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Beginner's Guide to NFTs

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This article will take you to understand NFT from scratch

Original title: "Non-Fungible Tokens (NFT): Beginner's Guide"

Original author: Melanie Kramer

Compiler: 0x13, Rhythm BlockBeats

A non-fungible token, or NFT, contains identifying information recorded in its smart contract. It is this information that makes each token different, and therefore, they cannot be directly replaced by another token.

Cryptocurrencies, utility tokens, security tokens and more... digital assets and their classifications are coming with With the continuous development of encryption technology and blockchain technology. Non-fungible tokens (NFTs) were born with the rapid changes in the industry. In this guide, we'll explore what they are, how they work, and how they can be used.

What is non-fungible token (NFT)

Non-fungible tokens contain identifying information recorded in their smart contracts. It is this information that makes each NFT unique and, therefore, they cannot be directly replaced by another token. They cannot be exchanged like other currencies because each NFT is different. Paper notes, on the other hand, can simply be exchanged for one, making no difference to the holder if they are of the same value.

Bitcoin is a fungible token. You can send someone a bitcoin, and they can send one back, and it's still a bitcoin. The value may change depending on the time interval for exchanging bitcoins, but essentially the same. You can also send or receive less than one unit of bitcoin, since fungible tokens are divisible.

Non-homogeneous tokens are indivisible, just like you can’t give half of concert tickets to others . Half of a concert ticket is worthless.

CryptoKitties collectibles are the first NFTs. Every blockchain-based pet cat is unique. If you send someone a CryptoKitty and receive a CryptoKitty from someone else, the CryptoKitty you receive will be completely different from the CryptoKitty you sent.

NFTs like CryptoKitty store unique information in their smart contracts, And record it on the blockchain of the token, which cannot be changed. CryptoKitties are Ethereum ERC-721 tokens that use the Ethereum protocol and the Ethereum blockchain.

What makes NFTs so special?

NFTs have unique properties, and they are usually tied to specific assets. They can be used to prove ownership of digital items like game skins, as well as physical assets.

Other tokens are as homogeneous as coins or banknotes. Fungible tokens are the same, they have the same properties and value when exchanged.

What is NFT good for?

NFT tokens can be used for digital assets that need to be differentiated from each other, like encrypted collectibles like CryptoKitties, to prove its value or scarcity. They can represent everything from virtual parcels of land to artworks to ownership licenses.

NFTs are not traded on standard cryptocurrency exchanges, but are bought and sold on digital marketplaces such as Opensea or Decentraland's LAND marketplace .

Like Bitcoin and other Ethereum-based ERC-20 tokens are fungible. Ethereum’s standard for non-fungible tokens, platforms like CryptoKitties and Decentraland use ERC-721. On other blockchains supported by smart contracts, NFTs can also be created through NFT tools. While Ethereum was the first to be widely used by NFTs, NEO, EOS, and TRON now all have NFT standards.

NFTs and their smart contracts allow for the addition of detailed attributes such as the identity of the owner, rich metadata or secure file link. The potency of NFTs to irrevocably prove digital ownership is an important advancement for an increasingly digital world. They can see that blockchain's promise of trustless security applies to the ownership or exchange of almost any asset.

Just as blockchain has faced challenges so far, NFT and its protocol and smart contract technology are still developing middle. Creating decentralized applications and platforms for managing and creating NFTs is still relatively complicated. Additionally, there is the challenge of creating standards. Blockchain development is fragmented, with many developers working on their own projects. To be successful, there may be a need for unified protocols and interoperability.

Who is making waves in the NFT field?

Terra Virtua

NFT A major emerging market for is the creation of digital collectibles, similar to physical trading cards, whose value comes from their scarcity. Numerous brands have begun licensing their content for use in digital collectibles; one of the companies at the forefront is Terra Virtua.

Terra Virtua calls itself the "Home of Digital Collectibles," allowing fans to create a digital "Fancave," where Show off their NFT assets. In September, the company released a series of licensed NFTs based on the "Godfather" film trilogy.

