What is a Non-fungible token? and how NFT blockchain works?
An NFT or non-fungible token is a digital asset that represents both digital objects and real-world objects, such as digital art, photography, video, music, game items, virtual worlds, etc. NFTs or non-fungible tokens are bought and sold online with Ether (ETH), the native cryptocurrency of the Ethereum network.
Although some enthusiasts have pointed out the existence of NFTs since 2012 with colored coins (colored Bitcoins), they first gained attention and prominence in 2017 with an online game called CryptoKitties, which allows users to create, adopt, buy and sell limited edition virtual cats. Each digital kitten is an NFT.
2021 is the year that NFTs are becoming an increasingly popular way to create, buy, collect, and sell digital artwork and collectibles. Digital artists can now sell their digital art pieces to a new crypto audience.
Brands like Taco Bell, NIKE, Marvel and NBA have found a new way to launch, sell or market new products/services through digital tokens. Celebrities like Mark Cuban, Paris Hilton, and The Weeknd have also found a new opportunity to connect with fans.
But digital art is not the only world exploring NFTs. Non-fungible tokens can be used to represent ownership of anything that exists in the real world or virtual environment and mark them as unique, collectible assets.
In addition to collectible card games, NFTs are commonly used to sell digital art, virtual collectibles including trading cards, virtual NBA trading cards, and even virtual real estate like the virtual world Decentraland.
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What is blockchain technology?
Although blockchain was initially developed to support fungible crypto assets like Bitcoin (BTC) and altcoins (cryptocurrencies that emerged after Bitcoin ), it has evolved to allow people to create a special type of non-fungible crypto asset.
Blockchain is a decentralized digital technology that uses cryptography to protect transaction records, files, and information through a distributed ledger. Transaction records are stored in a data structure. Each record contains a cryptographic hash that identifies a set of data, which makes it very difficult to alter or manipulate the transaction data stored in the blockchain ledger.
For users to make blockchain-based transactions, each user needs to create a key pair: a public key and a private key.
What is NFT and how does it work?
NFT stands for “non-fungible token. In essence, NFTs work as a unit of data stored in a distributed public ledger that records transactions, called a blockchain, that transforms any digital item into a digital asset and certifies it as unique and therefore not interchangeable. NFT tokens can be used to represent a wide range of digital items such as works of art, virtual real estate, digital collectibles, music or video clips, digital images, photos, and other types of digital files and can also link ownership to physical items.
Anyone can have access to any copy of the original file, however, an NFT is not restricted to the buyer of the NFT. Although anyone can have copies of these digital items and share them on the internet, NFTs are stored and tracked with the same technology as cryptocurrencies, to provide the owner and buyer with separate proof of ownership of the copyright.
NFTs are different from fungible assets. Fungible assets, or items, can be exchanged because their value defines them, not their unique properties. For example, Ether (ETH), Bitcoin (BTC) or dollars (USD) are fungible assets because 1 ETH / 1 BTC / $1 USD can be exchanged for another 1 ETH / 1 BTC / $1 USD.
- Via NFT, digital artist Beeple sold his digital image collage, “Everydays – the First 5000 Days’ ‘ for $69.3 million at an auction at traditional auction house Christie’s.
- Twitter CEO Jack Dorsey sold an NFT of his first tweet on the Valuables platform for $2.9 million.
- A CryptoPunk – a digital collectible – sold for over $11.8 million in the first ever NFT sale at traditional auction house Sotheby’s.
What blockchain is NFT?
Most NFTs are created and stored on the Ethereum blockchain, but other blockchains and protocols (such as Flow, Wax, Tezos and Binance Smart Chain) also support non-fungible tokens (NFTs). Flow for example is the blockchain behind the NFT platform NBA Top Shot.
The Ethereum blockchain supports ERC-721 and ERC- 1155 token standards and protocols, allowing NFT creators and artists to add information for their digital artifacts and store them as collectible digital tokens on the blockchain.
How is an NFT created?
An NFT or non-fungible token can only have one owner at a time. Each NFT has properties like a uniqueID and metadata that are different from the other NFT token, so each NFT is unique. NFTs are created through smart contracts that assign properties and allow transfers of NFTs between addresses or digital wallets. When you create an NFT, they execute code stored in smart contracts on the Ethereum blockchain of the ERC-721 or ERC-1155 standards. This information is added to the Ethereum blockchain.
Each NFT has a digital signature that makes it impossible to be exchanged for another NFT, even if they are of the same package or edition. (Therefore, not fungible).
An NBA Top Shot video clip or package, for example, is not the same as a Beeple artist’s crypto art or NFT art, simply because each NFT has a unique and exclusive ID. (An NBA Top Shot clip or package is also not the same as another NBA Top Shot clip or package.).
The process of minting, or turning any digital format (PNG, MP3, MP4, GIF, etc.) into an NFT, goes through the following steps:
NFTs have some unique and special properties:
- Each NFT token created has a unique identifier (unique ID) that is directly linked to an Ethereum address or wallet.
- Each NFT has only one owner at a time and this information and transaction history is easily verifiable.
- They are stored on the Ethereum blockchain and can be bought and sold on any Ethereum-based NFT market or platform.
- Each non-fungible token proves that your copy of the digital file or piece of art is the original.
- You can sell it on peer-to-peer (P2P) platforms, and in some cases they can yield royalties when your NFT is sold on the secondary market.
Is Bitcoin an NFT?
NFT uses the same blockchain technology that powers cryptocurrencies like Bitcoin, but an NFT is not Bitcoin, meaning NFTs are not digital currencies.
