Non Fungible Tokens(NFT)
Definition of ‘Non Fungible Tokens(NFT)’ - A non-fungible token or NFT is a non-interchangeable unit of data stored on a blockchain, a form of digital ledger, that can be sold and traded.
What are non-fungible tokens?
Non Fungible Tokens definition — A non-fungible token is a type of token that is differentiated from fungible tokens on the account of its uniqueness.
The unique property of the non-fungible token ensures that the token is not identical to any other thing that exists and hence, can not be replaced as such. The non fungible token is a new innovation in the world of crypto.
Until recently, only fungible tokens like Bitcoin and Ethereum were featured on the cryptosystem and these tokens function in such a way that they could be exchanged for and replaced with other identical tokens. So, when exchanged, holders can still have the same exact thing.
An example is exchanging one Bitcoin for another Bitcoin.
It would result in the same value and quantity. However, it is not the same in the case of non fungible tokens. In the case of non fungible tokens, an example is a one-of-a-kind trading card.
If you ever have to trade it for something else, then it will be a different card and that will result in something entirely different. So, for Non fungible tokens, if you give up a Squirtle art, you can never get a perfect replacement for it. The non fungible token is also referred to as NFTs.
The History of NFTs
If you are conversant with the crypto system, you would have heard the news about the non-fungible tokens (NFTs).
It however didn't just start out. Although 2021 was the year when NFTs experienced the boom, they have been in existence since 2012.
It existed as a concept from the idea of “Colored Coins,” which was proposed to feature on the Bitcoin Blockchain. The concept, however, was never realized, but it served as a solid groundwork for further NFT innovations and trials.
The very first NFT was created on the 3rd of May, 2014 by Kevin McCoy.
He minted the “Quantum;” is a pixelated octagon filled with different shapes that pulse in a quite hypnotic way. By November 28. 2021, almost seven years later, this one-of-a-kind Quantum art piece was worth over $1.4 million.
NFTs then went public in 2017. John Watkinson and Matt Hall both created an NFT generative project on Ethereum where no two characters generated were identical.
The piece was limited to 10,000 pieces. The project- Cryptopunks is the only project that used the ERC-20 to launch. One of the Cryptopunks has hit $530 million in value, making it the highest NFT sale yet.
Between 2018 and 2018, we witnessed the introduction of NFT games. The first was CryptoKittiesis a blockchain-based virtual game that allows players to adopt, breed and trade virtual cats from the safety of your own wallet. The project enjoyed acceptance and soon went viral.
It has since then enjoyed growth.
The system is still young and in its experiential phase. And despite the massive growth, the system is still set to reach unprecedented growth and application in many fields.
How do NFTs work?
The Ethereum blockchain was the first blockchain to support the operation of storage, exchange, and display of Non fungible tokens. It operates at a very high level, and even presently, most NFTs are hosted on the Ethereum blockchain. What this means is that Ethereum as a cryptocurrency, (like bitcoin and others) shares its blockchain with NFTs for activities that support NFTs.
It serves as a storage facility for all the necessary information that makes the NFT network act uniquely and efficiently.
We have established that while every other type of digital file and property is reproducible, Non-Fungible Tokens are a rare type such that every digital asset has a single unit of value. Now, let's examine how they work.
An NFT can be anything ranging from a drawing, a doodle, a meme, a picture, a piece of music, a text or even a symbol. The underlying factor is for it to be digital, unique, and be relevant to an audience. These verifiable assets gain their value from their unique identifier feature.
Once an NFT is created or drafted, it has to be secured with intellectual property rights to ensure that no other person makes a dubbed version of the art or token.
The intellectual property right of the NFT is the mechanism that preserves the uniqueness feature of the digital asset. It helps to curb the issue of environmental degradation, fraudulent activities on the blockchain and theft.
