What are NFTs?

Introduction

NFTs... NFTs... NFTs. You've probably seen the termed mentioned around in online discussions with a colourful Ape image most likely posted alongside... Yes? This was one crypto topic that was most spoken about in 2021 (even up till now, to be honest). A few people understood it when it initially got popular then; some others got to undertstand it later on; and for a last group of people, they still do not really get what NFTs are. For these last group of people, we write this short article! (just kidding, everyone is welcomed to read through... who knows you could learn one or two new things!).

NFTs (pronounced as "en. eff. tees") is an abbreviation for the term Non-Fungible Token. They are unique digital assets minted on a blockchain. They can represent ownership of real-world items, comprise of collectibles, digital art or music etc, addressing the challenge faced by the internet in replicating the features of objects such as rarity, individuality and verifiable ownership, all in a decentralized manner. The digital uniqueness of an NFT stems from the fact that during minting on a blockchain (a term used to describe the process by which NFTs are created), each token is assigned an identifier that is unique to only it (even if the NFT were in a collection).

Fungible & Non-fungible: What Do They Mean?

These terms brings us to the concept of "fungibility". In your immediate surroundings — and any other places — goods and services are exchanged with currencies used to facilitate the trade. Fungibility is a property of a means of exchange that permits interchangeability. Take for example, a dollar bill: A $1 note holds the same value with any other $1 note existing, and are thus interchangeable. Similarly, cryptocurrencies such as Bitcoin, Ethereum, Litecoin also exhibit characteristics of fungibility, as each of their units are identical and can be interchanged with any other unit circulating.

On the other hand, non-fungible entails the direct opposite. A non-fungible asset is an asset that is unique in and of itself. Unlike cryptocurrencies which are interchangeable (one of X is always worth another X circulating), it isn't interchangeable as one of it is not entirely/exactly the same as another because of the underlying identifier on the blockchain between each. NFTs falls in this class, hence the name: Non-fungible Token.

History of NFTs

NFTs became very popular in recent years, but the mainstream idea as we know of it today have existed long ago with Crypto Kitties as far back as 2017. CryptoKitties is an Ethereum-based game which launched in November, 2017. It granted players ability to collect and "breed" digital cats. Each cat is a unique NFT with specific attributes and features. By breeding, a player could create an entirely new cat/NFT based on the combination of attributes. It is one of the earliest implementation of NFTs and has since laid the groundwork for proliferation and exploration of NFT technology.

Much of the popularity of NFTs came in 2021 when a famous digital artist named Mike Winklemann — popularly known by his stage name, Beeple — created a collage of 5,000 daily artworks titled "EVERYDAYS: The First 5,000 Days". This specific digital artwork went on to be purchased at an online auction house in March 2021 for a whopping 38525 ETH (worth $69.3 Million at the time). This single event broke records for being the most expensive NFT sale.

The performance of this new asset class is proven in it's numbers; having a total Market Cap of $68.7 Billion as at the time of publishing. By this, it is evident that the technology is here to stay.

What are NFTs Used For?

NFTs have a wide array of usecases, with more being applied as the technology advances. Some prominent applications of NFTs include:

Social Media Profile Images

This is perhaps the most common application of NFTs so far. With social media platforms like X and Meta adapting NFT technology into their services, interested individuals are more than ready to display their NFTs as their profile photo. Some high-branded ones you may come across are BoredApes, CryptoPunks, Pudgy Penguins and MiLadys.

Digital Artwork & Collectibles

NFTs provide digital artists and creators with a way to create unique, verifiable and tradable art pieces. They can represent limited edition artwork, sports memorabilia or even virtual properties.

Gaming & Virtual Items

In gaming, NFTs offer an avenue to craft one of a kind, in-game items, characters or assets granting players ownership and control over their possessions. This has given rise to a new category of games classed as "Web3 games", which takes the fine details of normal gaming and blends it with blockchain technology.

Prized Pieces

Agreeable a vague term, but some digital contents can be considered valuable in today's day & age, and thus can be converted to NFTs and sold. For example, Twitter co-founder Jack Dorsey sold his first tweet ever as an NFT for over $2.9 Million. The tweet which is still up on Twitter (now X) is digitally owned by the buyer, and is considered prized because it is digitally signed by Jack Dorsey himself. Many other of such examples exist.

Music

Although not yet really popular, NFTs can serve as a means to signify ownership of content like remixes or rare tracks. It is estimated that in the near future, this would be a primary method for artiste to share & sell their contents.

Other versatile NFT usecases include tokenizing real-world assets, tickets for events, verification of virtual identities, management of royalties, serving as collateral in DeFi and more.

Where to Buy & Sell NFTs?

NFTs are bought and sold on specific websites/platforms designed for the purpose. These websites/platforms are called NFT Marketplaces, and can typically support trading NFTs on different blockchain networks.

Some of the most popular NFT Marketplaces include:

• OpenSea
• Rarible
• Blur
• Magic Eden
• Element Market

Key Takeaways

• NFT is an abbreviation for the term Non-Fungible Token. They are unique digital assets (art, music, documents etc) minted on a blockchain.
• It has various applications in gaming, art & collectibles, music, ticketing etc
• CryptoKitties game is considered one of the earliest adaptations of NFT technology
• NFTs can be bought or sold on specific websites/platforms called NFT Marketplaces eg. Opensea, Rarible, Blur, MagicEden, Element Market

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