NFTs (non-fungible tokens) aren’t such a difficult concept to grasp and more especially if you are familiar with bitcoin. But if you’re not, you’re in the right place to understand how it all works.

NFTs have been of great help and went viral in the artists/creators and gamers world as this became a marketplace for creators to sell their art pieces while gamers came in to buy new characters and items for their games. NFTs allow people to trade any form of digital asset, from domain names to digital art. 

The goal behind the creation of NFTs was to get a platform to sell items that otherwise do not have a specific audience/marketplace and are purely digital. In time, NFT will expand to cover “real-world” things too. NFTs allow you to verify that whatever you are purchasing is the original version, and you can always come back and resell it, and sometimes you could get millions of dollars in profit. 

For example, one of Beeple’s artwork sold at a price a hundred times more than what he’d sold it out at first. 

Ok, what in the world is an NFT?

Non-fungible tokens are unique and impossible to replace with something else. On the other hand, fungible tokens are easily replaceable as long as they have the same value. For example, bitcoins can be traded for another bitcoin and still have the same value. Money is a fungible item because you can exchange $1 for another $1 and still have the same amount of money but different serial numbers written on the bill. 

When you trade non-fungible items, you will end up having something completely different. For example, you could change one NFT that contains one of a kind in-game character and find yourself with a GIF. NFTs aren’t interchangeable because each token has unique properties and isn’t worth the same amount as another similar token. 

NFTs are unique identifiers that can cryptographically assign and prove ownership of digital goods or items. An NFT is a digital asset that links ownership to unique physical or digital items. These items could be; real estate, art, videos, or music. These items, once tokenized, can be bought and sold online. 

NFTs are created and are stored on the Ethereum network, which is a secure blockchain. This same technology is what’s behind cryptocurrency. It allows anyone to review the blockchain to verify NFT ownership and trace it while the person/company owning that token remains as pseudonyms. The technology behind NFTs makes it impossible to alter counterfeit NFTs. 

The best way to describe NFTs is as “modern-day collectibles.” By creating NFTs, creators and artists can verify anything digital’s availability, scarcity, and authenticity. This technology makes it easy to find fake items. 

When comparing this digital way of collecting and the traditional way, we can use an example of the Mona Lisa. There are multiple fakes of this great piece of art by Davinci, but there is only one original Mona Lisa making it quite priceless. The NFT technology does the same thing to digital art. Even though anyone can find a way to download digital art, there will always be one original piece that makes it quite pricey and worthy of the money you pay for it.

Depending on the type of NFT you’re purchasing, the copyright/licensing rights might not come with the purchase as the original creator retains those. But that’s not always the case since items like domain names can be fully bought and used without third-party intervention. 

What started the craze of NFTs?

Even though NFTs have been around since around 2012, they only started gaining prominence in 2017 and blew up in 2021. In 2017, NFT slowly started gaining a reputation over bitcoin primarily because of its storage. Unlike bitcoin, NFTs have tokens and storage built into their blockchain, which helps eliminate other third-party platforms like Counterparty. This specific aspect of NFTs is what has made it so famous and better. 

To understand how the prominence of NFTs came into public awareness, let’s start from 2017 when the platform experienced a lot of development and investment. 

In 2017, Larva Labs released CryptoPunks. This project contains 10,000 cartoon-like characters. Larva Labs released CryptoPunks for free into the Ethereum blockchain. These items started selling for lots of money in the secondary market as they were limited and no two characters were alike. 

Later on, in 2017, a project named CryptoKitties, was released by Dapper Labs and went viral. CryptoKitties are virtual cats that players can buy, trade, and breed. Because they are NFTs, each cat is different from the other. So, everyone gets a unique cat of their own. Any two CryptoKitties can be bred and create offspring with unique traits. 

Shortly after Dapper Labs released CryptoKitties, it went viral and initially raised over $12.5 million and had $20 million internal savings as of September 2018. 

Following the success of CryptoKitties, Dapper Labs released the beta version of NBA Top Shot. This project was for selling tokenized collectibles of NBA highlights; they would sell the NBA’s most significant moments during their games. When this project was released to the public, it brought over $230 million as of February 28, 2021. 

The NFT market growth exploded in 2020, causing its value to triple to $250 million. During the first three months of 2021, $200 million and more were spent on NFTs.

What types of things can be NFT?

You can tokenize various items in the real world and the digital world into non-fungible items. 

