NFT stands for Non-fungible token and is widely used today primarily to establish unique ownership but NFTs have multiple use cases. In this guide, we will learn what NFTs are and why is it in the news so much these days.
Anything that is fungible is easily interchangeable, for example, 1 Bitcoin can be exchanged for another Bitcoin and you would still have the same amount of Bitcoin. Fiat currencies such as dollars are also interchangeable and can be exchanged. You can exchange a 1 dollar bill for another 1 dollar bill and it is exactly the same. No difference at all! But non-fungible tokens cannot be exchanged. They are unique and there will never be another NFT that is identical to a previous one. This is a unique attribute and something that blockchain technology has been able to provide with ease.
According to DappRadar, CryptoPunks NFT has been responsible for 79 million dollars in trading volume. Just to give you an idea of the kind of market we are talking about, here is an interesting fact: Mike Winklemann’s NFT known as Beeple sold for a record $69.3 million.
How is an NFT Created?
An NFT is minted on a blockchain that comprises public data that can be easily verified at any time. It is non-divisible and the owner cannot be changed fraudulently making NFTs essential and rock-solid as an identifier of the true owner. Usually, a private key is provided which the owner uses to establish proof whenever required. The owner can also choose to provide uniqueness by adding a signature to the metadata associated with an NFT.
Potential Uses of NFTs
An NFT can be easily sold on an NFT marketplace and the creator can also choose to earn royalties from it. NFTs have come a long way and the possibilities are endless. Here are some of the potential use cases where NFTs can be an effective solution:
- Digital art world/Music Industry: NFTs can help to establish ownership and prevent unauthorized sales of digital art pieces. It also helps artists to reach their customers directly without paying a hefty commission to the agents and middlemen.
- Gaming: In the internet gaming universe, players can now earn collectibles in the form of NFTs and resell them to earn additional income. The game items can be sold or passed on by the players as they see fit.
- Tangible Items: NFTs can also be used to tokenize real-world sale deeds, vaccine certificates, anything that needs proof of ownership. While NFTs are being used more in the digital space, it is only a matter of time before real-world tangible items are tokenized and sold as NFTs.
- Investment: NFTs are being used as collateral in the decentralized finance (DeFi) space and they are increasingly popular as an investment option (especially art collectibles).
- Supply Chain: NFTs can be used to establish an item’s origin, sale and prevent chances of fraud. For example, NFTs are frequently being used in the wine industry to prevent the sale of spurious liquor and establish the sale and the true origin of a wine bottle. A similar concept can be used to establish the authenticity of a pair of sneakers, a popular watch, or even rare coffee. The possibilities are endless.
Do all Blockchains support minting of NFTs?
A blockchain with smart contract ability can be used for the creation of NFTs. The most popular and largest blockchain that allows minting NFTs is the Ethereum network.
What are some popular blockchains that support NFTs?
Here are some blockchains that support NFTs but the largest player without a doubt is Ethereum.
- Ethereum: Ethereum supports NFT creation through its ERC-721 and ERC-1155 standard. Ethereum has also proposed a new EIP-2309 standard that comes with improved abilities such as lower costs for minting NFTs. One of the most popular NFTs—CryptoKitties was built using Ethereum. Ethereum is also host to one of the largest NFT marketplaces—OpenSea.
- Binance Smart Chain: The BSC network has seen remarkable adoption and has become a popular choice for developers. It allows minting NFTs at a fraction of cost and is very cheap when compared to Ethereum. The BSC network plays host to BakerySwap, PancakeSwap, and Battle Pets that allow for the creation of collectible, financial, and gaming NFTs respectively. As per Dapp Radar, the BSC network has overtaken Ethereum in terms of transaction volume of NFTs but Ethereum remains a strong contender with the total volume locked in NFTs at an all-time high.
- Solana: The Solana blockchain has become very popular in a short period and hosts some interesting NFT projects. Some of these include Degenerate Ape Academy, SolPunks, Frakt, and Bold Badgers.
