Non Fungible Tokens (NFTs) are assets on a blockchain with unique data that differentiates them from each other. NFTs are also cryptocurrencies on the blockchain but unlike traditional cryptocurrencies, there can only be one original form of a particular NFT.
They are called non fungible tokens because only one form of a particular NFT can ever be in existence. This is similar to owning the original copy of Leonardo Da Vinci’s ‘The Monalisa‘. Although there may be millions of copies of ‘The Monalisa‘, there is only one original copy. This is the exact idea of non fungible tokens.
Fungible tokens on the other hand refers to the traditional cryptocurrencies such as bitcoin, ether and ADA. Millions of units of these cryptocurrencies exist with each similar to the other. This is to say that 1 bitcoin can always be exchanged for another bitcoin because they are in fact the same thing.
What Are Non-Fungible Tokens?
NFTs are digital assets on the blockchain that can never be replicated. There can only be one copy of an NFT and this copy will always be different from any other copy ever made. NFTs are also cryptocurrencies but differ from the traditional cryptocurrencies as a result of their non fungible nature.
Although they have been around since 2014, they began to attract a large amount of audience around 2017. The NFT market benefitted from the cryptocurrency surge of 2017 and as at the third quarter of 2021, the NFT market had a total trading volume of almost 11 billion dollars.
Unlike traditional cryptocurrencies, each NFT has a unique set of cryptographic data encoded into them such that only one original copy of a particular NFT can ever exist. Traditional cryptocurrencies have millions of units with the same set of cryptographic data making one unit exactly the same with another unit. With this, it is difficult to exchange one NFT for another because they aren’t similar and are not worth the same.
The NFT market is still in its early stage and is yet to gain wide adoption as a lot of people still see it as the buy and sell of worthless artworks without any practical use case. This opinion may be correct in the sense that most NFTs are just digital works that may or may not even have resale value.
The NFT market is driven completely by demand and not utility as is considered when trading traditional cryptocurrencies. Having no practical utility, it is possible to buy an NFT for millions of dollars and not be able to resell it.
Since the NFT market is driven by demand, you only sell your NFT if other people are interested in buying it. If no one is interested in buying your NFT, you may get stuck with that NFT and it would have been a bad investment as is seen in the case of Sina Estavi, the man who bought Jack Dorsey’s first tweet as an NFT.
Many NFTs in these early days have been digital representations that already exist in some form. It could be videos or images of iconic moments or skills from popular sportsmen or images of popular artistes or public figures in various industries. Virtually anything can be represented as an NFT.
Some Popular / Expensive NFTs Ever Sold
With the recent hype developed around the NFT market, people have been known to spend millions of dollars purchasing NFTs. Some persons purchase these NFTs for the love of art while some do so as a form of investment but one this is certain, it gives them the ‘bragging rights’ associated with owning the original copy of a particular NFT.
Some of the popular and expensive NFTs ever sold are:
- THE MERGE BY PAK: As at the time of writing this article, the most expensive NFT ever sold is the merge by Pak. It was sold for $91.8 million on Nifty gateway in December 2021 with almost 30,000 buyers pitching together for this piece of art. The price per unit started at $575 and increased by $25 every couple of hours. At the end, it was sold to nearly 30,000 buyers for a whopping $91.8 million in total.
- EVERYDAYS: THE FIRST 5000 DAYS: This piece of art was made by Beeple and is the most expensive NFT to be sold to one single owner. This NFT was sold for $69.3 million. Starting from 2007, Beeple pledged to create one piece of art everyday and this resulted to Everydays which is a collage of the first 5000 artworks he made during this period.
- CLOCK: Clock is a piece created by Pak and Julian Assange, and almost acts literally as a clock, counting the days that WikiLeaks founder Assange has been imprisoned. This piece of art sold for $52.7 million. The goal of the NFT was to raise funds for Assange’s legal defense, and was ultimately purchased by AssangeDAO — a collection of over 10,000 people pooling their money to purchase the NFT and support Assange.
As the hype keeps on growing, we’ve seen some popular NFT projects in 2022 alone even in the midst of the bear market. Some of these projects are:
- BORED APE YACHT CLUB NFT: Launched in April 2021, the Bored Apes are a set of 10,000 digital images of apathetic apes minted as Ethereum NFTs. They have generated more than $750m worth of trading volume and count celebrities such as Paris Hilton and Snoop Dogg as holders. The record sale for a single Bored Ape NFT is 740 ETH, or $2.9 million, in September 2021.
