NFTs, or Non-Fungible Tokens, have emerged as a revolutionary trend in the world of technology and finance. These unique digital assets have captured the imagination of artists, collectors and technology enthusiasts alike. This article explores in detail what NFTs are, how they work and the implications they have in various fields.
But... What is an NFT?
An NFT is, in essence, a special type of cryptographic token that represents the unique and verifiable ownership of a digital element, be it an image, video, music or other types of files. Unlike cryptocurrencies such as Bitcoin Or Ethereum, which are interchangeable with each other, NFTs are indivisible and are not interchangeable for equal value.
For example, if you have a virtual property, such as a virtual work of art, you can create a non-fungible token to tokenize the artwork. The NFT you own now reflects that the ownership of the artwork belongs to you. It's not interchangeable as your artwork will be unique. The NFT is stored on the blockchain as your property.
Three examples of NFT collections.
The basis of NFTs lies in blockchain technology such as Ethereum. This decentralized technology allows for the immutable registration and verification of the authenticity of each NFT. Every transaction related to an NFT is stored in a public record, ensuring transparency and the authenticity of ownership.
History of NFTs
According to some, Coloured Coins, which was started in 2012, have the honor of being the first NFT. In the words of investor Andrew Steinworld, he said that it could be argued that Colored Coins were the NFT that first emerged.
Coloured Coins showed a big leap in Bitcoin's capabilities, however, they also had a disadvantage. They could only represent some values if everyone agreed on their value. Bitcoin's programming language did not allow this type of behavior within the network in which it is located.
However, many agree that the first known “NFT”, called Quantum, was created by Kevin McCoy and Anil Dash in May 2014. It consists of a video clip made by McCoy's wife, Jennifer. McCoy recorded the video on the Namecoin blockchain and sold it to Dash for $4 during a live presentation at the Seven on Seven conference at the Museum of Contemporary Art in New York. McCoy and Dash referred to this technology as “monetized graphics”, establishing an explicit connection between a non-fungible blockchain bookmark and a work of art through on-chain metadata enabled by Namecoin.
Picture of Quantum, the first NFT.
In October 2015, the first NFT project, Etheria, was launched and was shown at DevCon 1 in London, the first Ethereum developer conference, three months after the launch of the Ethereum blockchain. Most of Etheria's 457 purchasable and negotiable hexagons went unsold for more than five years until March 13, 2021, when interest in NFTs renewed and a buying fever broke out. Within 24 hours, all of the hexagons from the current version and a previous version, each encoded in 1 ETH ($0.43 at launch), were sold for a total of $1.4 million.
The term “NFT” reached greater dissemination with the ERC-721 standard, first proposed in 2017 through the Ethereum repository on GitHub, following the launch of several NFT projects that year. This standard coincided with the release of NFT projects such as Curio Cards, CryptoPunks (a project to trade unique cartoon characters launched by Larva Labs on the Ethereum blockchain). The 2017 online game CryptoKitties became profitable by selling cat NFTs, drawing public attention to NFTs.
The NFT market experienced rapid growth in 2020, with a value that tripled to $250 million. In the first three months of 2021, more than $200 million was spent on NFTs in a big bubble within the cryptocurrency Bull Market.
NFT Utilities
Here are several fascinating applications of NFTs in various fields:
Digital Art and Collectibles: NFTs have triggered an explosion in the market for digital art and online collectibles. Artists can sell unique works and collectors can securely own authenticated digital art.
Gaming and Entertainment: In the world of video games, NFTs allow players to own and trade game elements, such as skins, characters or virtual properties, providing a new dimension to the online gaming economy.
Live Music and Entertainment: Musicians and artists can use NFTs to sell exclusive versions of their albums, VIP concert tickets and unique experiences, establishing a closer bond with their fans.
Virtual Real Estate: Platforms such as Decentraland And The Sandbox are creating virtual worlds based on blockchain where users can own and trade virtual land and buildings, opening up new possibilities in the digital real estate market.
Certification: NFTs are used to authenticate the originality of physical and digital products, such as works of art, limited product editions, and even certificates of authenticity for collectibles.
Skills Education and Certification: Educational platforms can use NFT to certify students' abilities and achievements, providing a secure and transparent means of verifying the authenticity of academic achievement.
Sports and Sports Collectibles: NFTs have transformed the way sports fans collect and trade everything related to sports. From collectible cards to iconic gaming or competition moments, everything can be authenticated through NFT.
Charitable Causes and Donations: By using NFTs, charities can create unique digital assets that represent contributions and fundraisers, giving donors a way to show their support in a tangible way.
Digital Identity and Authentication: NFTs can be used to create unique and secure digital identities, which could revolutionize the way online authentication and privacy protection are handled.
In short, NFTs have unlimited potential to transform various aspects of our digital and physical lives. From art to education to virtual property, these applications show how NFTs are shaping the future of technology and the digital economy.
These are just a few examples of how NFTs can be used in as many applications as your imagination allows you to come up with.
