What are NFTs? For starters, NFTs are a special type of crypto asset. This asset gives holders proof of ownership over their digital (or real) items. NFTs were there long before they gained so much hype. According to Investopedia, the first NFT sold was “Quantum,” designed and tokenized by Kevin McKoy in 2014 on the Namecoin blockchain, then minted and sold in 2021 on Ethereum.
What are NFTs?
You’ve heard the term non-fungible token many times, but what does it mean in the real world? You could describe your kitchen stand mixer and fridge as non-fungible because you can’t exchange one for another. This is mainly due to each one having distinguished properties. The same goes for NFTs- no NFT can be exchanged for another because each one is unique.
On the other hand, take dollars and ETH as an example. 1 dollar/1 ETH can be exchanged for another 1 dollar/1 ETH because their value is what defines them, rather than properties.
Now that we’ve covered fungibility, NFTs also characterize as indestructible and verifiable.
Indestructible because data related to your NFT is stored on the blockchain via smart contracts. This implies that they cannot be destroyed, removed, or replicated. As for verifiability, it means that historical ownership data is also stored on the blockchain, This allows NFTs to be authenticated by tracing back to the original creator (no need for third-party authentication).
How do NFTs Work?
We now have a general idea about what NFTs are, so how do they work? Simply put, the process of creating an NFT is called minting. This is the process of recording an NFT on a blockchain. This procedure requires the incorporation of smart contracts. Which, in turn, assigns ownership and manages the transferability of NFTs.
What are They Good for?
From the artists’ point of view, NFTs gave them a unique opportunity to sell their art without having to depend on an auction or a gallery. Instead, artists can now sell their work directly to their customers in NFT form, consequently keeping more of the profits. Furthermore, artists can program in royalties so they can receive a percentage of sales whenever their art is sold to a new buyer. If you’re an artist considering taking a plunge into the NFT world, check out how to create an NFT.
For gamers, NFTs are an opportunity to own in-game items and other unique assets. They are also an opportunity to create or monetize objects in the virtual world, like buildings and parks. They can also sell digital items they acquire during gameplay, such as costumes, avatars, and in-game currency on a secondary market. Take Axie Infinity for example.
Art isn’t the only way to make money with NFTs. Brands like Charmin and Taco Bell have auctioned off themed NFT art to raise funds for charity. Charmin dubbed its offering “NFTP”. And Taco Bell’s NFT art sold out in minutes, with the highest bids coming in at 1.5 wrapped ether (WETH)—equal to $3,723.83 at the time of writing, according to Forbes.com
As for buyers, everyone has their own motive for owning an NFT. Mainly, people are buying NFTs as an investment, either by flipping or in the long run. Others are simply collectors who love collecting unique artwork or hyped digital collectibles. Also, Most NFT projects offer special perks such as utility, community benefits, and merchandise. This drives people to join and invest in fun, and engaging projects.
Examples of the most popular NFTs
You’ve definitely heard of Larva Labs’ Cryptopunks and Yuga Labs’ Bored Ape Yacht Club (check out their mutant variant, the Mutant Ape Yacht Club). But there are many other very hype PFP NFT collections to take notice of. Check out Doodles, Pudgy Penguins, and Clone-X on OpenSea for updated floor prices and more. More on how to buy them
To summarize, NFTs are the next step in revolutionizing our financial infrastructure as we know it. Actually, the digital representation of physical assets is not new to us, nor is the unique identification of those assets. However, these two notions, combined with an unalterable blockchain and smart contract technology, become a powerful source of change.