The R Roundup Presents: NFTS 101 FOR DUMMIES #2
As we continue our beginners series “For Dummies” it’s only right we break down the highly sough after NFTs. Many beginners in the space may have been attracted by their favourite celebrities changing their PFP however, what are NFTs and why is there so much noise around them.
NFT’s have been the talk of the town within the crypto space for some time now, even gaining mainstream attention. Despite this, NFT’s are still generally misunderstood, with many misconceptions surrounding them. In this article, I aim to explain what NFT’s are, how they work, and the different types of NFT’s.
What Are NFT’s?🤔
NFT’s or ‘non-fungible tokens’ refers to assets with a digital certificate that proves ownership stored on the blockchain. Currently, NFT’s generally are used to prove ownership for digital assets due to their nature, which allows them to be easily replicated, i.e., screenshot a photo. NFT’s are called NFT’s as they are Non-Fungible, which means they are ‘unique and non-interchangeable.’
This is in contrast to most assets such as fiat currency or even cryptocurrencies which are interchangeable. If you own two different £10 notes or even two different Bitcoins, they are interchangeable. (Side note, this isn’t necessarily true as everything is Non-Fungible when broken down to a particle level or looking at banknotes which all have a barcode, but when looking at these things on a surface level, they are fungible assets).
To create an NFT, it must be minted. This is the process of recording an NFT on the blockchain for the first time; it can also be considered tokenizing a digital file with cryptography. Turning an asset into a digital token allows for it to be stored, moved, and recorded on the blockchain. Many platforms will enable you to mint an NFT, but the most popular platform is Opensea. To mint an NFT, you need a crypto wallet, most commonly Metamask, connected to Opensea. Once your Metamask is connected to Opensea, go to my collection and click create a new one. From here, you can follow the instructions, and your digital asset will be tokenized. On Opensea, you can mint an NFT on the Ethereum or Polygon network. NFTs can also be minted on other blockchains, including AVAX, SOLANA, CARDANO.
An important note regarding minted NFT’s is that the digital asset itself is stored off-chain. By this, I mean it is not stored on the blockchain, but rather the NFT itself is a digital token that verifies ownership and is stored ‘on-chain.’ Data in the NFT code references where the file is kept ‘off chain.’
Types of NFT🖼
There are multiple types of NFT’s currently being conceived, although there may be more to come. The list of the kinds of NFT’s includes:
- Collectibles-Online collectibles are the first example of NFT’s. Collectibles include collections with traits that are distinct and unique. Digital Collectibles can be likened to real-world collectibles such as trading cards, with the significant difference being digital tokens proving ownership.
- Artwork-Artwork NFT’s are one of the most popular components of NFT’s currently. Digital Art includes artwork pieces that were made digitally and via smart contracts, and NFT’s ownership of digital Art can be verified, and ownership can be transferred easily. Real-world art can also utilize NFT technology to verify ownership of pieces, and this would result in a complete record of ownership of Art.Event Tickets-Another conceived use case tickets, NFT tickets, would verify ownership of tickets and remove counterfeit tickets or scamming within the events industry.
- Music and Media-Recently we have also seen a push for NFT music and media. The use of NFT technology allows individual ownership of music and media files. Rarible and Mintbase are currently two platforms that help with minting music/media. Using the technology in the industry provides benefits to the artists and consumers who receive a more premium experience. NFT’s can address issues in the sector of piracy, and we will begin to see more artists utilize the technology.
- Gaming-In game purchases are standard within the gaming space. NFT’s could revolutionise the industry, allowing reselling of in-game items while also ensuring companies receive a % of resales, also benefiting them. Furthermore, the technology could provide records of ownership, improving in-game economies.Real World Assets-Currently, it is not common for real-world assets to utilize NFT technology. However, this use case seems to be becoming more realistic. Hennesy utilised NFT technology to sell its most prestigious bottle, with only eight available. Furthermore, we can see retail and real estate industries utilize the technology to streamline the buying process, improve ownership records, and even prevent fraudulent sales. NFT’s could take the place of housing deeds, and once NFT’s begin to represent ownership of more real-world assets, we will start to see the benefits of NFTs in our everyday lives.
- Identity-As NFTs are unique and not interchangeable. They could be used as unique identifiers preventing fraud. Recently Satoshi’s island, a project opened up a raffle where you have the opportunity to win a unique NFT that acts as a visa for the island. There are 10,000 possible winners, and the island will run entirely on blockchain technology.
- Memes-Memes have gained momentum in recent times in the NFT space. As a popular part of the culture, we’ve seen memes immortalised via NFT’s with people willing to pay crazy prices to be associated with the meme.
- Domain names-Domain Names have also gained popularity recently. NFT domain names allow for the decentralisation of Domains, and ENS and Unstoppable both provide services selling NFT domain names. Domain names also offer ease of sending funds as they can replace wallets which are long and complex numbers.
Popular NFT Projects🚀
- BORED APE YACHT CLUB
- MUTANT APE YACHT CLUB
- CLONE X — X TAKASHI MURAKAMI
As a reminder this is not a trading signal, it is an opinion and each trader/investor should know and understand the risks attached with trading. At no point should this be regarded as financial advice.
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