that NFTs have become really popular with intellectual property and copyright owners seeking to keep their works original and unadulterated. How did NFTs come to be what they are today? They literally were unknown a few years back to be enjoying the hype they are getting now.
A Brief History of NFT
Unbeknownst to many people, NFTs did not just come out of nowhere or become an overnight sensation, it isn't a recent project at all. The development of NFTs began almost a decade ago before Ethereum (the blockchain network on which most NFTs are minted). Below is a timeline of NFT's developmental process over the years.
The first notion of NFTs was conceived in 2012. The 'Coloured Ones' concept was introduced in a paper released by Meni Rosenfield in 2012 and it was meant to be on the bitcoin blockchain. The idea was that ‘Colored Ones’ would represent real-life assets on the blockchain to prove ownership of those assets. These concepts could not eventually be actualized due to the limitations of Bitcoin. What the ‘Coloured One’ concept however did was lay a foundation for what would later lead to the invention of NFTs.
The first known actual NFT called 'Quantum' was minted on May 3rd, 2014, by digital artist Kevin McCoy. Quantum was created on the namecoin blockchain and it was a pixelated image of an octagon that could hypnotically change colours with pulsations identical to that of an octopus.
Lots of experimentation and development occurred subsequently after Quantum. Following these events Robert Demordy, Adam Krellenstein and Evan Wagner founded the Counterparty platform (Bitcoin 2.0) a peer-to-peer financial platform established to enable the creation of digital assets and have a decentralized exchange. This was the first instance of trading means that would not be counterfeited.
In April 2015, Spells of Genesis followed the footsteps of Counterparty and even partnered with them. Space of Genesis pioneered the issuing of in-game assets. Space of Genesis introduced its own in-game cryptocurrency called BitCrystals.
The year 2016 saw a lot of development and new trends. Force of Will in collaboration with CounterParty launched cards for trade on the Counterparty platform. This had Force of Will becoming the fourth most traded card game in North America.
Another major NFT trend in 2016 was the release of a host of Rare Pepe’s NFTs on Counterparty. Memes eventually made an entry into the blockchain. People began adding assets to Rare Pepe's which initially was a comic character.
2017-2020 ( The Age of Ethereum)
The previous NFT development projects were on the Bitcoin blockchain and seeing that the blockchain was meant to be used as a database for tokens that represent asset ownership, it was unavoidable that future NFT projects will need a new home, hence the Ethereum blockchain. In 2017 John Watkinson and Matt Hall created Larva Labs and used the Ethereum blockchain to generate new unique cards for a project called Cryptopunks, a hybrid of ERC-721 and ERC-20.
Cryptopunks was originally offered for free as an experimental project; 10,000 copies were made with no two characters having the same features. 2018 to 2024 saw NFT making it slowly to the mainstream. By 2020 it had garnered enough momentum and 2021 easily went boom.
2021 till date( Age of the billion-dollar Apes and big boom)
If I take a wild guess, 2021 was your first time hearing about any of this. If you are conversant with social media, especially Twitter or any photo-sharing platform, you have probably seen the image of an ape with a hat or shades on or with cigarettes. The cheapest of these NFT ape images cost $313,175 or 99 ETH on OpenSea. The boom was crazy, the media PR was astounding, everyone who was somebody was keying into NFT, entertainment ticketing was revolutionized, and asset ownership was redefined. 2021 also saw the record-breaking sale of Beeple's Everyday: The First 5,000 days.
The after-effects of this boom were all the blockchains starting to get involved and developing their own NFT versions. NFTs are no longer exclusive to the Ethereum Blockchain. They’re also available on other blockchains like Solano, Cardano, Flow and Tezos. Social media giant Facebook also contributed to the boom when it rebranded as Meta.
What are ERC standards?
There are 3 ERC standards which will be quickly broken down. ERC stands for Ethereum Request for Comments and these standards serve as rules for how tokens should interact.
ERC-20: this is a fungible token built on the Ethereum network and each token is indistinct from another of its kind in terms of features and value. This can be swapped, exchanged or replaced.
ERC-721: the ERC-721 is the standard protocol by which NFT is issued. It represents a single and unique digital asset that cannot be swapped or divided. The most expensive among NFTs are created using the ERC-721 as it guarantees one-of-one ownership.
ERC-1155: this standard gives you the power to mint multiple assets in a single smart contract. Let you create multiple pieces of art all connected to each other through a single Smart connect.
What gives NFTs so much value?
When the Bored Ape Yacht Club NFT launched in April 2021, each one sold at 0.088 at that time equivalent to $192. The most expensive acquisition of a BAYC NFT is Bored Ape #8817 at $3.4 Million. If you had bought a Bored Ape NFT a year ago for a little less than $200 you would be running six-figure assets now or probably over a million. That begs the question, how does something become so expensive? What gave them such a rise in value?
The rarity of an NFT asset increases its value and can therefore be sold for a lot more. An NFT collection will be valued with how rare the collection is. Little wonder the most expensive NFTs are usually 1-of-1, valuation is driven by scarcity of supply.
2. Ownership history
Imagine owning a car Michael Jackson once drove? What would it feel like to you? Priceless, right, that is the exact same thing. Previous ownership of an asset by a popular person will make the asset appreciate in value. So any of these celebrity-owned NFTs are worth buying as you are sure of selling for higher.
The popularity, clout and PR an NFT gets online also determines how costly it will be. At the moment, it is safe to say that the most popular NFT is the Bored Apes Yacht Club NFT which is not surprising that the cheapest Bored Ape is about $300,000. This has to be one of the most hyped decentralized projects of all time, seeing singers, TV hosts and even Tesla CEO Elon Musk giving Bored Apes a nod.