NFT markets allow people to buy NFTs with cryptocurrencies like Ethereum. However, cryptocurrencies like Bitcoin (BTC), Ether (ETH) and non-fungible tokens (NFTs) were designed and created to be used for different purposes.
Bitcoin (BTC) for example, was designed to be a store of value and act as a currency to allow anyone to buy or sell goods. Bitcoin, Ethereum, and ERC-20 standard tokens (BNB, DAI, LINK) are fungible tokens, similar to fiat currencies such as dollars, euros, or pounds sterling. NFTs are unique tokens that can show their owner’s ownership or other information and convey rights to digital assets.
Why do artists use NFTs?
NFTs create unique opportunities for artists and content creators to monetize their digital products and digital art pieces. For example, artists no longer need to rely on art galleries, stores, museums, or auction houses to display and sell their artwork. Instead, the artist can display his art in online galleries and can sell it directly to the collector as an NFT, i.e. without a middleman.
When an artist turns his digital art into crypto art, he can get a larger share of the profits by selling NFTs. In addition, artists can receive royalties whenever their creations are resold to a new collector.
How to buy NFTs
There are several ways of owning NFTs. You can buy NFTs, collect, sell, trade, and create NFTs on platforms, marketplaces, or online exchanges. The creator, artist, or new owner can sell an NFT for a fixed price, or can set up an auction, and you will have to bid on the token and win the auction to later transfer the NFT to your digital wallet.
If you are thinking of buying an NFT, know that NFT is an asset that is part of a speculative market. Some artists, creators, and collectors or buyers have made thousands or millions of dollars creating NFTs and selling digital art. Other people may end up spending a lot of money on a crypto asset that may become worthless or lose value.
That said, if you intend to collect NFTs, you will need to acquire some important tools or items:
First, you will need to create and set up a digital wallet or crypto wallet (such as Metamask, TrustWallet, or Coinbase Wallet) or any wallet that allows you to store cryptocurrencies and NFTs. To buy NFTs, you must first buy Ether (ETH) cryptocurrency or any payment token that your NFT platform accepts.
You can buy Ether (ETH) or any cryptocurrency using a credit card or debit card on cryptocurrency exchanges such as Binance, Coinbase, or Kraken. You can then transfer the cryptocurrency from the exchange or platform to the wallet of your choice, and later connect your wallet to the NFT markets.
When you pay for, purchase or buy an NFT, you only gain the right to transfer the NFT token to your digital wallet, however you do not own the copyright of the NFT artwork.
The token only proves that your copy of an NFT digital file is the original, just as if you had purchased the Mona Lisa or an original painting. And just as masterpiece paintings, fine art or the Mona Lisa can be copied, plagiarized and distributed almost for free or sold cheaply, any internet user can have a digital copy of your non-fungible token (NFT) and share it on social networks.
When you buy NFT you acquire a private cryptographic key that serves as proof of ownership of the original item. The artist’s public cryptographic key acts as a certificate of authenticity for that piece of digital art or digital artifact. The public key pair of the artist and the private key pair of the buyer or owner is what determines the price and value of any NFT.
WePlay Collectibles are for people who want to be part of esports events and show that they like players and talents in a different way, besides merchandising. The WePlay Collectibles are part of a platform, where you can buy items with NFT technology – both digital and physical. They are rewards and items associated with a specific tournament.
Popular NFT Marketplaces
After creating, setting up, and depositing cryptocurrency into the wallet, now is the time to log into NFT platforms and websites to make purchases. There are many different NFT marketplaces. The most popular is photography NFT marketplace, closely followed by art, gaming and music NFT Marketplaces.
These are the largest NFT marketplaces:
OpenSea NFT is the first and largest NFT marketplace for rare and collectible digital items and other digital products and assets. To get started with OpenSea NFT, you need to log in with your Metamask Wallet or Coinbase Wallet to browse the available NFT art pieces.
Categories: art, music, metaverse, virtual world, trading card, sports, etc.
Rarible is another popular NFT platform, its popularity lies in the fact that it is an open platform for any digital artist and digital asset buyer. The platform allows NFT artists and creators to upload their creations and sell NFTs with ease.
Categories: artwork, music, photography, punk, metaverse, DeFi, etc.
Foundation is an exclusive platform for elite artists, which means that new artists need to submit their artist profile and portfolio, and once approved, their artwork can appear on the platform. Being an exclusive platform means that the artworks are more expensive.
Blockchain’s carbon footprint and the environmental impact of NFTs
Despite all the advantages and NFT sales reaching $2.5 billion this year alone, according to nonfungible.com, this new technology also brings some discomfort to the art world when the issues are environment, carbon footprint, fossil fuels and excessive energy use.
NFTs are built on the same blockchain technology that powers cryptocurrencies like Bitcoin and Ethereum. These blockchains use a proof-of-work (PoW) system, which means they consume a lot of energy to run.
Most NFTs are stored on the Ethereum network, and this blockchain is decentralized and secure.
Decentralized means that anyone anywhere in the world can check the transaction history and NFT ownership. Secure means that no one can steal NFTs.
For proof-of-work (PoW) blockchains to work, they need many computers around the world to be connected to the network and solve complex mathematical puzzles. Each computer connected to the blockchain network, however, needs to have a lot of computing power, which drives high electricity consumption.
NFT exists in Ethereum, and this blockchain uses the PoW system, so NFTs contribute to the carbon footprint of the Ethereum network, but the good news is that this blockchain will have an upgrade, and will be 99.98% more environmentally friendly than many industries.
Find more information about the platform and NFTs at https://weplaycollectibles.com/
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