NFT Definition:
A non-fungible token (NFT) is a unique digital asset that represents ownership of specific digital or physical items.
What Is an NFT
Non-fungible tokens (NFTs) are unique digital assets on a blockchain representing verifiable ownership of items like art, collectibles, and real-world assets. Unlike fungible cryptocurrencies (e.g., Bitcoin, Ethereum), NFTs are distinctive, enabling creators and collectors to confirm authenticity and scarcity. Well-known NFT examples include Beeple's art, NBA Top Shot collectibles, and gaming NFTs like Axie Infinity.
How do NFTs Work?
NFTs are created (minted), bought, and sold using blockchain technology, ensuring transparent, secure ownership of each token.
Upon buying an NFT, the transaction is logged on the blockchain, and the new owner receives the token in their digital wallet. This decentralized nature of NFTs ensures that they cannot be tampered with or duplicated, providing a layer of security for both creators and collectors. Each NFT is assigned a unique identifier and metadata (e.g., creator, ownership history, asset link), which guarantees its authenticity.
On the Ethereum blockchain using the ERC-721 and ERC-1155 token standards, while Solana uses the SPL token standard for both fungible and non-fungible tokens.
The Ordinals Protocol is a decentralized protocol that enables the creation, management, and transfer of NFTs on the Bitcoin blockchain, allowing for the inscription of arbitrary data, including images, text, and other media, onto individual satoshis.
Most Popular Types of NFTs
NFTs can be categorized into several popular types, each with distinct use cases:
- Art NFTs: Digital artworks sold as NFTs, allowing artists to monetize their creations. For example, Beeple's "Everydays: The First 5000 Days" sold for $69 million.
- Collectible NFTs: Unique digital collectibles that can be traded, such as trading cards or virtual pets. An example is NBA Top Shot, which allows users to buy and sell officially licensed NBA highlight clips.
- Gaming NFTs: In-game assets that players can own and trade, such as skins, weapons, or characters. An example includes Axie Infinity, where players can buy and breed virtual creatures called Axies, which can be sold for substantial amounts.
What does Non-Fungible in NFT Mean?
Non-fungible means every NFT is one-of-a-kind and cannot be exchanged for another on a one-to-one basis. For example, two NFTs in the same NFT collection, such as CryptoPunks, can have different features and different prices.
Fungible vs Non-Fungible Tokens
By definition, non-fungible tokens are unique and not interchangeable, as opposed to fungible cryptocurrencies, where any one token can be exchanged for another, and both tokens have the same value when exchanged for something else.
Unlike fungible tokens using standards like ERC-20, non-fungible tokens can have metadata, such as images or video, attached to each individual token. This is made possible by using ERC-721 or ERC-1155 token standards.
What Was the First NFT?
The concept of NFTs emerged from the need to give digital assets a sense of ownership and scarcity, enabling creators and collectors to trade and showcase their digital art, music, videos, and other forms of content as tokens. The first ever NFT was a video clip added to metadata on the Namecoin blockchain in 2014, presented and sold in the New Museum of Contemporary Art in New York City. On Ethereum, the earliest NFTs were a collection of digital artworks named Curio Cards.
The first widely popular NFT project, a game called CryptoKitties, was launched in 2017 and allowed users to buy, sell, and breed virtual cats, each represented by a unique NFT. From that point onwards, NFTs started gaining momentum, until in 2021 the NFT market exploded with various platforms and marketplaces like OpenSea, Rarible, and Foundation facilitating the buying and selling of NFTs. This surge in interest has led to the widespread adoption of NFTs across various industries, including art, gaming, and even real estate.
What Is the Best Place to Buy NFTs?
Top NFT marketplaces vary by blockchain ecosystem. Based on trading volume, the best Ethereum NFT marketplaces are Blur, Opensea, and X2Y2. Leading Solana NFT marketplaces are Tensor, followed by Magic Eden and MOOAR. The most widely-used Ordinals NFT marketplaces are Magic Eden, Unisat, and Ordzaar.
Examples of Famous NFTs
Some famous NFT examples that illustrate the growth and diversity of NFTs include:
- Beeple's "Everydays": The First 5000 Days" sold for $69 million at Christie's auction house, marking a significant moment in the NFT art world.
- NBA Top Shot reached over $700 million in sales since its launch, demonstrating the popularity of collectible NFTs in sports.
- Bored Ape Yacht Club (BAYC) features 10,000 unique cartoon ape avatars. The Bored Ape NFT collection has gained significant popularity and recognition in the NFT and broader crypto communities, especially after launching its own fungible ERC20 token, ApeCoin.
