What are NFTs?
Non-Fungible Tokens - A Quick Overview Non-Fungible Tokens (NFTs)
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NFTs have been gaining immense popularity for the past several years. NFTs have become the newest wave of cryptocurrency assets that many indie creatives have been drawn to due to the ease of ownership, transferability, authenticity. Check recent the stats!
If you are new to NFTs, there are many things to learn and explore. We are here to keep it simple for you. Let’s start with some basics.
What are NFTs?
How do they work? What are some use cases?
What are NFTs?
Commonly known as Non-Fungible Tokens, NFTs are a type of cryptographic token that represents a unique asset. This asset can be either a tokenized version of an asset in the physical world, like a piece of real estate or a digital intellectual property asset in the virtual world, like 3D Digital Art or a Digital Music Composition.
NFT tokens- ERC-721, for example, are minted, bought and resold on the Ethereum (ETH) Network. The Ethereum website does an amazing job explaining how this works but its essentially a decentralized community based platform and token (right now, on March 7, 2021, 1 Ether is 1,729.78 USD). It’s important to note that other blockchain networks are starting to offer NFT’s like the Tron Network- TRC-21 based in China.
As the name indicates, Non-Fungible Tokens are not interchangeable with each other. Unlike Euros, US dollars, or even Bitcoin, it functions as proof of authenticity and ownership in the digital markets.
Since 2012, NFT’s have been transforming the concept of ownership. Even though NFT’s have become popular recently, the first instance of an NFT started in 2012. Protocols developed on top of Bitcoin Networks, like Counterparty, Colored Coins, and Omni led to the creation of the first-ever NFT assets.
After years of slow growth and little notoriety both in and outside of the space, in 2015, NFT’s had their major publicized event. The Counterparty protocol had one of the most viral NFT drops of all time. Counterparty launched Frog Memes, called “Rare Pepes” before the Ethereum Network launched their own NFTs.
Not long after this, CryptoKitties was introduced into the market. Developed as a blockchain-based game, CryptoKitties allows every player to purchase, gather, breed, or sell virtual cats. After successfully launching the blockchain-based game, ERC-721, the first major NFT standard, was created.
ERC-721 was launched as the first Non-Fungible Token standard on the Ethereum blockchain. Each NFT token is unique and can’t be duplicated, reproduced, or exchanged for an identical token. This is why NFTs are used to verify authenticity. Each token that is issued represents a unique physical or digital asset.
For example, if you bought four cars of the same make, model, color, and year, they would all look identical, but each car is a unique asset on its own VIN number and possibly independent license plate. NFTs are similar in that each token represents a unique asset.
Use Cases
Counterfeiting and fraud have been huge problems in a number of industries. For example, the collectibles and art ticketing sectors have been plagued with fraud over the recent years. With NFTs, this problem of validation and authenticity is virtually eliminated because each time you make transaction, it is minted and recorded on an immutable ledger. That immutable ledger simply means that it can’t be changed or altered. This disruptive innovation is a huge paradigmatic shift in the way we think about authenticity, transparency, and accountability in market economies.
Since 2012, NFT’s have been used and incorporated in various ways. Here are some of the most popular examples of NFTs in use today:
Gaming:
Gaming was one of the first uses of NFTs. Cryptokitties and Decentraland are two popular games that introduced the unique concept of NFTs to the marketplace. “Cryptokitties” is a game based on the ERC-721 standard on the Ethereum blockchain that allows gamers to collect, breed, and sell digital kitties.
Another popular gaming platform is called “Decentraland”. As the name implies, it utilizes a 360-degree virtual world with empty digital plots of land that users develop. One of the objectives of the game is to build unique structures on the platform and on your plot of land. Players can build anything over their plot of land to add unique characteristics that add to the value of their land.
Art:
The art industry has started to tokenize artworks and real-world assets by adopting Blockchain technology. Thanks to the Blockchain and IoT( Internet of Things), NFTs have become so accessible that anyone can verify and track their artwork on the blockchain. Artists, Gamers and Musicians, for the first time in history, can now ascribe provenance to their unique assets.
With the integration of the ERC-721 token standard, people have experienced a drastic change in how they can authenticate their assets. People now scan a code on a sticker or painting with a tap of a button and register their assets on the Blockchain right away.
