What are NFTs

What are NFTs?

A non-fungible token (NFT) is a unique and non-interchangeable unit of data stored on the blockchain. NFTs represent any form of data that can be tokenized onto the blockchain. What this means is that you write data onto a public space, and this data cannot be added to or subtracted from in any way, or hidden from anyone. If this token is transferred, one can see both the previous owner and the new owner. Ownership data lives on the blockchain forever. NFTs can be used to represent easily-reproducible items such as photos, videos, audio, documents, and other types of digital files as unique items (analogous to a certificate of authenticity), and use blockchain technology to establish a verified and public proof of ownership. The lack of interchangeability (fungibility) distinguishes NFTs from blockchain cryptocurrencies, such as Bitcoin.

The first NFT project was launched in 2015 on the Ethereum blockchain, and interest grew with the rise of interest in crypto currencies. Interest and the total monetary value of NFTs grew significantly in 2021, with sales of NFTs exceeding $2 billion during the first quarter of the year.

A token in the world of NFTs can be anything virtual or real. Sounds vague right? To make the waters clearer, NFTs let us tokenize anything like art, tweets, videos, GIFS, images, collectibles of any kind and EVEN REAL ESTATE!

The present-day mania is to tokenize art and sell it online. For instance, 24-year-old artist Lana Denina has earned over $300,000 by selling her art as NFTs on various platforms.

Justin Aversano, 28, known for his portrait photography, was able to sell all 100 portraits in his “Twin Flames” collection as NFTs between February and June, earning him more than $130,000.

Utility in NFTs

The hype around NFTs is increasing exponentially, prompting several people to think about the use of NFT as an asset class. This classification has lots of supporters and naysayers. Non-fungible tokens are an evolution over the relatively simple concept of cryptocurrencies. Over the past few months, dozens of brands and celebrities have minted their own NFT collections with more or less resounding success. NBA Top Shot sold $500 million worth of NBA history, Elon Musk was offered $1 million for his NFT song, Formula 1 sold digital collectible car components, and Taco Bell’s collection was, well, less popular. The question of relevancy of NFTs will soon vanish as various major mainstream companies are integrating NFTs in their user systems. Twitter is integrating NFTs, Nike is creating NFT verification on shoes and Coinbase is building a marketplace for NFTs too.

NFTs started out as digital collectibles and art. However, the future of NFTs lies in utility - NFTs that serve a purpose. They can be broadly categorised into this (not exhaustive) list

Access NFTs: Provide access to exclusive experiences, online and offline, which can include events with celebrities/athletes, premium content, voting on brand decisions, and much more.

Ownership NFTs: NFTs that signify ownership of something valuable and exclusive, and also guarantee authenticity of the item it symbolises.

Gamified NFTs: Users compete for special NFTs that are dropped as a perk for their activities or as a part of a gaming universe.

Social NFTs: are NFTs that can be used socially like GIFs, emojis, badges, profile pictures, comment embeds, etc. The approach here is similar to Discord with channel/role-specific emojis but users can earn them as NFTs and use them within that community or across the NFTverse.

Fantasy NFTs: Players can purchase player card NFTs and each week, they can create lineups and earn points based on players’ real-life performances.

The common denominator for utility NFTs is that the assets can and should be used regularly. These aren’t just digital collectibles that sit in your wallet and are only good for a few viewings.

What are the different types of NFTs?

As mentioned above, the various types of NFTs include a wide range of collectibles and artefacts of internet and human history, digital art and in-game items and as tokens which provide utility. Some NFTs also work as membership cards for virtual clubs. Bored Ape Yacht Club was the first project to enter this space. Before launching utilities and features for their NFT holders, they mentioned that their NFT would also work as a virtual club card to gain exclusive access to their future offerings.

