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What Is NFT? A Beginner’s Guide
Introduction
‘Non-Fungible Tokens (NFTs)’ is a trending topic in the blockchain ecosystem. The concept is on the lips of many people who are part of the cryptocurrency and blockchain ecosystem. Among the crowd, some believe it to be the future of arts, while others see it as a profitable investment. However, others see NFTs as a wildfire soon going out of trend.
Although many people have these different opinions about NFTs and what they represent in the blockchain ecosystem, it will not just be what this article will focus on.
This article will focus on everything you need to know about NFTs. We will talk about what they are, the ecosystem’s future, how they are created, bought, and sold, their relationship with other aspects of the blockchain ecosystem, and so on.
What Are NFTs?
NFTs are digital representations of physical objects in the real world like music, artworks, gaming characters and collectibles, videos, etc. People can buy and sell these digital representations online using cryptocurrencies. Interestingly, the creators use the same kind of crypto-coding software for coding them.
Although NFTs did not come into the scene last year, they captured the attention of the cryptocurrency ecosystem last year (2021). Suddenly in 2021, people began to find NFTs as the best ways to purchase and sell their artworks. That year alone, the NFT market was worth $41 billion. Interestingly, the total market value for 2021 alone comes close to the total market value of fine arts globally.
Generally, NFTs exist as one-of-a-kind artworks because, in a limited run, they can be only one. In essence, the presence of an NFT creates a scarcity of that digital art. The nature of NFTs is moving against the tides of many digital creations because most of these digital creations usually have an infinite supply. Therefore, NFTs are rising in price in the digital market because they are scarce while still in high demand.
Again, NFTs are rising in price because, by nature, the original owner of an NFT is the buyer. While many people can view the artwork for free online, it belongs to just one person; the buyer. Because creators design NFTs to have one owner, they are coded with authentication. Their authentication is the owner’s ownership proof. Furthermore, the authentication gives the owners (collectors) bragging rights.
How Does an NFT Work?
NFTs work using blockchain technology, and this technology is a Distributed Ledger. The ledger is a public one for entering and recording transactions. Similarly, cryptocurrencies use this technology for operations. NFTs run on the Ethereum blockchain. However, some other blockchains support the running of NFTs. Also, unlike cryptocurrencies that are produced by mining, NFTs are created by minting.
Types of NFTs
NFTs refer to digital representations of a real-life physical object. Just like objects in our real world, there are different types of NFTs, and they are
Artworks
These NFTs are more popular in the NFT space and are majorly digital representations of real-life artworks and paintings. The most expensive NFT artwork is Beeple’s ‘The First 5000 Days.’ He sold it for $63.9 million in 2021.
Collectables
These NFTs are the first to come into the NFT space. They are mainly physical collectibles in digital forms. NFT collectibles include Pokemon cards, Curio cards, Bored Ape Yacht club, Cat Colony, Cryptopunks, and Meebits. The highest valued digital collectible is the Bored Ape.
Sports Memorabilia
These NFTs are currently the hottest in the market. Examples of these NFTs are NBA Top Shot and Lebron James Sunk Throwdown Series.
Video-Game Assets
These NFTs are video game rewards. Examples of games that reward players with NFTs are Axie Infinity, Cryprokitties, and Gods Unchained.
Virtual Land
These NFTs are virtual lands in the metaverse that people in the metaverse can develop. So, people can build virtual real estate properties and rent them out in the metaverse on their virtual land NFTs.
Memes
Memes are also NFT collections that have rocked the NFTs world. Examples of meme NFTs are the original Doge meme, Disaster Girl, Success Kid, Bad Luck Brian, and NyanCat.
Domain Names
These types are minted crypto domains on the blockchain. Examples are the BSC (Binance Smart Chain) and Ethereum. Currently, the domain extension NFT rocking the market is the ‘.eth.’
Music
This NFT category is arguably the newest in the block. Today, artists can release their albums as NFT digital representations and sell parts of the album before streaming on platforms. As a result, the buyers will get shares of the profits from the traditional album release.
