What is an NFT?
NFTs (or “non-fungible tokens”) are a special kind of crypto asset in which each token is unique — as opposed to “fungible” assets like Bitcoin and dollar bills, which are all worth exactly the same amount. Because every NFT is unique, they can be used to authenticate ownership of digital assets like artworks, recordings, and virtual real estate or pets.
Why are NFTs important?
You can think of NFTs as being kind of like certificates of authenticity for digital artifacts.
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As as Bitcoin and other crypto has boomed in popularity over the last year, NFTs have also soared — growing to an estimated $338 million in 2020. Each NFT is stored on an open blockchain (often Ethereum’s) and anyone interested can track them as they’re created, sold, and resold. Because they use smart contract technology, NFTs can be set up so that the original artist continues to earn a percentage of all subsequent sales.
What does “non-fungible” mean?
Every bitcoin is worth as much as every other bitcoin. NFTs, on the other hand, are all unique. “Fungibility” refers to goods or assets that are all the same and can be swapped interchangeably. A dollar bill is another perfect example — each is worth exactly one dollar.
Concert tickets, by contrast, are non-fungible. Even if every Radiohead ticket is the same price, they aren’t directly exchangeable. Each represents a specific seat and a specific date — no other ticket will have those exact characteristics.
Where do you buy or sell NFTs?
Digital-artwork NFTs are mostly sold on specialized marketplaces like Rarible, and Opensea. Coinbase NFT, a peer-to-peer marketplace that will make minting, purchasing, showcasing, and discovering NFTs easier than ever, is coming soon (sign up for the waitlist). If you’re more interested in games and sports collectibles, developers like Dapper Labs have created experiences including NBA Top Shot (virtual trading cards) and Cryptokitties (a Pokemon-ish digital-cat collecting app that actually was the first NFT hit in late-2017). Online games including Sanbox are starting to use NFTs to sell in-game assets like weapons or or wearables upgrades. Real estate in new virtual worlds is sold via markets including Decentraland and The Sandbox.
You can also buy or sell some NFTs directly via a compatible crypto wallet.
How do NFTs work?
If you’re interested in DeFi, you might have heard of the ERC-20 standard, which allows anyone to create a token compatible with the Ethereum blockchain. Those are “fungible” tokens. Most non-fungible tokens are built using the ERC-721 and ERC-1155 standards, which allow creators to issue unique cryptoassets via smart contract. Because each NFT is stored on a blockchain, there is an immutable record starting with the token’s creation and including every sale. (Some NFT-focused developers have also built their own alternative blockchains, including Dapper Lab’s Flow.)
What can you do with NFTs once you buy them?
Good question! Some people display their digital artworks on large monitors. Some buy virtual real estate (via NFT, of course) in which they’re able to build virtual galleries or museums. You can also roam virtual worlds like Sandbox and check out other people’s collections. For some fans, the appeal is in the buying and selling — much like any other asset class.
More and more mainstream artists have also gotten involved in the space — especially from the world of music. In early March, Nashville band Kings of Leon announced their next album would arrive in the form of multiple NFTs. Depending on which a fan buys, various perks will be unlocked — like alternate cover art, limited-edition vinyl, and even a “golden ticket” to a VIP concert experience.
The Future of NFT’s
The ever-growing world of NFT’s is here to stay. We take NFT’s very seriously like any other asset in the real world. We believe the future of NFT’ is up to us, we are shaping the way the world does commerce with the use NFT’s and utility ties to the Non- fungible Tokens.
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