For most NFTs issued on Ethereum usually follow an ERC (Ethereum Request for Comments) Standard. The most common classifications are ERC-721 and ERC-1155. With NFTs increasing in popularity and more artists wanting to create NFTs, it is essential to maintain a token standard quality such as ERC-721 or ERC-1155.The ERC-721 Standard emphasises the uniqueness of each token, that is each token is one-of-a-kind. On the other hand, ERC-1155 divides a single NFT into multiple parts, which helps represent partial ownership of an artwork.

Can I create and sell my NFTs?

Yes, you can! Many platforms allow you to make your own NFTs for FREE, but selling them could be a different matter altogether. Most NFTs on Ethereum blockchain and every transaction on Ethereum blockchain costs fees (called ‘gas’) which can vary significantly. However, getting an audience to whom you can sell your tokens is the toughest task. You can advertise about it on Twitter, Facebook and other platforms.

There’s been a rise in popularity for layer-2 blockchains and other blockchains, such as Polygon, Fantom, Binance Smart Chain, Solana, etc. People are now beginning to move away from the highly saturated Ethereum environment and mint NFTs on other chains. If you are interested in building your own NFT project, whether on Ethereum, Polygon, or other chains, reach out to Incepthink with your idea and we’ll sort you out!

How NFTs work

Each individual token is completely unique and is not divisible. NFTs give the ability to assign or claim ownership of any unique piece of digital data, trackable by using the blockchain as a public ledger. An NFT is minted (written onto the blockchain - the public ledger) from digital objects as a representation of digital or non-digital assets. For example, an NFT could represent:

• Digital Art:
• GIFs
• Collectibles
• Music
• Videos
• Real World Items:
• Deeds to a car
• Tickets to a real world event
• Tokenized invoices
• Legal documents
• Signatures
• Lots and lots more options to get creative with!

An NFT can only have one owner at a time. Ownership is managed through the uniqueID and metadata that no other token can replicate. NFTs are minted through smart contracts that assign ownership and manage the transferability of the NFT's. When someone creates or mints an NFT, they execute code stored in smart contracts that conform to different standards. This information is added to the blockchain where the NFT is being managed. The minting process, from a high level, has the following steps that it goes through:

• Creating a new block
• Validating information
• Recording information into the blockchain

NFT's have some special properties:

• Each token minted has a unique identifier that is directly linked to one wallet address.
• They're not directly interchangeable with other tokens 1:1. For example 1 ETH is exactly the same as another ETH. This isn't the case with NFTs.
• Each token has an owner and this information is easily verifiable.
• They live on the blockchain and can be bought and sold on any NFT market that supports said blockchain.

In other words, if you own an NFT:

• You can easily prove you own it.
• Proving you own an NFT is very similar to proving you have ETH or BTC in your account.
• For example, let's say you purchase an NFT, and the ownership of the unique token is transferred to your wallet via your public address.
• The token proves that your copy of the digital file is the original.
• Your private key (similar to a password) is proof-of-ownership of the original.
• The content creator's public key (similar to an account number) serves as a certificate of authenticity for that particular digital artefact.
• The creator's public key is essentially a permanent part of the token's history. The creator's public key can demonstrate that the token you hold was created by a particular individual, thus contributing to its market value (vs a counterfeit).
• Another way to think about proving you own the NFT is by signing messages to prove you own the private key behind the address.
• As mentioned above, your private key is proof-of-ownership of the original. This tells us that the private keys behind that address control the NFT.
• A signed message can be used as proof that you own your private keys without revealing them to anybody and thus proving you own the NFT as well!
• No one can manipulate it in any way.
• You can sell it, and in some cases this will earn the original creator resale royalties.
• Or, you can hold it forever, resting comfortably knowing your asset is secured by your wallet on the blockchain.

And if you create an NFT:

• You can easily prove you're the creator.
• You determine the scarcity.
• You can earn royalties every time it's sold.
• You can sell it on any NFT market or peer-to-peer. You're not locked in to any platform and you don't need anyone to intermediate.

To know more, contact us here:
Email: contact@incepthink.com
Twitter: @Incepthink
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Website: www.incepthink.com