Real-World Assets
These NFTs are representations of real-world physical properties. Buying the NFTs means you own a part of or the whole asset, and the NFTs are legal proof of ownership. Since NFTs have unique authentication, owners or creators cannot duplicate the ownership.
NFT Fashion
Fashion NFTs are the real deal now. Companies like Nike have their NFT sneakers representations. Also, other fashion brands like Burberry and Louis Vuitton have kimonos and sneakers for avatars in digital games.
Miscellaneous Online Items
these are other NFTs that are not in the other classes. Miscellaneous NFTs include blogs, tweets, comments, and posts. For example, Jack Dorsey’s first tweet was sold as an NFT for $2.9 million.
What Are NFTs Used For?
NFTs have become a way for content creators and artists to sell their crafts using blockchain technology. Therefore, artists and content creators do not need to rely on traditional auctioning to profit from their creativity. Furthermore, these content creators can program royalties in their NFTs so that they will receive some percentages if their owners sell to new people.
What Is OpenSea?
OpenSea is the largest NFT marketplace. It is a decentralized marketplace where NFT collectors and creators can buy and sell NFTs. In 2021 alone, the total worth of NFTs people bought and sold in the OpenSea marketplace was $3.5 billion.
Why Are NFTs So Popular?
NFTs are digital representations of a physical, real-world item. So, just like real-world items have owners, NFTs are designed to have unique owners. The nonfungibility of the assets makes them unique and impossible to duplicate. Furthermore, NFTs are stored on the blockchain with a policy ID and token numbers to establish their authenticity.
Their uniqueness accounts for why it is very popular. People who own NFTs have bragging rights and are the sole owners of these NFTs. So, with one owner worldwide, that particular NFT will be scarce, and if it is highly sought, it will be on the lips of everyone. These characteristics of NFTs make them very popular and highly sought after.
Furthermore, NFTs are becoming popular because global brands and celebrities are involved in the ecosystem. According to Stevenson, Vancouver’s digital art galleries founder: “The reason NFTs have skyrocketed in popularity is that most artists in the world, for example, Justin Bieber [who has] has his NFT– all these global celebrities are coming out with their own NFTs which are making [them] in general just more popular,”
In addition, Stevenson said, “A whole bunch of notable brands and artists are coming on board. They’re kind of pumping up the popularity of NFTs in general.”
NFT Going Mainstream
Generally, the NFTs market is growing daily. According to a forecast from research by QYReseach, the NFT marketplace may reach $7.63 billion between now and 2028. With the rate of popular artists and global fashion brands going into NFTs, the Industry may go Mainstream in the next six years.
NFTs and Cryptocurrencies
NFTs and Cryptocurrencies are like siblings. They share the same parent but are different entities. The parent, in this case, is Blockchain technology. Therefore, siblings from the same parent will share some similarities. On the other hand, they will also have some differences, the major one being fungibility.
NFTs (Non-Fungible Tokens) are not fungible, but cryptocurrencies are fungible coins and tokens. In other words, one Ether coin is equal to another Ether coin, but one NFT is not equal to another NFT. So, even though some cryptocurrencies are scarce based on limited and finite supply, NFTs have only an original copy.
Ethereum and NFTs
Ethereum is a decentralized Blockchain for building or developing decentralized applications (DApps). Most NFTs are minted on the Ethereum Blockchain, and here are the reasons why the Ethereum Blockchain supports NFT minting.
- It is easier to prove NFT ownership history on the Ethereum Blockchain.
- All products on the Ethereum Blockchain communicate with each other, making an NFT a cross-portable digital asset.
- The Ethereum Blockchain does not go down, so it means that NFTs will always be available for sale.
Penguins NFTs
The Penguins NFTs is an 8,888 NFT collection built on Web 3.0. The Penguins are a representation of compassion, empathy, and a representation of positivity. Apart from these representations, holders of the Penguin NFTs get special access to events and experiences.
Last week, people bought 60 Penguins NFTs valued at $103.21 thousand. So, the average price of one Penguin’s NFT was $1.7 thousand. In addition, 4,357 people own the entire 8,888 Penguins NFT in the ecosystem.
