Excerpt: Since Twitter’s founder, Jack Dorsey’s first-ever tweet was sold for 2.5 m, NFT became a very hot topic. But what is this NFT? A quick overview of NFT and how it works and the basic ABC of it is all there in this quick read.
Read Time: 4 mins 6 secs
NFTs are being welcomed as the digital answer to collectibles, similar to how Bitcoin was heralded as the digital answer to currency, but many sceptics believe they're a bubble ready to explode.
But what is this NFT?
What is NFT?
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So, let’s explain it to you. Non-fungible Tokens are one of the types of cryptographic tokens that can represent ownership of digitally scarce goods, such as pieces of art or collectibles. We know it is still unclear.
Let’s make it more simple for you by breaking it. This breaking takes you back to Economics. Let’s understand what fungibility is. Fungible means is something in units that can be easily interchanged. Like money or in crypto language Bitcoin is a fungible token. Whereas non-fungible as you might have correctly guessed is something that is unique and can’t be replaced or interchanged. For example, the Monalisa painting is non-fungible as it has only one original, though you might take a picture of it. The Adidas limited edition basketball cards are non-fungible.
Properties of NFT
Now when we know what non-fungibility is, let’s quickly run through the properties of NFTs that make it so exclusive:
Each NFT has a unique feature that is frequently recorded in the token data. NFTs all have their own personalities, and no two are the same. On the other hand, an original image.jpg file and its replica, a.jpg file, are identical, yet the original remains original.
2. Digitally Scarce Resource
NFT is stored on the blockchain network. As a result, the certificate of ownership is now available across a variety of networks, allowing the owner of a digital asset to be verified.
Most NFTs cannot be broken down into smaller amounts, nor can they be bought or transferred in parts.
The ownership of the asset transmitted is guaranteed by these tokens.
They're simple to transmit and aren't harmed by fraud.
How Do NFTs Work?
Paintings are precious because they are one-of-a-kind traditional works of art.
Digital files, on the other hand, can be reproduced indefinitely and easily.
Artwork can be "tokenized" using NFTs to establish a digital certificate of ownership that can be purchased and sold.
A record of who owns what, similar to crypto-currency, is kept on a shared ledger known as the blockchain.
Because the ledger is maintained by thousands of computers all around the world, the records cannot be fabricated.
NFTs can also include smart contracts that, for example, offer the artist a percentage of any future token sales.
Standards of NFTs
Normally, NFTs has two standards:
But what are these standards?
Let’s break it again for you. Standard by standard.
ERC-721 is the standard set by an NFT trading platform called Ethereum. According to this, the ERC-721 sets a standard for NFT, which means that this form of Token is unique and may have a different value than another Token from the same Smart Contract, for example, due to its age, rarity, or even its visual.
According to Ethereum official website, “All NFTs have a uint256 variable called tokenId, so for any ERC-721 Contract, the pair contract address, uint256 tokenId must be globally unique. That said, a dApp can have a "converter" that uses the tokenId as input and outputs an image of something cool, like zombies, weapons, skills or amazing kitties!”
Another widely used NFT standard is ERC-1155. Enjin invented it, and it became the official token standard for NFTs. It's a multi-asset token standard that can be used on Ethereum to produce both fungible and non-fungible assets. ERC-1155, like ERC-721, is based on the Ethereum network, ensuring that tokens created using these standards are secure, marketable, and resistant to hacking.
While it facilitates the formation of many assets, it also lowers transaction costs. Developers can also use ERC-1155 to create escrow/atomic swaps of multiple tokens. The standard eliminates the requirement for individual token contracts to be approved independently. Furthermore, this standard allows both fungible and non-fungible tokens to be described in the same contract. As a result, it promotes more secure and efficient token trading.
A few quick examples of NFT Games and marketplaces
Once you have known about the standards, you should know about some of the NFT games and marketplaces available online. We are not going deep into it but just listing them out for you
- Axie Infinity
- Evolution Land
- Gods Unchained
These are the online platforms where you can buy art pieces or collectibles. Here’s a quick list of these as well.
- Open Sea
Another thing that can be an example of NFTs are domain names. Such as:
- Ethereum’s .eth
- Unstoppable’s .crypto
How much does NFT worth?
In theory, anybody can tokenize their work to sell as an NFT but interest has been fuelled by recent headlines of multi-million-dollar sales.
On 19 February, an animated Gif of Nyan Cat - a 2011 meme of a flying pop-tart cat - sold for more than $500,000 (£365,000).
A few weeks later, musician Grimes sold some of her digital art for more than $6m.
It is not just art that is tokenized and sold. Twitter's founder Jack Dorsey has promoted an NFT of the first-ever tweet, with bids hitting $2.5m.
And there are many more such other stories of some expensive NFTs.
We hope with this we have explained to you the basics of NFT. This was a quick preview of the new thing that is making most of the noise. But we also need to mention that NFTs are also creating a lot of environmental hazards, which no one will ever mention. Thinking how? That’s gonna be another lot of discussion. So, we urge you to just google it and there will be many videos.