Another big innovation that has become popular in the NFT Art space is programmable art. Programmable art is a combination of creativity and state-of-the-art technology that allows artists to split their pieces into layers that change the piece over time. With programmable art, different artists can create and develop images that resonate with the variety of available crypto assets using smart contracts and oracles. Meaning that based on the conditions set in the smart contract, the piece will look different depending upon whatever conditions the artist(s) set.
Collectibles:
As I mentioned earlier, NFTs are used as tradable and collectible items. Apart from Decentraland and Cryptokitties, there are a number of sites for collectibles such as:
Gods Unchained is one of the top digital collectible card games in the NFT space. Each card is minted as an NFT, so each card is unique. That means you can own or trade the cards with the confidence of knowing the selling history of the card, previous owners and bids, etc.
My Crypto Heroes is a multiplayer role-playing game that allows players to take their historical heroes to the next level through battles and guests. The in-game items and heroes are issued as tokens.
Binance Collectibles is a platform that is run by Enjin and Binance. Users are given collectibles when they complete certain transactions or requirements set by Binance. The collectibles are put into users’ wallets and then users are able to take those collectibles and trade them on Opensea.
Crypto Stamps was created by the Austrian Postal Service, to connect digital stamps to the real world. The digital image on the stamp is saved on an Ethereum blockchain where they can then be traded or collected. For that reason, Crypto Stamps have become a popular collectible in Austria and have given citizens an opportunity to participate in trading or holding a digital collectible.
Licenses and Certifications:
NFTs can be used to validate and keep a record of licenses or certifications. Commonly, a certificate is awarded in either digital or hard copy form when a specific course or event is completed or when you need to validate the authenticity of an asset. By moving to the blockchain, educational institutions, businesses and employers could easily verify the credentials of customers or potential employees.
NFTs offer a more convenient and straightforward way for those who hold licenses and certifications to store any piece of information without any risk of losing it in the future. Today, there are a number of services that issue certificates and licenses on the blockchain that are minted as NFTs to represent physical assets like a collectible one of a kind Porsche.
Fashion:
One of the most prevalent issues in fashion is counterfeit or “knock off” products. NFTs are a great way to solve the problem and some of the leaders in the luxury fashion industry have started to use blockchain technology to implement the authenticity of every product.
Consumers can easily scan a QR code that is either attached to the internal label or a sale tag to display the NFT. Aside from minimizing the risks of counterfeiting, the integration of blockchain in the fashion/retail sector helps add extra protection to customers while they’re shopping by allowing businesses to keep a nearly perfect record of every item that they own. This is especially useful when considering assets with a robust secondary and tertiary market such as expensive handbags, accessories, and shoes.
Music:
It is an exciting time for independent music industry professionals that are interested in creating IP assets like; Exclusive Digital Music Drops, Special Projects/Collabs and Sample Beat Kits.
For the first time in history, independent producers and musicians can now use Blockchain technology to mint their works any time they want.
Ethereum based platforms like Audius and Mintbase allow musicians, producers to mint their work. We strongly believe that collaborations with visual artists are a must for musicians that create using the Blockchain. Music paired nicely with visual arts makes the narrative more dynamic and easier to sell unless the musician/producer has an established fan/collector base.
Royalty splits has also become very simple and straightforward with the use of smart contracts. Everyone that has contributed to any musical composition/project can get paid instantly with this technology. More importantly, if a project is sold, all creatives involved get royalty payments in perpetuity.
No more waiting to get paid. When you do get paid, it’s every time the work is sold!
The possibilities are endless and will reach as far as your creativity can take you.
Dj’s and Producers, for example, can drop exclusive beat packs and mixes on the platforms and also do live virtual events in the MetaVerse with web3 destinations like CryptoVoxels or Decentraland.
It’s a great time to explore all of the possibilities that your music will take you with Blockchain Technologies.
I hope this quick overview about Non-Fungible Tokens helps you to better understand how NFTs are being used in the real world. Please feel free to browse our substack for more e-books on this topic.
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-Binary Lawyer
Thank you ...Still unsure what site to use and with regard music my band have our debut album coming out this year and I am weighing up again which site and how to maximise ...it will be interesting to see how Kings of Leon get on with their new album via NFT.
Glad that I found your interview trough Games YTB channel and I'm reading these posts! Greetings from Lithuania. Dima Fenix.