4. Buying and Selling
Another reason for the increase in value of some NFTs is that the market is made of buyers and sellers trading different NFTs at the same time, which then determines the price of those in-demand NFT projects. The value of an NFT will rise if there are more buyers than there are vendors.
An NFT's utility value will have the asset price ascend. The utility value of the NFT is dependent on how it can be used. When an NFT can serve more than one purpose its price increases automatically on the market.
Are NFTs just Ape Heads and Drawings?
The art and pictorial part of NFT seems to be the most popular on the internet but this doesn't mean NFT isn't beyond 2D and 3D images. Everything that can possibly be owned can be minted, not just cat Involved are industries like arts, music, games, sports collectables and movies.
NFT is set out to redefine ownership and copyrighting in every industry. Let's take a brief look at what music, movie and gaming NFTs are.
Artists can now sell their music on the NFT market as non-fungible tokens. Music NFTs are a game-changer for music creators as it gives an avenue for them to earn revenue even without having a record label. Haleek Maul, a Bajan rapper, made $226,800 from five catalogues NFT sales. Before then the highest he had earned on the distribution app Spotify was $178. In 2021 DJ 3LAU made a record sales of $11.6 million for 33 NFTs which included a limited edition vinyl of Ultraviolet, 11 original songs. One of these entities included custom song access to unreleased music and customer art. In October 2021 3LAU minted his song 'Worst Case' and NFT holders received 50% in streaming royalty rights, a really good investment if you ask me. Another way fans can benefit from this is that their tokens increase in value as the artist grows career-wise.
How we see movies is about to be changed as several big NFTmovies are in the works already. Rich people and all who can afford it are keying into the movie NFT industry as it not only gives them a return on their investment, it also gives bragging rights that they were a part of the movie production.
Coinbase announced on Twitter that it was creating a trilogy movie that would feature the Bored Ape Yacht Club NFT community, a community which boasts of celebrities like Eminem, Justin Bieber, Jimmy Fallon, Snoop Dogg and Steph Curry. The movie titled DEGEN Trilogy called for casts from holders of Bored Apes for their NFTs to make cameo appearances in the movie. This would create a lot of hype around the movie and the Bored Ape owners will receive a licensing fee of $10,000 worth of Bitcoin or Apecoin.
Similarly, actress Reese Witherspoon's Hello Sunshine Production studio has announced that it will create movies and a TV series based on the World of Women's NFT project Yam Karkais. Holders of the World of Women NFT will have a say in the creation of projects for filming, suggestions will be taken, opinions heard, and together WoW NFT intends to create something iconic and personal to them.
According to cryptoslam, Axie Infinity, an NFT gaming platform has the highest NFT ranking with a revenue of over $3billion in sales, 3 times that of the BAYC.
This is to say that NFT's influence in the gaming world can no longer be underestimated as its pull on gaming assets acquisition is very huge. With NFTs, you can buy in-game assets that will aid your gameplay and these assets are exclusively yours but can be sold or stored whenever the player wishes. Pokemon card games can be utilized across different gaming platforms with a single NFT asset.
Where can you get NFTs?
Like every other purchasable item, there has to be a marketplace where you can buy and sell them. This marketplace facilitates minting and trading operations bringing prospective NFT buyers to meet NFT sellers. For non-fungible tokens, there are several such platforms or marketplaces whichever you choose to call them.
Top NFC marketplaces
OpenSea is undeniably the largest NFT marketplace and has become even more popular over the past few months witnessing an increase in the number of accounts created and digital assets sold. It is safe to say this is the most trusted NFT marketplace of every newbie. The OpenSea platform allows you to mint, buy and sell anything. It supports images, 3D, video and audio files. They feature more than 700 different projects so there are lots of ones to pick interest in. OpenSea is regarded as the eBay of NFT.
Asides from cryptocurrency services, crypto.com also has its own NFT marketplace which it launched in 2021 and offers categories ranging from music NFTs to gaming, art, sports, celebrities and crypto. The big catch with buying NFT on crypto.com is that you will not be charged transaction or gas fees when you purchase NFT.
● Axie Marketplace
Axie Marketplace serves as the online asset shop for Axie Infinity. All Axie Infinity NFT features assets like lands and gameplay lives, Axie Shards are all available on the Axie Marketplace. So if you are a heavy gamer this one's for you.
● Larva Labs
One of the pioneers of NFT marketing, Larva Labs is best known for its viral CryptoPunks NFT project. Larva Labs also has other digital assets on its marketplace such as Autoglyphs.
The Rarible Marketplace allows you to "turn your products into publicly-traded items". With a huge user base, Rarible allows digital artists and creators to create and sell their assets.
Controversies on NFT
NFT isn't devoid of its own share of controversies and morality calls either. There are theories that the whole NFT thing is just a decoy for criminals to discreetly launder money because it makes no sense why someone will splurge millions on an image that other people can easily see for free. Whatever it is, NFT enthusiasts are definitely loving it.
Additionally, there is the issue of gas emissions as a result of the excess power needed to mint NFT tokens and process transactions. However, there is an Ethereum upgrade on the way which would see gas use cut to 1% of what is currently being used. We hope to see it.
To wrap this up we should do a quick recap of everything that was mentioned and bring out the important facts from this read.
NFT means Non-Fungible Token
No two NFTs are the same, every single one is a unique and original item.
Anything digital can become NFT, screenshots, photographs, tweets, audio, video and lots more
Most NFTs exist on the Ethereum blockchain
They are either ERC-721 or ERC-1155
There is more to NFT than art and pictures
Bored Apes are an elite collection. Get one if you can.
Check out dWeb Guide's own NFT collection here!