- EOS: EOS is another blockchain that supports NFTs but it has declined in popularity and is overshadowed by new blockchains such as Solana and Cardano. However, it has some NFT projects such as the Crypto Dynasty, Upland, and Atomic Market.
- WAX: The WAX network is a comparatively new blockchain having launched in 2017 and charges lower fees than other blockchains. It costs 2% of the transaction to trade an NFT on the WAX network. Some notable NFT projects on WAX include Alien Worlds, R-Planet, and Farmers World.
- TEZOS: Tezos is a popular blockchain that also supports NFTs through its own token standard known as FA2. Some NFTs issued on the Tezos blockchain include Doja Cat, and the Grammy Awards.
- Tron: The Tron blockchain supports smart contracts and is also compatible with the ERC721 standard. IT supports NFTs through its blockchain standard known as TRC-721. It has also recently launched a $300 million fund to support NFT marketplaces on the Tron network. Some popular NFTs on Tron include TPunks, and TronMeebits.
- FLOW: FLOW is another new kid on the block but has become a popular blockchain among developers for issuing NFTs. Some important projects are TuneGO, and xtingles.
Some other layer 2 solutions and side chains also support NFTs. These include Decentraland, Polygon network, Enjin, and Chiliz.
For trading (buying/selling) NFTs, you will need to access an NFT marketplace. Some cryptocurrency exchanges have an in-built NFT marketplace but there are also some big players where you can easily buy NFTs or sell them if you hold one already. Let us discuss the top ten NFT marketplaces below.
OpenSea: This is one of the biggest NFT marketplaces and runs on the Ethereum platform and also supports other layer solutions such as the Polygon network. It was founded by Devin Finzer and Alex Atallah. Supports both Ethereum and Polygon networks.
AxieInfinity: It is the native NFT marketplace for the popular game, Axie Inifnity. Players can buy new Axies, as well as entire lands and other items, as NFTs from the marketplace.
NBA Top Shot: It is the National Basketball Association and Women's National Basketball Association's foray into the NFT world. You can purchase collectible moments and art featured from basketball games. It runs on the FLOW blockchain.
Rarible: To use Rarible, you will need to purchase the native token known as RARI. Rarible is also a multiple blockchains supporting NFT marketplace and currently supports NFTs issued on Ethereum, FLOW, and Tezos with plans for more blockchains in the future.
Zora: It supports music, images, videos, and GIF NFTs. It is built on the Ethereum network and allows artists to gain royalty commissions from sale of NFTs on the platform. It supports MetaMask and Coinbase wallets.
Foundation: Runs on the Ethereum network and was launched almost a year ago. You need Ethereum to buy/sell NFTs on Foundation. Runs mostly on an auction basis where artists list content for sale as NFTs within a 24-hour window.
Patrn: This is a crowdfunding space for minting NFTs. It is an interesting solution as it offers new artists the ability to crowdsource Ether for minting NFTs. Whatever ETH is left after transaction costs is delivered to the artist.
CNFT.io: It is the marketplace for Cardano based NFTs. It charges 2.5% ADA as a commission but there are no charges for listing, buying, or changing the price of an asset. Has also introduced the CNFT token (available as an NFT currently) that will support airdrops and early access to NFTs in the future.
Theta Drop: The native marketplace of the Theta network. Claims to be 100x faster than Ethereum network and has a partnership with the World Poker Tour. It is currently in the beta phase.
Ghost Market: It is a cross-bridge NFT marketplace that supports multiple blockchains such as NEO, BSC, Avalanche, Polygon, and Phantasma blockchain networks. Ghost Market also plans to add support for Ethereum and Solana soon.
NFTs are likely to become major investment options in the coming decade. It is the next big thing supported by blockchain technology. The NFT technology will also continue to expand into other major areas such as identity verification and certification that frequently experience bottlenecks and are prone to fraud and impersonation.