- DOODLES NFT: Doodles is a collection of 10,000 generative NFTs created by Evan Keast, Scott Martin, and Jordan Castro. The team uses “working aliases” and are known as Tulip, Burnt Toast, and Poopie respectively. Before Doodles, Keast and Castro were already well-established in the NFT community, as they helped launch the legendary NFT project known as CryptoKitties in 2017. Martin, meanwhile, had been minting his own pieces and growing his creative brand within the NFT space for about a year.
Are NFTs Worth The Hype?
The NFT market has really seen some huge growth and adoption in recent times as a lot of big brands such as coca-cola, adidas, gucci, starbucks and a host of others are diving into the NFT market to better interact with and serve their customers.
According to DappRadar data, a total of $25 billion was recorded in 2021 and this figure is set to be exceeded as NFTs recorded a transaction volume of $3.7 billion is May 2022 alone.
NFTs are also cryptocurrencies and just like traditional cryptocurrencies, lots of hype gathered around NFT art before proper evolution came into the NFT space. NFTs are now a huge part of the metaverse and are gaining adoption in the areas of gaming, virtual real estate, social spaces and clubs and digital fashion.
Certainly, NFTs are worth the hype and will be a game changer in areas such as the metaverse and digital spaces.
Some Utilities Developed Around NFTs?
Some utilities have been developed around NFTs recently but the value of these NFTs are limited to the platform which they are built for. NFTs have been employed in areas of crypto gaming and recently have become one of the key parts that make up the metaverse.
In the area of gaming, in-game NFTs can be used for level upgrades or to purchase certain in-game weapons or abilities. These NFTs are however not useful outside that particular gameverse. This brings up the issue of limitations associated with gaming NFTs.
For metaverse NFTs, people can own rare NFTs in a particular metaverse but it still remains of little value outside that particular metaverse. The metaverse and gaming sectors have proven to be the two most important sectors so far in terms of NFT utility.
Other utilities associated with NFTs are access to exclusive communities and social spaces as seen with the Bored Ape Yacht Club, NFT ticketed events and virtual fashion in the metaverse.
How Are NFTs Created?
NFTs exist on blockchain the same way traditional cryptocurrencies do. The only difference between both is that NFTs are non fungible while traditional cryptocurrencies are fungible. NFTs on most occasions are digital or pictorial representations of items on the blockchain.
NFTs can exist on the Ethereum blockchain or on any other blockchain that supports their existence. They can be created or minted from items such as: art, collectibles, music, photographs or anything tangible or intangible.
Even tweets can be minted as NFTs and this can be seen when the co-founder of twitter, Jack Dorsey minted and sold his first ever tweet which read, ‘just setting up my twttr‘ for more than $2.9 million.
Where Can You Buy & Sell NFTs?
If you’re looking at buying some NFTs or selling your own collection of NFTs, you would need to know certain things before diving into it. First, you’ll need to set up a wallet that allows you to store cryptocurrencies and NFTs. You can check out how to install and set up metamask.
After setting up a wallet, you will need to purchase the native cryptocurrency of the network you’ll be transacting on. For Ethereum network, you have to purchase some Ether and for Polygon network, you have to purchase some Matic. You can purchase any of these cryptocurrencies on a centralized exchange like Binance or Kucoin using your credit card. You can also request some cryptocurrencies from a friend if you have anyone kind enough to spare some.
Before you start buying and selling NFTs, you may want to also consider the gas fees on each network. While the Ethereum network remains the best and biggest network for NFTs, its gas fee is considerably on the high side compared to other networks like Polygon and Binance smart chain.
Some of the most popular NFT marketplaces where you can easily mint, buy and sell NFTs are;
- OPENSEA: This is a peer to peer platform where users can easily mint, buy and sell digital items and collectibles. To get started, one needs to just create an account to begin browsing various collections of listed NFTs.
- RARIBLE: Rarible is a software allowing digital artists and creators to issue and sell custom crypto assets that represent ownership in their digital work. Rari tokens issued on the platform serve as a governance token for activities on the platform.
- MAGIC EDEN: Magic Eden is a decentralised NFT buying and selling platform that allows users to buy, sell and trade unique digital assets. It is built on the Solana blockchain and allows users to interact with each other in a trustless environment.
NFT started just like traditional cryptocurrencies but have gained adoption in recent times.
Many big brands such as coca-cola, adidas, gucci, starbucks and the likes of them have adopted NFTs and are utilising it to better serve customers. Even social media platforms like twitter, instagram and facebook have recognized NFTs and are properly transitioning into the trend.
As more people understand NFTs and technology continues to advance, more adoption and utilities are certain to evolve around NFTs.
In all, one thing is certain; NFTs are going mainstream.