Empowered by blockchain technology, digital assets are multiplying fast!
This post was originally published on Zelcore
The third quarter of 2021 saw NFT sales surge eightfold to $10.7 billion, with top markets such as OpenSea recording over $75 million on their best day. What are they, how do they work, and who’s making the most waves? We answer these and other basic questions you might have about NFTs below
Non-fungible tokens are a class of digital assets that contain unique digital signatures imprinted in smart contracts. This identifying information makes each NFT unique and gives it the ability to represent digital and real-world objects such as art, music, videos, and in-game items such as characters or skins.
The creation of NFTs can be traced back to the 2012–2013 crypto era when “colored coins” were released on the blockchain. They were used to represent proof of ownership of various assets, from precious metals and real estate to equities and bonds.
So, how are NFTs different from cryptocurrencies and other tokens? NFTs, being unique, cannot be directly replaced by any other fungible token or swapped like-for-like as you would cryptocurrencies.
Fungible assets such as banknotes, BTC, XRP, DODGE, and other cryptocurrencies are divisible and interchangeable. Anyone with a single BTC has the same thing as another person with another BTC or two halves in separate wallets. NFTs are unique.
NFTs run on blockchain networks, much like cryptocurrencies. Most NFTs are powered by the Ethereum network. However, a few other blockchains support NFTs, including Solana, Tezos, Flow, Secret Network, EOS, NEO, and TRON.
The most common Non-fungible token standard is ERC-721. Fungible Ethereum-based digital assets use ERC-20. Tokens that use ERC-721 encryption are not divisible. They also allow for detailed attributes such as owner identity, secure file links, and rich metadata.
NFTs also bring the same advantages of blockchain technology to the table, including immutability, trust, and security. This combination of characteristics makes them suitable for representing tangible and intangible items in the digital world.
Sure, each NFT is unique and not interchangeable, but why are they attracting so much interest? It’s just like collecting stamps, rare stones, paintings, baseball cards, comics, or any other collectible. It is human nature and represents passion, empathy, and connection to the things we value. It creates a sense of ownership as well as belonging.
Like other collectibles, the value of NFTs lies in what someone is willing to pay for them. NFTs are also valued among crypto enthusiasts for their potential to gain value over time and reward creators in the long term through in-built rights. For instance, Cryptopunk’s collection of 24 by 24 pixelated images of punks that were initially free now go for several hundred thousand bucks.
Another great example is the first tweet of Twitter co-founder Jack Dorsey that sold for over $2.9 million. What’s more, while Beeples’s 69.3 million NFT sale is still rubbing in, CryptoPunks has just recently sold a collection of NFTs for a record 124,457 ETH (about $532 million).
You may have heard of CryptoPunks already. A brainchild of Larva Labs, CryptoPunks was launched in 2017, featuring 10,000 unique pixel images of punks. These images now go for up to millions of dollars while the cheapest ones command six-figure rates.
Axie Infinity is another popular name in the NFT world. The company has a focus on digital objects in video games. It boasted the most traded NFT collection ever by the end of Q3 2021, has attracted over $2.5 billion in trades. The game allows you to collect cute monsters called Axies, put them to battle, and breed them. A single Axie goes for hundreds of dollars.
Our next unique NFT product, NBA Top Shot, comes from the US basketball league. Their NFTs are in the form of digital collectibles embedded with awe-inspiring moments in basketball. They plan to add more items such as jewelry, clothing, and other accessories that can be used on social media.
We have barely scratched the surface when it comes to NFTs. Recognizable brands are increasingly taking their content digital through NFTs. Startups are coming up with unprecedented products and solutions, proving that the potential of NFTs is much wider than we could imagine. Catch our part 2 breakdown of NFTs for more information.