What is Non Fungible Tokens (NFT)? Why NFTs are So Popular Today?

NFT aka Non-Fungible Tokens are one of the use cases of blockchain technology. NFTs use cryptocurrency as their underlying payment method. Billions of dollars has been invested in NFTs this year alone, and more and more applications are popping up each week. This article is all about NFTs. I have tried to simplify a complex technology in simple terms so that even a non-technical person can understand what NFTs are all about and why they have become a hot topic this year.

NFT, which stands for Non-Fungible Token, is a blockchain-based technology that prevents users from creating more than one copy of a piece of content. This characteristic of the blockchain ensures that there can only be a single copy of digital content. Blockchain ensures the owner digitally signs the piece of content using a cryptography algorithm, and stores the digitally signed copy on a public blockchain.

This article talks about the fundamentals of NFTs and more. In this article, I will cover the following topics,

  1. What is an NFT
  2. What does NFT stands for
  3. Why NFTs
  4. How to make an NFT
  5. How to buy and sell NFTs
  6. What is NFT Art
  7. How to make NFT Art
  8. What is NFT Crypto
  9. How to buy and sell NFTs

On March 23, Jack Dorsey’s first tweet ever posted on Twitter sold for $2.91 million to @sinaEstavi. It was purchased in a bidding process where Justin Sun, Tron blockchain founder, offered $2 million.

What is NFT

The tweet was put up for sale on an NFT trading platform called Valuables that allows people to buy and sell tweets. The following tweet sold for $352.08 or 0.1771 ETH.

What is NFT

This were just tweets. What about other content like paintings, videos, photos, text, voice, and even music tracks? The answer is yes, anyny digital content can become an NFT.

What other NFTs and their prices? Check out Top 10 Most Expensive NFTs Ever Sold to learn about most expensive NFTs ever sold. 

What does NFT mean?

What does “buy” this tweet mean? In simple terms, it means that it’s proof that the tweet is unique and digitally signed and verified by the creator. This proves that Jack Dorsey’s first tweet is now owned by @sinaEstavi as a collectible and he can sell it to anyone whenever and for whatever price he wants. It is now stored in a form of NFT on a blockchain. By converting this tweet to an NFT (non-fungible token), @sinaEstavi has proof of ownership of this tweet and when it was purchased. In future, if he wants to sell it, he can transfer the ownership to a new buyer.

Now let us compare this with the most famous painting in the world, the Mona Lisa by Leonardo da Vinci. Everyone knows that there is only one original Mona Lisa painting in the world. Because it is an original work of art by a master, the value of the original painting is much more than its copies. 

What is NFT

NFTs are a e similar idea, where “the content” is digital. The singularity of the content is protected by using a blockchain in the form of an NFT and the owner has publicly-available proof.

What does NFT stand for?

NFTs stands for non-fungible tokens; tokens that are unique in and of themselves. NFTs are similar to a unique work of art that has no other duplicate copy.

The NFT concept has been around for several years now, but it was in 2021 when NFTs became the craze and a mainstream phenomena. In 2014, Kevin McCoy and Anil Dash introduced the concept of non-fungible, tradable blockchain markers at an event in New York City. In October 2015, right after the launch of Ethereum blockchain, the first NFT project, Etheria, was launched at DEVCON 1 in London, UK. But at that time, people really didn’t care about NFTs, until now.

Why would you want to buy or sell NFTs?

The purpose of buying NFTs is like buying and owning a baseball card, an autographed jersey, a famous work of art, or a vintage car. One purpose is to own it and have a good feeling about it, and the second purpose is to keep it and hope its value goes up so you can sell it and make a profit.

A photographer or an artist may want to auction their photo or art as an NTF to make some money from it. The buyer can relax and have a good feeling that there is proof that it’s an original, and no one else can claim the photo or art they have purchased as an NFT.

Now you understand what NFT is and why someone would want to buy or sell NFTs, let us take some famous NFT applications that are already in business.

What are the most popular NFT projects?

The following is a list of the top 5 NFT projects (not in any particular order) that are live and show good use cases of NFTs.

  1. NBA Top Shot
  2. Cryptopunks
  3. Sorare
  4. CryptoKitties
  5. Hashmarks

The NBA launched a trading platform in partnership with Dapper Labs called Top Shot that allows people to collect, buy, and sell NBA highlights, photos, and videos. A Lebron James NBA highlight was sold for $200,000.

