NFTs stand for Non-fungible tokens. Non-fungible tokens are a form of digital assets built on blockchain technology like cryptocurrencies but are different from cryptocurrencies in that every NFT is built with special information and properties that make it non-fungible (unique).
It holds value like a cryptocurrency but also in the form of art, culture, and quality. It is considered to be a value-holding asset like art collectibles but in a digital form.
The fuss and specialties of an NFT lie in the fact that although it is built like cryptocurrency and can be traded as such, each one created or exchanged hold information that makes it different from another NFT. This is what makes it stand out from other products on the blockchain. NFTs could take the form of any digital art, a music file, anything that can be stored in digital properties that are considered valuable.
Do you know how people buy art and consider a piece of art as a store of value? In the NFT marketplace, the buyers are there to do the same only that they do not receive a physical painting or asset, they receive it in the form of a JGP file.
How do they work?
They can be traded just like coins and tokens, and gain their value based on normal market conditions like supply and demand.
The extra information that NFTs contain is what allows them to take forms of JPGs, GIFs, videos, music, art, etc.
The tokens can be considered as proof and certificate of ownership of the digital asset. Just like how art collectors bid for a painting or drawing at an auction, in the NFT market space, the set prices of the tokens are determined when a buyer pays the highest price (set by the current holder).
If a virtual image of an NFT is uploaded online, it can be downloaded but will not be the same as the original token because it will not have its special blockchain properties.
Also, NFTs can be duplicated and sold on other blockchain networks but note that there can only be one original.
NFT Blockchain Technology
The ethereum blockchain network is rich because it supports other projects like Defi projects and now NFTs.
NFTs are a part of the ethereum blockchain and are created with unique extra information that distinguishes them from other ethereum-supported projects. Ethereum’s standards for supporting NFTs are ERC-721 and ERC-1155.
ERC-721 was created before the ERC-1155 and it supports the popular CryptoKitties, a crypto game, by Dapper labs that allow players to trade virtual cats. Every crypto kitty is different from another because of the properties, unique numbers, and coded DNA that allow owners of the kitties to breed them differently. The game gained popularity in 2017 and caused minor issues in the ethereum network. ERC-1155 is a subset on ERC-721 such that tokens built on the earlier, can also be built on ERC-1155.
Ethereum, although it is very popular, is not the only network that supports NFTs. FLOW and Tezos use the proof of stake consensus model that supports NFTs.
The markets for NFTs were not popular until 2021 even after the first fully-fledged NFT, Etheria, on the ethereum blockchain was built in 2015. On March 13th, 2021, the tokens sold for 1ETH each, making a total of about $1.4 million.
In 2017, cryptopunks, a project to sell unique cartoon characters on the ethereum blockchain, was released alongside cryptokitty the game that allowed players to trade virtual kitties and groom them uniquely, and they both had gotten great attention that the project gained a total of $12.5 million in investment and the crypto kitties started selling for over $100,000 each.
More sales in the NFT marketspace were generated within the early months of 2021 when the developers of cryptokitties created a beta version of the NBA Topshot, a project created to sell highlights collectibles of the NBA. It was built on FLOW which claims to be more effective than Ethereum. When the project was released it made over $230 million in gross sales from the project.
With NFTs getting much attention, a lot of more digital art was created and sold for nothing less than $4000. One of the most popular NFT stories this year was Jack Dorsey, the founder of Twitter, selling his first tweet as an NFT for over $2.5 million.
In the past 30 days, nonfungible.com has shown that over $300 million has been spent on NFTs. It also reported that over a whopping $2 billion was spent on NFTs in the first quarter of 2021. In the previous quarter, it was about $93 million spent which means that the amount of NFTs traded in value has increased by over 2000%
The Future of NFTs
The Non-fungible tokens markets have been widely accepted. This can be proven statistically as the number of buyers and sellers has increased by 239% and 128% respectively since 2020. NFTs have come to stay just like cryptocurrency.
Blockchain, through NFTs, has allowed assets to be tokenized and sold globally, giving many innovative people the chance to put out their work for its worth.
written by Joy Abia