What is an NFT?
Non Fungible Token
NFTS are unique, digital items with blockchain-managed ownership. Examples include collectibles, game items, digital art, event tickets, domain names, and even ownership records for physical assets.
If you’ve been living in the crypto world for a while, you’ve likely heard of the term “Non-Fungible Token”, or “NFT”. Maybe you’re a skeptic, a believer, or perhaps you still don’t really know what exactly a non-fungible token is. In any case, this post is for you!
Most discussions about non-fungible tokens begin by introducing the idea of fungibility, which is defined as “able to replace or be replaced by another identical item”. We think this overcomplicates things. To get a better sense of what might constitute a non-fungible asset, just think about most of the stuff you own. The chair you’re sitting in, your phone, your laptop, anything you could go and sell on eBay. All of these fall under the category of non-fungible things.
A non-fungible asset can be categorized in:
➼ Irreplaceable
➼Non interchangeable
➼Unique
An NFT has data and information stored within it that cannot be substituted for an identical set of data and information*
On-chain vs. off-chain
The first decision for developers is what metadata to represent on-chain vs. off-chain. That is, do you bake the metadata directly into the smart contract representing the tokens, or do you host it separately?
On-chain Metadata
The benefits of representing metadata on-chain are: 1) it permanently resides with the token, persisting beyond the lifecycle of any given application, and 2) it can change in accordance with on-chain logic. Point #1 is important if assets are intended to have long-lasting value far beyond their original creation. For example, a piece of digital art is expected to persist throughout the ages, regardless of whether the original website that was used to create the art is still around. It therefore is important that its metadata persist alongside the lifecycle of the token identifier.
Additionally, on-chain logic may need to interact with the metadata. In the case of CryptoKitties, for example, the “generation” of the CryptoKitty influences how quickly a CryptoKitty can breed, and breeding all happens on chain (higher generation cats bred more slowly). So the logic inside of the smart contract needs to be able to read the metadata from its internal state.
Off-chain Metadata
Despite these benefits, most projects store their metadata off-chain simply due to the current storage limitations of the Ethereum blockchain. The ERC721 standard, therefore, includes a method called tokenURI
that developers can implement to tell applications where to find the metadata for a given item.
ERC Tokens
• ERC = Ethereum Request for Comments
• Standards for building certain types of software on the ETH blockchain
• ERC721 = identifying number for NFTs on ETH blockchain
NFT Market Places
Crypto Wallets
Gas Fees
Gas fees are payments made by users to compensate for the computing energy required to process and validate transactions on the Ethereum blockchain. “Gas limit” refers to the maximum amount of gas (or energy) that you’re willing to spend on a particular transaction.
This guide was designed for individuals who are new to the NFT market and looking to learn the basics, as well as the core fundamentals needed for success.
We understand that there is a lot of information out there and we have designed this to be a baseline for you to grow, learn, and earn. Let the mistakes we’ve made and the endless research allow you to shorten the learning curve and begin growing your financial future!
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Digital art
The art world started getting excited about NFTs around this time. Digital art turned out to be a natural fit for non-fungible tokens. A core piece of what makes physical art valuable is the ability to reliably prove the ownership of a piece and display it somewhere, something that’s never been as true in the digital world. A group of excited digital artists started experimenting.
NFT Minting Platforms
NFT minting platforms made it easier for anyone to mint an NFT, regardless of whether or not they had the development skills to deploy a smart contract.
In mid-2018, Digital Art Chain launched to allow users to mint NFTs out of any digital image that they uploaded – the first project of its kind. The same year, a project called Marble Cards added an interesting twist, allowing users to create unique digital cards based on any URL in a process called “marbling”. This would auto-generating a unique design and image based on the content of the URL, and has led to some controversy in the digital art world in response to the “marbling” of crypto art.
Virtual worlds expand
New blockchain-native virtual worlds started NFTs for land ownership and in-world assets. Decentraland, which raised $25M in an ICO for its MANA token, kicked off a $10M land sale for parcels in their virtual reality metaverse. Decentraland’s LAND NFTs saw more trading volume than any other NFT for the majority of 2018. The Decentraland project now has an open beta with some pretty rad early experiences, such as Battle Racers, a racing game playable inside the world.