How is an NFT different from other cryptocurrencies?
NFTs (Non-Fungible Tokens) and other cryptocurrencies share a common technological base: both are built on blockchain technology, which is a distributed and decentralized ledger. However, there are fundamental differences between them:
Fungibility
NFT: NFTs are unique and indivisible, meaning that they cannot be exchanged one-on-one like traditional cryptocurrencies would. Each NFT has a specific value and characteristics that distinguish it from others.
Other Cryptocurrencies: Traditional cryptocurrencies, such as Bitcoin or Ethereum, are fungible, meaning that one unit of a cryptocurrency is equal in value and utility to any other unit of it.
Interoperability
NFT: NFTs are especially used to represent the ownership of unique digital assets, such as digital art, collectibles or virtual properties. Each NFT platform can have its own standard (such as ERC-721 or ERC-1155 on Ethereum) for creating and managing NFTs.
Other Cryptocurrencies: Traditional cryptocurrencies are primarily designed to function as a medium of exchange and storage of value. They are interchangeable with each other and can be used in a wide range of financial applications and transactions.
Value and Scarcity
NFT: The value of an NFT derives from its uniqueness and authenticity. Being unique, they can have a subjective and emotional value for collectors and enthusiasts.
Other Cryptocurrencies: The value of traditional cryptocurrencies is determined by factors such as supply and demand in the markets, as well as by the adoption of and trust in the underlying technology.
Applications and Use Cases
NFT: NFTs find applications in digital art, online games, collectibles, music, virtual real estate, and other fields where authenticity and exclusive ownership are critical.
Other Cryptocurrencies: Traditional cryptocurrencies are primarily used as a form of digital money, and can be used for transactions, investments, and as a store of value.
Fractionation
NFT: Since NFTs are unique and indivisible, they cannot be divided into smaller parts.
Other Cryptocurrencies: Traditional cryptocurrencies can be divided into smaller fractions, making it easier for microtransactions and adoption in everyday use cases.
In short, while traditional cryptocurrencies are exchangeable and used as digital currency, NFTs represent the authenticity and exclusive ownership of unique digital assets, making them a form of digital art and valuable collectibles in the digital world.
Examples of NFT collections
There are thousands of NFT collections. Here are 2 of the most notable collections that have left an indelible mark on the NFT universe.
CryptoPunks
Widely recognized as the first NFT project, CryptoPunks is a collection of 10,000 random characters on the Ethereum blockchain, featuring 24 x 24 pixelated avatars with unique and eccentric attributes. A duo of Canadian technologists launched the series in 2017 from their headquarters in New York City, Larva Labs.
Picture of four CryptoPunks NFTs.
Bored Ape Yacht Club
Second in popularity, only after CryptoPunks, the Bored Ape Yacht Club presents a collection of 10,000 NFTs of eccentric primates whose unique code works like a pseudonymous mask to which users link their Web3 identities. To date, the project has generated more than $2.5 billion in sales and continues to innovate in the utility space, inviting token holders to private online spaces, exclusive merchandise and live events for members only.
Picture of four Bored Ape Yacht Club NFTs.
How to buy NFT?
To buy NFT you must follow the following steps:
1. Choosing an NFT Platform
First, you need to select an NFT marketplace platform. Some of the most popular platforms include OpenSea, Rarible, and SuperRare, each with their own interface and NFT catalog.
2. Setting up a Cryptocurrency Wallet
To buy NFTs, you need a cryptocurrency wallet compatible with the blockchain in which the NFTs are issued. Ethereum is the most commonly used blockchain for NFTs, so an Ethereum-compatible wallet, such as MetaMask or TrustWallet, is essential.
3. Transfer Funds to the Wallet
Depositing funds into the cryptocurrency wallet is necessary to make purchases. This can be done by buying Ethereum or other compatible cryptocurrencies on an exchange and then transferring them to the wallet.
4. Explore and Select NFT
On your chosen platform, browse through the available NFT collections. You can filter by category, price, and other criteria to find the NFT you want to buy.
5. Verify Authenticity and Details
Before making the purchase, review the details of the NFT. This includes your title, description, author, and any associated unique attributes or characteristics.
6. Make the Purchase
Once you've chosen an NFT, follow the steps on the platform to make the purchase. This usually involves connecting your cryptocurrency wallet to the platform and confirming the transaction.
Conclusions
NFTs, Non-Fungible Tokens, have transformed the way we perceive authenticity and ownership in the digital world. By backing up each digital asset with a blockchain, they guarantee its uniqueness and originality. This has triggered an explosion of creativity in digital art, allowing artists to monetize and exhibit their work directly, without intermediaries. NFTs have also opened up new business possibilities and digital economies, from the ownership of virtual assets to the creation of metaverses and virtual worlds, revealing vast and diverse potential.
This democratization of participation in the world of art and collectibles has extended the opportunity to people everywhere to buy, sell and own digital assets. Representing an exciting evolution in the interaction with digital property, NFTs are shaping the course of our increasingly digitized society.
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