NFTs. When Satoshi Nakamoto was programming the first Bitcoins and heralding the birth of cryptocurrency, certainly, he never envisaged the World would trade digital art using cryptos. Alas! The year is 2021, and the World is raving about Non-Fungible Tokens, more popular in the crypto-verse as NFTs. Here, we roll out a beginner’s guide for persons interested in the NFT market, or I would prefer to call it: NFT for Dummies.
Why The NFT Craze?
The frenetic excitement around NFTs probably stems from the feeling of owning something rare, usually a digital asset. Take, for example, the original copy of Leonardo da Vinci’s “Monalisa”. That famous face, deftly created by the skilful hands of da Vinci, every stroke of the paintbrush coming together nicely to create a historical masterpiece. That artwork can arguably be regarded as one of the most famous art pieces in history. Now, imagine owning the original copy made by da Vinci himself? That is the concept behind NFTs; rarity and originality.
NFTs create scarcity by definition because each NFT is unique. Also, maybe because of FOMO (fear of losing out). Consequentially, NFTs can inspire trust into what might previously have been a trustless system where ownership and authenticity were difficult to prove. The Wall Street Journal hailed NFTs thus: “NFTs are fueling digital art boom“.
So, What Are NFTs?
An NFT is a Non-Fungible Token (a unique digital token). It is mainly considered being a certificate of authenticity or a deed or proof confirming that you have the right to display the referred art on your wall or in your wallet (digital wallet). This may give you ownership of the copy you purchased (for your private use) but not necessarily ownership of the original work. Production rights and copyrights are automatically retained by the artist unless otherwise specified.
In addition, the unique data of NFTs ensure easier verification of ownership and transfer of tokens among owners. It is also important to note that the owner or creator of an NFT could store specific information in it. This example of artists signing artwork by including a signature in the metadata of an NFT shows the assurance of integrity in ownership data.
Technically, focusing on the Ethereum blockchain, an NFT is an ERC721 token hosted on the Ethereum blockchain. A different meaning of ERC is a “collector’s item”. The artwork is minted in the ERC721 token. This token contains:
- the historical information of each transaction and artist information (including the artist’s public key) plus the number of likes.
- a uniquely identifiable number = the token ID
- a picture of the art
- a smart contract (the NFT is practically an intelligent contract, you don’t need people to sign the signature). Standard copyright law applies, and more specific conditions can be added to the description section.
Blockchain real asset tokens ensure the secure verification of information or data relating to specific entities. Non-fungible tokens have also been implemented to identify various data types, such as audio and visual files. In addition, NFT has also found applications in many fields such as the gaming industry, art, and other sectors, thus creating favourable opportunities for the growth of the NFT market in 2021.
The video game industry, valued at around $160 billion, is expected to grow by more than $200 billion by 2023. Perhaps the popularity of NFTs in the gambling industry is a reason to consider ways for non-fungible tokens to function correctly in 2021.
Continuous gaming enables players to trade their assets with other players through NFT. Seasoned players can collect more tokens and buy better tools to improve their gaming experience. Thus, the gaming industry offers promising and profitable prospects for NFT growth in 2021.
Identification and Certification
While Personal Identity Management is one area where NFT can shine, it is too early for that type of application just yet. Because the NFT contains a code with unique information, it can be used to encrypt documents such as university diplomas, licenses and other documents, and medical records, birth and death certificates. The ID card or certificate can be issued directly via the Ethereum blockchain as an NFT, returned to the owner. Hence, using NFTs to digitally store and protect medical histories, personal information, training information, and addresses gives users greater control over their data and can help prevent identity theft.
A similar concept can be applied to future driver’s licenses or passports. While NFTs can help with driver license revocation and visa and passport fraud, the details of the technology – possibly using a mobile app – have yet to be discovered.
Luxury Items and Sports
NFT applications were mainly introduced first in collections, art, games and the virtual World. Usage prototypes include Cryptopunks, 24×24 pixel graphics with algorithms and Cryptokitties, a virtual game. Further examples include:
- Digital artist Beeple sold an NFT painting for $69 million in March 2021.
- A digital image of the New York Times column was sold as cryptocurrency for $ 560,000.
- Ditto Music’s NFTs on Bluebox’s blockchain enables the purchase of shares in songs.
Sports tickets and other collections are also encrypted. Examples of digital sports series are “Moments” sold on the NBA Top Shot platform. Moments can be a video of a player moving or the Top Shot NBA, a blockchain-based business card system offering gaming functionality.
Benefits of NFTs
A Decentralized Marketplace for Creators and Buyers: NFTs allow creators to earn directly from their work. A good example is an art, where someone would need an agent to sell and market their work. NFTs eliminate these middlemen and allow original artists or creators to interact and negotiate directly with their clients.
Rare Collectibles: Basically, all NFTs are collectables. As mentioned in this article already, they are unique, and only one of each can exist. You can keep them at the time of purchase, and their value will increase over time, which provides an investment pathway for enthusiasts.
Resale Value: Most people who would delve into NFTs would do so for the main prospects of its economic gains. Investing in NFTs for their resale value can lead to huge profits. Some collectables were resold for more than 20,000 USD when they were only purchased for a few Dollars by the original buyers.
Immutable: The metadata on the token can never be changed by anyone. This means that they cannot be erased, lost or deleted from the blockchain. They are intended to last forever because their data will always stay the same way it was created. This in itself gives them a rare collectable worth and high value.
NFTs Marketplaces and the Trading of Tokenized Art.
You may be wondering where do people buy these NFTs? The NFT markets have grown into a thriving virtual shopping street, selling digital art and collectables at every possible price. Here is a rundown of some of the most popular NFT trading platforms.
OpenSea boldly asserts itself as the largest NFT market currently. The platform offers many non-fungible tokens, including art, censorship-resistant domain names, virtual worlds, trading cards, sports, and collections.
NFT artists can use the OpenSea coin tool to create their projects without needing a single line of code. When you sell items on OpenSea, you have the option to either sell a product at a fixed price, create a list of falling prices, or create an auction list.
Rarible is a community-owned NFT market whose “owners” have the ERC-20 RARI token. This platform focuses explicitly on Art assets. Content creators can use Rarible to “mint” NFTs to sell their work, including books, music albums, digital art, or movies.
SuperRare has a strong focus on the digital art market. Each work of art is created by an artist on the internet and encrypted as a digital collection that you can own and trade. Referring to themselves as a crypto version of“Instagram meets Christie’s”, they offer a new way of interacting with art, culture, and online collectables.
Every piece of art in SuperRare is a digital collection – a digital object encrypted and tracked on the blockchain. All transactions are made using Ether – the original cryptocurrency of the Ethereum blockchain.
Beyond NFT for Dummies?
As with all market values, the principles of supply and demand apply in the NFT market. Collectors and investors can better understand the present value of NFTs by looking at past sales and similar sales in existing markets. The longevity of NFTs depends on the value of their use, not just theory. As with other bulk collections, this happens when NFT owners consider them a unique experience or feature. NFT communities develop and grow, hold prices and markets, and increase their confidence and this would be a considerable determinant in their long-term survival.