Nowadays, the concept of NFT more often appears in the news, and usually enormous amounts of money are written next to it. For example, the famous scene from the black-and-white movie “Alien Autopsy” was auctioned on Rarible in the form of NFTs and the starting amount was $1.2 million.
What NFT is, why there is such interest around it and what people are willing to pay hundreds of thousands of dollars for, we will tell in the Cryptorobotics blog.
Table of Contents
What does NFT mean?
NFT or non-fungible tokens is a relatively new phenomenon in the world of cryptocurrencies. Each NFT exists in a single copy, it cannot be divided, and all data about its author, owner as well as all transactions with it are safely stored in the blockchain. In other words, an NFT is a digital certificate attached to a unique object.
The NFT coin is unique and cannot be exchanged for another coin with the same value.
The NFT is designed from the ground up so that it cannot be counterfeited or split, like bitcoin, which is divided into satoshi.
Like all blockchain-based tokens, NFT is stored in a virtual wallet with a unique address and you cannot create a copy of this token or even move it without the consent of the issuer.
History of NFT tokens
The history of NFT tokens dates back to 2012 when experiments began with the so-called Colored Coins (colored coins). These are the basic units of BTC and can represent many resources and therefore have many uses. They were used as coupons, company shares, access tokens, or simply collectibles. In the meantime, other projects using NFTs have emerged such as Rare Pepes memes or CryptoPunks pixelated portraits.
The technology gained popularity in 2017 with the CryptoKitties virtual game, which allowed players to accept and sell virtual cats. The launch of the game coincided with the growing popularity of cryptocurrencies.
What can become an NFT token?
Almost everything can be turned into NFT tokens: virtual game items, paintings, music. Each NFT is unique and exists in a single copy, all information on the author and owner has been securely stored on the blockchain owing to a smart contract. NFT can be compared to a digital certificate attached to some unique object.
But NFT can also pay for real existing things. For example, NFTs are used for real estate transactions. The 13% of transactions in total were in this area, 7% of NFTs were used to purchase collections of card games, and 6% to buy domains.
However, there is a clear distinction between authoring and owning a token. For example, you can buy NFT in the form of a GIF, but this does not make you its author. You will only be the owner, as you have bought this digital art, and not created it. The authorship will remain with the creator, and the ownership will pass to you.
Theoretically, NFTs could be used even more creatively. For instance, movie companies can sell fragments from popular movies. In this case, you can become the sole owner of the final Terminator death scene (both in the first and second movies). You can earn money on the purchased stage by reselling it to someone else. The value of such a scene is its uniqueness among collectors.
How does NFT work?
NFTs are part of the different blockchains, so they are separate tokens with additional information stored in them. This information facilitates them to take the form of images, music, videos, and other items that we save as JPEG, MP3, or GIF. Because they have value, we can buy and sell them like any other art form. The cost, in turn, as in the case of art, is determined by demand and the market.
As in the art market, there are still up-to-date copies of NFTs. However, they will not have the same value as the original. For example, if you see a JPG image sold as NFT online, you can’t install it and become an owner of NFT for free. This type of file will not contain information that makes you the owner. Only when buying NFT on one of the special platforms, you will receive the appropriate certificate and additional elements, thanks to which you become the unique owner of this product.
Where are NFTs sold?
NFTs can only be bought and sold on specialized trading platforms.
The most popular platform for purchasing NFTs has been and remains Open Sea. Users can buy rights to real estate, a domain name, some collectibles or programs, and even crypto cats. Transactions are performed using the MetaMask program, which connects users’ cryptocurrency wallets, and, of course, are carried out in digital coins.
But the choice of the platforms is not limited to only OpenSea. There are also other platforms, albeit less popular ones. This is, for example, SuperRare, where the most expensive and unique works of digital art are sold.
Also, among the active sites can be called Rarible, which is also focused on connoisseurs of virtual art. It has already placed more than 20,000 authors. Another platform for digital artists and lovers of unique collections is called Makers Place where users can even leave comments to a particular NFT.
And if you want to draw virtual pictures by yourself, then you have to go to the Async Art site. Finally, the Nifty Gateway platform is also popular; this project is considered one of the most promising for the sale of NFTs, as it is owned by representatives of the well-known Gemini crypto exchange.
Experts believe that the prospects for NFT are very high and this technology can significantly affect our future. The essence of NFT is that you can tokenize any digital product like image, video, audio and receive a certificate testifying that you are the owner of a unique work of art, which has no analogs in the world.
NFT has merged into almost all areas of our lives including games, music, art, etc. But the spread of NFTs in other areas is still in question. One potentially winning use case for NFTs in the future is digital documents, and this is an area that could very well be coming to NFTs in the near future. Recording unique and valuable documents (for example, diplomas, contracts, certificates) in the blockchain will eliminate the risk of their forgery. If you add an electronic signature to them, the risk of forgery will be even lower.
As we mentioned above, NFTs are a new phenomenon and it is difficult to predict what will happen next with NFTs. But it is safe to say that this field of activity is developing rapidly and attracting the attention of a huge number of collectors, which is saying about a promising future for NFTs.
Biography of author
Slava Orel (CMO at CryptoRobotics OÜ) – DeFi and Meteverse enthusiast as well as a marketer. Slava helps crypto projects build the right marketing strategy and loyal communities.