You might have heard about the term “non-fungible tokens” most commonly known as “NFT.” Like many others, you might have found yourself wondering what this term is all about and why it has become one of the most trending topics in the crypto world today.
NFTs are now revolutionising the way we think about digital assets. In fact, the massive sales of crypto audiences have significantly changed the lives of many digital artists. What’s more, popular celebrities and huge brands are now jumping on the trend as they see NFTs as a new and effective way to reach out to their audiences.
In this article, we’ll know more about NFTs, how they work, what they are used for, the NFT standards and the different types of NFTs.
What is NFT?
NFT, which stands for a non-fungible token, is a collectible digital asset that you can use to create ownership of real-world objects such as artworks and sports cards. However, NFTs cannot be duplicated or exchanged like standard coins such as Bitcoin and Ethereum. Also, NFTs are not interchangeable since each NFT has unique characteristics that sets it apart from all other digital tokens.
Unlike Bitcoin which you can lend to someone and then eventually receive one back as a payment leaving you the same value, NFTs cannot be replaced by another token as no two NFTs are alike. What’s more, compared to Bitcoin which is divisible, meaning you can send and receive smaller amounts of one Bitcoin (measured in Satoshis), NFTs are not divisible, in the same way, you cannot divide art into pieces.
How Do NFTs Work?
Typically, NFTs are held on the Ethereum blockchain and have additional information saved on them. This information comes in the form of art, gif, videos, music and more. Since they carry value, they may be sold like other forms of art. Similar to traditional arts, their value depends on the market and demand.
While NFTs cannot be duplicated, it doesn’t mean that there is only one version for each NFT. Just like art pieces in the real world, there are also copies of NFTs that are considered legitimate, however, their value is not the same as the original.
With NFTs, the original owners receive exclusive ownership rights that allows verification of ownership and transfers between different owners.
What Are NFTs Used For?
NFTs provide artists and content creators with an effective way to monetise their work. Artists, for instance, no longer have to look for auction houses and galleries to sell their art. With NFTs, they can simply sell their art directly to their customers, allowing them to keep a large sum of the profit. What’s more, NFTs allow artists to create royalty programmes so that they get a percentage of sales once their piece is sold to a new owner. This is one of the best features of NFTs as most artists do not earn further once their art has been first sold.
NFTs need to have a proper standard to understand what they are actually capable of. Here are the three most popular NFT standards as of today.
ERC-721 is the most commonly used token standard. It is used in non-fungible token development as it ensures that each token is unique and can be priced independently.
Similar to ERC-721, ERC-998 is also non-fungible. However, unlike ERC-721 which can only hold NFTs, ERC-998 is capable of owning other NFTs and uniform fungible tokens such as ERC-20 as well. Given that ERC-998 can hold a unique set of digital assets, it is considered a portfolio of digital assets.
ERC-1155 is a multi-asset token standard that allows users to register fungible tokens (ERC-20) and non-fungible tokens (ERC-721) using the same address and smart contact. As such, it saves transaction costs as it eliminates the need for the approval of individual ken contracts.
Different Types of NFTs?
Here’s a list of the most common types of non-fungible tokens.
Art is one of the most popular forms of NFT in the market. Virtual artworks, including but not limited to digital pics, drawings, paintings, short videos and gif are the kind of NFT that sells the best.
One of the most valuable NFTs ever sold is a digital artwork called “Everyday’s — The First 5000 Days” created by Mike Winkelmann most popularly known as Beeple. It was sold for a whopping US$69 million.
For many years, music has been sold as a fungible item distributed on records, cassettes and CDs. However, artists only earn a portion of what their music generates due to various charges such as cord label cuts. Today, DJs and musicians are now using NFTs to send music directly to their fans. Thus, allowing them to earn much more money in just a matter of hours.
In March 2021, Grimes, a Canadian musician, made $5.8 million selling the WarNymph Collection, Vol. 1, a suite of 10 exclusive artworks in the form of NFTs. Some of the artworks were accompanied by her original songs.
Video games are another frontier in the NFT space. Blockchain games such as Axie Infinity allow users to buy, collect and trade NFTs. These can be in the form of characters, creators, virtual weapons or skins.
Another NFT game is the CryptoKitties. It allows users to breed and collect digital cats. Individual cryptokitties have reached more than US$300,000 a piece.
Similar to traditional collectible cards, people can also buy and trade digital trading cards. They can also opt to store them as a collectible.
Some of the most valuable NFT trading cards include Curio Card, Crypto Strikers and Gods Unchained.
Big sports moments are a type of NFTs that doesn’t have a physical counterpart. These include short clips of historical moments in the world of sports. One great example is the NBA Top Shot featuring a LeBron James Top Shot moment that was sold for nearly US$400,000.
People now care about what their avatars are wearing. Hence, the existence of virtual fashion. While buying a piece of clothing for a hefty sum of money may sound ridiculous to many, virtual possessions actually generate sales in the metaverse.
Dolce & Gabbana launched a 9-piece collection during Venice Fashion Week where the NFTs were auctioned for US$5.56 million. Alongside the NFT, buyers also received the physical versions of the items and exclusive access to D&G events.
You can also buy and trade memes on the NFT market. The iconic Doge meme, for instance, which was sold for a whopping US$4 million made history by becoming the most expensive meme NFT ever sold.
When it comes to NFTs, we can all agree on the fact that we’re still at the tip of the iceberg. There are still a bunch of things left undiscovered and as time goes by, the list of the different types of NFTs will continue to grow.
Be part of the future of art, fashion, music and more. Learn more about NFT with SMMILE. Send us a message at firstname.lastname@example.org or contact us at (65) 8687 8143.