Music 

For the longest time in history, music has been a fungible item sold in cassette tapes, CDs, and mixtapes. Recently, DJs and musicians have turned to NFTs to sell their art, resulting in millions of dollars. Typically, musicians don’t get a lot of money from their music since record deals and streaming platforms, but when they sell their music as NFTs, they can keep 100% of the money

Digital Art

Art is the most popular NFT, and that’s a great thing considering NFTs were created for artists to sell their best works online as though they are physical pieces of art. Currently, the most expensive NFTs are artwork. Video arts such as GIFs have been trading for millions of dollars. For example, an artist named Beeple has sold two NFTs worth millions. An art piece called EVERYDAY’S: THE FIRST 5000 DAYS went for 69 million dollars. He also sold another short looping video called CROSSROAD for $6.6 million. 

In-Game Items 

In the NFT platform, players can buy different skin shades/types and characters for their video games. As much as players buy millions of DLC assets, a company can create unique ones, specific ones exclusive to one buyer. Developers can still sell regular DLCs and then place a limited edition version on the NFT market. 

Sports 

Currently, memorable sports moments are sold as NFTs by companies and individuals in NFT markets. These clips of memorable moments in sports can be as short as 10 seconds. These clips are valuable as they are special moments in sports history like slam-dunks or game-changing touchdowns. These videos can sell for up to over $200,000. 

Collectibles 

The same way people collect limited edition baseball cards and sell them for thousands of dollars, the NFT market works similarly. People can trade and buy virtual versions of trading cards on the NFT market and keep them like they do a physical one. These collectibles act like the ones in real life. Some can sell for over a million dollars. Companies can decide to trade any collectibles on the NFT market and not just trading cards. 

Domain names 

One can create domain names and sell them as NFTs. Selling domain names as NFTs makes it cheaper for the buyer because they no longer need a third party to manage their domain name. 

Memes 

You can trade memes in the NFT market. Believe it or not, some memes have sold for up to millions of dollars. For example, the most popular meme to date is the “Doge Meme,” which sold for $4 million. 

5 Examples of NFTs

1. Everyday: The First 5000 days

This art piece is the most expensive one ever sold. The piece of art is one of Mike Winklemann’s creations. He is also known as Beeple in the NFT market. This pacific art piece of his went for $69.3 million at Christie’s. It was the first this auction house sold purely digital artwork. Christie’s has been around for 225 years and, during that time, has sold famous art pieces like Davinci’s last discovered art piece and the only known portrait that Shakespeare created.

This digital mosaic by Beeple contains images that he released on the web once a day since May 1, 2017. This piece of work was valuable because Beeple has a large fanbase across his social networks, and this piece of work took him over 14 years to accomplish. 

2. CROSSROAD 

Again, this art piece by Beeple is a very political art piece showing how we process and acknowledge political events. CROSSROAD sold for 6.6 million dollars at Nifty Gateway. This art piece won him a vast audience gaining over 1.8 million followers on Instagram and collaborations with big companies like Louis Vuitton and Nike. Childish Gambino and Katy Perry invited him to partner up with them too. 

This art piece features a Donald Trump-like figure laying in a defeated heap, and all over his naked body, there are various types of profanities written. This appearance was not the end goal of this art piece. According to Beeple, he was going to create another one with Donald Trump wearing a crown on his head if he won the 2021 elections. 

3. The First Tweet

The Twitter co-founder and CEO (Jack Dorsey) sold his first-ever tweet as an NFT in March 2021. This NFT sold for $2.9 million. This specific tweet was uploaded on March 21, 2006, by Dorsey. The buyer used ether cryptocurrency to purchase the tweet. Jack Dorsey converted the proceeds to bitcoin and donated them to the African charity GiveAway. 

4. Quantum 

Kevin McCoy created this octagon-shaped animation. This artwork was the first one to be associated with NFTs even before the coining of NFTs. McCoy is the pioneer of NFTs, which currently generate millions of dollars every month.

5. CrypoPunk #7523

CrypoPunks are pixelated faces that sell for millions of dollars. This specific punk is one of nine alien punks. It is even more versatile as it has a mask, wearing it like everyone else is around the world. It sold for $11.8 million.

Conclusion 

Even though NFTs are quite a new thing in the art world, they might be a thing that will go into the future and be a new way to store deeds and licenses, which would be a great way to transact and prove ownership and authenticity of any property.