It is not enough to create a digital file, this file has to go through the process of conversion into NFTs by securing your right to it. However, as a result of the fact that it is dependent on a decentralized system, it is difficult to track the original owner of the artwork if it has not been claimed. Below is a step by step procedure for creating and publishing an NFT.
First, you would have to select a blockchain platform where your NFT will be hosted and encoded. Some months ago, there was only the option of the Ethereum blockchain. However, present times now feature numerous options of NFTs. Your selected blockchain is what will be used to store and record information related to the exchange of your digital property.
Then secondly, you will get a crypto wallet if you do not already have one.
To get your NFT encoded on your chosen blockchain, you must have first made payments using cryptocurrencies. Minting can not be paid for using fiats. This can only mean that you ultimately need a Crypto wallet when paying to mint an NFT.
Note that the NFT marketplace consists of NFT buyers, NFT creators, and NFT investors.
It is important to state that the process of making an NFT comes at a price. It is tantamount to the price that is paid to gain a copyright license for a traditionally written work or intellectual property. By design, just like you are required to pay for a copyright license, you are also required to pay certain fees to register your NFT’s information in the blockchain. This process is called Minting. After minting has occurred, you can then put up your NFT in an NFT marketplace. The cost of minting your NFT ultimately varies across the different NFT platforms where the NFT is encoded.
Once the NFT is up on display in the NFT marketplace, sales and purchase can be initiated as an original digital asset. At the point of sale, the ownership is transferred as an original file not a copy. However, the intellectual property right is retained by the seller. Hence, the buyer may not have copyright privileges over the NFT. Meanwhile, anyone can view an NFT for free. What this means is that a buyer only has the right to say that they own an NFT and not the right of creation.
Which NFT is worth buying?
NFTs cover a wide range of digital assets ranging from paintings and lyrics to higher levels of assets like a downloaded brain that is configured into an AI. However, the fact that the system is still at its inception has limited its operation and trade to the sale of digital art.
There is no formula to determine which NFT will be worth buying and there is no guarantee that a presently high-worth NFT will continue to gain more value and traction. Hence, the NFT market, like cryptosystem, is very volatile.
Will NFT eventually bud into something like art collecting?
The art of buying NFTs may be likened to art collection only that the ownership of the NFTs can not be copied. Although like an art collection, the artist still holds the copyright and reproduction rights. So, what this means is that unlike physical art collection, only one person can own the original NFT.
What Is The Essence of NFTs?
There are different perspectives from which one can view the essence of NFTs. One is from the perspective of the artist and the other is from the perspective of the buyer or investor.
As an artist, you should understand that your earning from the sales of your NFT is not a one-time earning. With NFTs you will earn a percentage every time the NFT changes hands. So, after making your first huge sales, every other time the token is sold, you are entitled to a portion. This is way more rewarding than any other market that you would have sold to.
Meanwhile, as a buyer, you can support your favorite artists by buying their NFT and this support comes with the right to use and post the image online.
Asides from this, NFTs are investments within the speculative class of asset.
Can Articles Be Minted As NFTs Too?
Yes, every article or literary piece that is mined and put up on an NFT marketplace can be bought as an NFT. The sale of texts as NFTs started with the sale of assets like tweets and comments. So, yes! Articles, news pieces, and even animated stickers can be sold.
Eventually, NFTs will not only be limited to art. NFTs will find adaptations in real-world objects although as a verification method. Nike has started out on this path with the Cryptokicks.
Why are NFTs so expensive?
There are several factors that account for the cost at which NFTs are sold. Some of these factors are the liquidity premium, utility, perception of the buyer, ownership history, underlying value, and speculated future value.
Where Can I Sell NFT Crypto?
Generally, NFTs work like cryptocurrencies. Like Fungible tokens, they are stored in crypto wallets. Although not all crypto wallets are compatible with NFT. Hence, to sell NFTs, you require a wallet as well as a san NFT marketplace. The marketplace is where NFTs are displayed with price tags and offerings.