Blockchain technology came into prominence with cryptocurrency; however, it has greatly benefited different fields. One area that is currently leveraging the special characteristics of blockchain technology is non-fungible tokens (NFTs).
Some people indeed believe that NFT is a bubble that will soon burst while others think that it has come to stay; by any standard, however, the fact that more than $2 billion was spent on non-fungible tokens, or NFTs, in Q1 of 2021, which represents an increase of about 2,100% from Q4 2020, makes it an important economic contribution globally, and cannot be put aside.
The bubble on NFTs becomes more interesting if we take into consideration that the revenue from NBA Top Shot, which was said to have hit $472 million in Q1, wasn’t included in the figure above. Also, the staggering $69.3 million spent on an NFT from Beeple wasn’t taken into consideration before coming up with the amount.
What is a non-fungible token (NFT)?
A non-fungible token is a crypto token that is indivisible and unique. An NFT exists on a blockchain, which is a decentralized, unregulated, and distributed public ledger that records transactions.
Though an NFT is built on smart contracts just like ETH and DAI, the difference lies in NFT contracts containing specific information that makes each NFT different from the next. This makes it impossible for one NFT to be interchanged with another.
Also, you can’t attempt to break the whole into smaller units and use them. As a digital asset, an NFT can represent real-world objects like art, digital trading cards, music, in-game items,
tokenized real-world assets, and video clips.
The workings of NFTs
NFTs just like the cryptos are blockchain-based, and this means that they exist on a distributed public ledger that records transactions. While they are essentially held on the Ethereum blockchain, other blockchains can also support them.
An NFT is conceived, minted, or fabricated from digital objects that represent both material and abstract items, some items that are very much in the news currently as NFTs include:
- Videos and sports highlights
- Virtual avatars and video game skins
- Transforming into stories rare collectible card collections representing remarkable events from the crypto space
- Designer sneakers
To show how far-reaching and all-inclusive NFTs can be, Twitter co-founder Jack Dorsey sold his first-ever tweet as an NFT for more than $2.9 million.
Talking in the basics, NFTs are more like physical collector’s items, the overriding difference, however, is that they are in the digital form. For instance, where you should have the real-life Bust of Nefertiti, you’ll get a digital file. But then, the sweet thing to it is that you’ll also have exclusive ownership rights.
It’s absolutely impossible for an NFT to have two owners at the same time. If you want to purchase any NFT, you can verify the ownership due to its unique data, and transfer tokens to the owner since the owner is willing to sell.
If you are the owner of an NFT, you can easily store any vital information inside it, this is a way of authenticating the NFT. There have been instances where artists authenticate their artwork by including their signature in an NFT’s metadata.
How do you go about getting your blockchain-backed NFT collectibles?
The problems we encounter with physical items such as scarcity, uniqueness, and proof of ownership are being radically resolved with the blockchain-backed NFTs. This is a good cause as everything is becoming more digital.
With the blockchain, it becomes easy for verification of every collectible since every NFT must have an owner and this will be on public record. Fortunately, an NFT is compatible with anything built using Ethereum or any other blockchain that supports it.
If you have to take part in an event, all you need is to trade your ticket on any Ethereum marketplace. You can use your digital artwork as collateral in a decentralized loan or trade a piece of art for a ticket.
Examples of NFT Marketplaces
NFTs are bought using cryptocurrencies and this you’ll have to do from a marketplace. The following are four marketplaces and what they offer, you’ll need to understand the intricacies, security, and privacy issues that surround any marketplace to be able to compare and contrast before venturing into any NFT purchase.
Whatever cryptocurrency your NFT provider accepts, which you can buy from Coinbase, eToro, or PayPal, you’ll then move it to your wallet from the exchange.
- OpenSea.io: As a peer-to-peer platform, OpenSea bills itself as the first and largest NFT marketplace of rare digital items and collectibles. What you need to get started is to create an account to browse NFT collections. You have the opportunity of sorting pieces by sales volume to find out if there is any new artist.
- Rarible: Rarible bills itself as a democratic open marketplace that allows artists and creators to issue and sell NFTs. The platform uses RARI tokens to ensure holders can weigh in on features like fees and community rules.
- Cryptomedia: Cryptomedia is championing the issue of fake copies and calls out to users to be careful from falling prey. The platform believes the problem can be solved by using cards issued only by Cryptomedia since they will guarantee that no replicas will be displayed in this marketplace. The essence of this is to ensure that all transactions made within the marketplace are trustworthy.
- Foundation: Foundation makes it complicit that any artist must receive “upvotes” or an invitation from fellow creators before posting an artwork. An artist has to go through the community’s regulations such as purchasing “gas” to mint NFTs. This strict requirement makes the Foundation exclusive and the cost of entry determines the nature of artwork that the platform showcases.
While the platforms above and many more like them are hosts to many NFT creators and collectors, you need to do your research carefully before making any purchase. There have been instances where artists fell victim to fraudulent impersonators who listed and sold their artwork without their permission.
You must also understand that platforms have varying verification processes and NFT listings. For instance, OpenSea and Rarible don’t demand owner verification for NFT listings.
Whenever you want to buy, you must be extra careful and completely understand what to do to ensure your protection. While blockchain technology is powering NFT collectibles, the onus is on you to ensure security.