What is NFT

Currently, a Kevin Durant’s dunk is being asked for over $1k.

CryptoPunks developed by Larva Labs is a collection of 10,000 uniquely generated characters. No two are exactly alike, and each one of them can be officially owned by a single person and by using NFT stored on Ethereum blockchain, a person has the proof of ownership of that character.

What is NFT

Not only can you buy punks on this platform, but you can also sell the punks you own.

Sorare is a platform for people to create their own fantasy football games, collect cards, and trade them.

What is NFT

CryptoKitties allows you to collect, breed, and sell digital virtual cats. You can also breed virtual cats. Each cat on the platform has unique features and skills.

What is NFT

The platform is based on Ethereum blockchain and uses ETH as digital currency to buy and sell virtual cats.

Hashmarks allows art creators to sell their art and buyers to buy and own art on a blockchain. A piece of digital content on Hashmarks is called a Hashmark and each Hashmask is owned by one user only.

What is NFT

The NFTs are stored on Ethereum blockchain and hosted on IPFS.

How Is NFT Different Than Cryptocurrency?

Both NFTs and cryptocurrencies use blockchain technology to create tokens. Blockchain uses a cryptographically secure, distributed ledger that is publicly available. To learn more about blockchain and understand the difference, check out What Is Blockchain.

A cryptocurrency is a “fungible” token. It means a token is exchangeable or replaceable by another identical token or coin and multiple tokens may exist. For example, there are going to be 21 million Bitcoins once all Bitcoins are mined, and each BTC is equal to other BTC in value. That also means that a BTC is not unique. Like BTC, all of the cryptocurrencies such as ETH, ADA, XRP, and STRAX are fungible. There are billions of some these coins or tokens and they are all the same in value.

NFT tokens are non-fungible. That means each token is unique and there is no other token like it. . They can be traded for other similar tokens or currencies but there is no duplicate token. It is like a unique piece of art created by an artist that will have no duplicate copy. This is what makes NFT valuable. Once you own an NFT, no one else can own that exact one, and if someone wants it, you can ask whatever price you want.

In the case of NBA Top Shot NFTs, each highlight is unique and there is no other copy. Once you own it, you have the right to sell it for whatever price you want.

What are the advantages of NFTs?

The biggest use of NFTs is the proof of ownership. If you like a character in a game and you don’t want anyone else to have the same character, you can buy the NFT and own it.

For game creators, NFTs are a revenue stream. They can create unique characters and sell them for a price.

Traders can buy NFTs and hold them and sell them when their price goes higher.

Artists and musicians can convert their art and music into NFTs and sell for a premium price.

How Do NFTs Work?

To understand how NFTs work, you must understand its underlying technology, blockchain. Blockchain is a distributed ledger that is secured using cryptographic computer algorithms. A blockchain stores all transactions on a public ledger that is distributed on a network of computers called node. Each participating node on a blockchain has the exact and complete copy of entire blockchain transactions.

NFTs are stored on one of the popular blockchains that support NFTs such as Ethereum and Stratis.

An NFT is created from digital objects such as photos, videos, content, and combinations of them. The process of creating an NFT is called minting and once an NFT is created, it’s called minted. Some of the examples of NFTs are art, images, videos, copy of tweets, collectibles, sports cards, sports highlights, and music.

The owner of an NFT owns the digital copy of an item that is stored on a blockchain. The owner of an NFT gets exclusive ownership of the item. Since NFT is on blockchain, the data stored in an NFT can be customized.

It is up to the owner how he or she wants to sell NFTs. He or she can have a fixed price or a bidding process. There are publicly available platforms (apps, websites) that allow individual artists to convert their digital content into NFT and sell it.

NFTs are bought using a cryptocurrency such as ETH or STRAX, depending on the blockchain they are stored on.

What is NFT Art?

One of the applications of NFT is NFT art. We just saw an example of Hashmark, where an artist can buy his/her art as an NFT. Any artist can turn their art into an NFT that will be saved on a public blockchain and sell it for a price. People can also bid on art. Only one owner can own the art at a time. The payments are made in a cryptocurrency that is used to run the used blockchain. For example, NFTs stored on Ethereum blockchain will require buyers to pay in ETH and NFTs stored on Stratis Blockchain will require buyers to pay in STRAX.

The most famous NFT is Beeple’s EVERYDAYS: THE FIRST 5000 DAYS that was sold for $69 million. The collection is an image of 5,000 images that were taken each day since May 2007.