Gary Bracey, CEO of Terra Virtua, believes that Terra Virtua's core mission is to "bring the benefits of NFTs to the mainstream market." ’, adding that the use of NFTs was inspired by an idea of connecting the digital world with the real world.

“We started thinking more about creating something more dynamic, and the main catalyst was providing something in the digital world that wasn’t practical in the real world,” added Bracey .

SuperRare

When Terra While the NFTs created by Virtua are favored by big brands and Hollywood, other NFT marketplaces trade another important NFT segment - art.

SuperRare is one of the pioneers in the emerging field of NFT-driven digital art. As the name suggests, SuperRare provides a marketplace for rare and valuable digital artwork. On SuperRare, artists' work is authenticated on the Ethereum blockchain, ensuring value. According to data from the SuperRare website, more than 10,000 artworks have been collected by users so far.

Although according to its website, SuperRare hosts only a "small number of carefully selected artists," it does a lot of business. In October 2020, SuperRare reported $4 million in art sales on its platform, with artists selling over 10,000 artworks and earning $3 million.

Decentraland

NFT also More and more emerging in the field of games. Decentraland is the world's first fully decentralized game world built on the ERC-20 token MANA. Users can spend MANA to purchase goods, services, and virtual land, backed by non-negotiable LAND tokens. Decentraland’s MANA token ICO initially raised $20.7 million and sold out in 5 minutes. In the subsequent LAND auction, users spent 161 million MANA to purchase virtual land, which is about $15 million at current prices.

The game world itself is similar to Minecraft: simple blocky graphics and user-generated creations, including Everything from art galleries (where NFTs can be displayed) to simple games built in game worlds.

Decentraland supports a few different NFTs in addition to LAND, including Axie Infinity and the ever-popular CryptoKitties.

NFT and DeFi

NFTs are also making waves in one of the most intriguing innovation spaces in cryptocurrency — decentralized finance (DeFi).

One example of how NFTs are used in DeFi is Aavegotchi, an experimental startup funded by DeFi money marketplace Aave company. Aavegotchis are NFT encrypted collectibles used in the game universe. Each Aavegotchi also has Aave’s aTokens as collateral, which means that each Aave will generate income. If the owner liquidates his stake, Aavegotchi will disappear.

Another service aiming to connect the DeFi and NFT communities is Rarible, a decentralized application ( or dapp), users can sell digital artwork on the Rarible marketplace.

In July 2020, Rarible launched RARI, a governance token that rewards creators and Collectors; can only be obtained by actively participating in the platform, a process Rarible calls “market liquidity mining.”

Rarible's market is huge compared to other markets. Rarible has dominated NFT sales since September, according to data published by Dune Analytics. If Rarible continues to dominate the industry, DeFi will hopefully become synonymous with NFTs. The NFT industry may be young, however, some believe it is full of potential.

“The game hasn’t really started yet, it’s just a warm-up,” Bracey said.

The Future of NFT

NFTs are mainly used in games and encrypted collectibles. More and more well-known brands are authorizing their content to cast NFTs. The fantasy football game Sorare has signed 100 football clubs on its platform, while the Smurfs, Minecraft and the BBC's "Doctor Who" have all been cast into NFTs .

For games, NFTs can be used to represent in-game items, such as skins, potentially allowing them to be transplanted to new games or trade with other players.

However, their potential is much greater, with potential applications in copyright and intellectual property, ticketing, and video games Sales and deals.

NFTs add potential to the creation of security tokens, i.e. the tokenization of digital and real-world assets. Physical assets like property can be tokenized for fractional or shared ownership. If these security tokens are non-fungible, ownership of the asset is fully traceable and clear, even if only tokens representing partial ownership are sold.

Further applications of NFTs could be certifications such as qualifications, software licenses, warranties, and even birth and death certificates. NFT's smart contract irreversibly proves the identity of the recipient or owner and can be stored in a digital wallet for easy access and representation. In the future, our digital wallets could contain every certificate, license, and proof of asset we own.