How to Buy NFTs
You have seen that NFTs run on the Ethereum blockchain, so buying an NFT requires you to pay with Ether. Generally, the particular blockchain on which a creator mint or sell an NFT will determine the cryptocurrency a collector pays.
Therefore, if you want to buy an NFT, here are the steps you should follow:
- Register with a cryptocurrency exchange and buy Ether.
- Open a MetaMask wallet and transfer your Ether to your wallet.
- Connect your cryptocurrency wallet to your chosen NFT marketplace, browse and select your preferred NFT and pay for it from your Ether wallet.
Best Marketplaces for Buying and Selling NFTs
Below are the top ten NFT marketplaces in the NFT ecosystem.
- OpenSea
- Axie Marketplace
- Crypto punks/Larva Labs
- NBA Top Shot Marketplace
- Variable
- SuperRare
- Foundation
- Nifty Gateway
- Mintable
- Theta Drop
Should I Buy NFTs?
This question is the big question in the mind of many people who want to get into the NFT community. As much as this question looks valid, it is not the most important. The most important question is, “why should I buy or why should I not buy.”
Vitally, the reasons for something will give you a clue about whether or not you should go into it. Therefore in this section, we will answer why you should buy or not buy NFTs.
Firstly, one valid reason people buy NFTs is to support artists they love but are neither rich nor famous. Secondly, people buy NFTs to resell and make money from them. Thirdly, sports lovers buy NFTs as fans to support their favorite teams or stars. Lastly, people buy NFTs to make money playing video games on the blockchain.
If you feel any of the reasons listed above are worth your investment in NFTs, you should give it a shot. Otherwise, you can look for other places to spend your time and money.
How to Create an NFT
Anyone with basic Blockchain and Ethereum knowledge can create (mint) NFTs by following these simple steps:
- Select an item that belongs to you in the real world.
- Select the blockchain you want your NFT to run on.
- Set up your cryptocurrency wallet.
- Choose the NFT marketplace where you want to list your NFT.
- Upload the NFT you have created as a file on the marketplace.
- Set up the process for your sale.
What Is the Relationship Between NFT, Metaverse, and Web3?
Again, these three concepts are siblings like NFT and cryptocurrencies. They have common similarities like;
- They all have decentralization as their core.
- They run on Blockchain technology.
However, these similarities are just one aspect of their relationship. There is more; these three concepts are interwoven into each other. Let’s begin by looking at the concepts in their simple terms.
Firstly, NFTs are digital representations of real-world physical assets. Secondly, The Metaverse is a decentralized digital world that allows people to be and do what they want. People can relate, socialize, govern and own properties in this digital world. Thirdly, Web3 is an internet of the future built around decentralization. Web 3.0 is the integration of blockchain into our current Web 2.0. This integration is to make Web 3.0 a decentralized Web 2.0.
Summarily, NFTs are digital tokens of real-world assets that people can use in the metaverse; now, both the Metaverse and NFTs used as tangible in the Metaverse run on Web 3.0.
The Future of NFTs
NFTs are gaining ground, popularity, and huge traction globally. People from different sectors are getting involved globally. So the big question will be, “what does the future hold for the NFT ecosystem?”
Although we might not be able to give a sure outcome for the ecosystem in the future, we will likely have these four scenarios.
- The market will keep gaining stability slowly and steadily.
- NFTs may end up becoming gold mine assets in the virtual world.
- It will go Mainstream in the video game industry, and in-game NFTs will dominate the market.
- The market will eventually collapse, according to skeptics and critics.
Conclusion
The NFT ecosystem and everything surrounding it is a beautiful concept that people positioning themselves for the Web 3.0 future need to know. From this article, you have seen the answers to the throbbing questions around the NFT ecosystem like what NFTs are, how they work, their future, if they are worth your investment, the reason for their popularity, their effect on the environment, how to buy and create them and so on.
Getting to know these should set you on a course to know if you will be part of this ecosystem or not. Lastly, this article does not carry information on the profitable NFTs to buy, so if you have decided to get into the space after reading this article, research before buying any NFT.
References
What is Blockchain? All You Need to Know About Blockchain
What is Metaverse? All You Need to Know About Metaverse
What is Web3? All You Need to Know About Web3