What is NFT

CryptoPunks is perhaps the most popular application of NFTs where 10,000 unique characters are available and stored on Ethereum blockchain with proof of ownership. Each character can be purchased and owned by a single person at any time.

What is NFT

As you can see from the above list, top CryptoPunks are sold for close to $1 million or more.

What is NFT Crypto? 

A cryptocurrency is used to buy and sell NFTs. The cryptocurrency used for NFTs is called NFT Crypto. The most popular NFT crypto is ETH, a digital currency that fuels Ethereum blockchain. All NFTs stored on Ethereum blockchain must use ETH to trade. 

How to buy NFTs?

If you want to buy an NFT, there are several public platforms that offer to buy, sell, and trade NFTs. These platforms are called NFT providers. NFTs can be purchased using cryptocurrencies that are supported by NFT providers.

Before buying NFTs, the first thing you will need is a digital wallet that allows you to store NFTs and cryptocurrencies. Here is a shocker. When you buy and store NFTs in a wallet, you actually store keys that are proof of the ownership, not actual NFTs. Actual NFTs (digital content) are stored on a public blockchain where anyone can see what key owns the NFTs.

First, you need to buy a cryptocurrency such as ETH, BTC, and STRAX. You can buy these cryptocurrencies on popular crypto exchanges such as Coinbase, Kraken, Binance.us or Robinhood. These crypto exchanges allow you to use a credit card, debit card, or bank account to pay for crypto. Buying and selling on crypto exchanges is not free. There is a fee for every transaction and these fees can be as little as 1% to even up to 4%. So, do your own research before you buy any crypto. To learn more about most popular crypto exchanges, check out Top Crypto Exchanges In US.

Once you have crypto, you need to transfer to a private wallet where you can store it. This is the wallet you can use to buy NFTs.

To buy NFTs, you need to use a platform. Some of the popular platforms to buy and sell NFTs are Nifty Gateway, SuperRare, Foundation, OpenSea, Rarible, and Mintable. There are some specialized platforms that allow only certain NFTs including NBA Top Shot, CryptoPunks, CryptoKitties, and Hashmarks.

Should I Create My Own NFTs?

Can anyone create an NFT and sell it? YES. If you think you have a unique digital content that someone may want to buy and own, you can create an NFT and sell it.

You must keep a few things in mind when creating NFTs.

First, you must be the original owner or creator of the content.

Second, before you create your own NFT, you must really think whether or not people really want this digital content and if they would be willing to pay for it. If no one wants it, it is useless to create an NFT.

Third, there is a cost associated with creating NFTs. Since NFTs live on a blockchain, there is also a technical process involved. It is not as simple as uploading a file to a cloud storage.

Fourth, you must have some understanding and knowledge of cryptocurrencies. All NFTs are traded in the form of cryptocurrencies. A cryptocurrency is the fuel that runs a blockchain and the cryptocurrency depends on the blockchain you use for your NFT.

In theory, any digital content can be converted into NFTs. But not all types of digital content make sense to convert into NFTs. The keywords are “unique” and “wanted”. You can compare NFTs with famous paintings which many art lovers want to own. The more original and unique the painting, the more likely it is to be in demand. One of the most famous paintings, Salvator Mundi by Leonardo Da Vinci, is priced at $450 million.

What is NFT

Some people buy art to own while others buy to make profit from it. The same applies to NFTs. Some people buy NFTs to own them but others buy to hold and sell them when the price is right. For example, the NBA is selling NBA players’ highlights as NFTs. If you buy a player’s dunk and that player wins NBA titles, chances are the NFT will fetch much more than its initial price.

Here are some examples of NFTs,

  • Popular unique art
  • Famous people’s content such as Tweets
  • Players’ highlights, signed photos, and unique shots
  • Avatars
  • Paintings
  • Video game characters
  • Videos
  • Music

Summary

This article explains what NFTs are all about and why one should pay attention to this newest use case of blockchain technology. We also learned about popular NFT platforms and how one can buy and sell NFTs.

Stratis Blockchain allows you to create NFTs using C# and .NET. In my upcoming article, I will cover how to create your own NFTs and store on Stratis blockchain and buy and sell them on Stratis NFT marketplace.

You can buy NFTs via online NFT marketplaces. Check out How to buy NFTs to learn more.

Stay tuned!

Note: This article is for informational purposes only and shall not be used as financial or investment advice. All images used in this article are copyright of their respective owners.