NFTs have become so popular that reputable companies, celebrities, and investors list or talk about their NFTs. But what are NFTs anyway? Investing in cryptocurrencies is progressing slowly and new trends continue to emerge regularly and show the potential to become the next big thing in the crypto world. In the ever-evolving world of cryptocurrency, the technology behind Non-Fungible Tokens (NFTs) It soon formed as a passive investment style. Is it a meme or has an idea about the future of NFT and could it change the way money is invested? Take a closer look at this topic.
What is NFT anyway?
NFT represent Irreplaceable icons In contrast to the Replaceable icons. A redeemable token is a redeemable asset. Bitcoin For example, they all have the same value and are therefore interchangeable, i.e. interchangeable. An example of a non-replaceable symbol is a digital artwork. You can own two nearly identical digital artwork, but each is still unique. The coding artist gives an example nutty. Your 21 artworks “Forward Together – Bitcoin Edition #1/21” to “Forward Together – Bitcoin Edition #21/21” may look the same, but because of each Blockchain Absolutely unique.
A blockchain is a decentralized database with a very special mechanism that makes it possible to clearly assign ownership and assign participants. All participants are connected to each other. Due to the decentralization of the blockchain, this database containing information about the owners is not stored in one place, but in each participant in the network. “Owners” are ultimately transactions that move back and forth between network participants and can have a different value.
On the topic of blockchain, we recommend our article on how blockchain works in more detail.
History of non-replaceable tokens
While NFTs have recently become just a global buzz, they are older than you might think. The oldest references to NFT can be traced back to 2012 and are called color coins.
colored coins It consists of small denominations of bitcoin and can be as small as one satoshi, which is the smallest unit of bitcoin. Coins are used to represent different tangible assets and have multiple use cases, such as stock investments, digital holdings, or the ability to spend cryptocurrency. The color coin system ran into fundamental problems, however they opened the door to further experimentation and laid part of the foundation for NFTs.
In 2016, she discovered blockchain memes and made a huge contribution to the development of NFTs. Nader Pepes They are images of Pepe the Frog, a cartoon character created by illustrator Matt Furie. This is made on coding platform opposite partyPowered by the Bitcoin blockchain. In 2017, Rare Pepes found its way to Ethereum, an open source distributed platform that provides the creation, management, and implementation of decentralized software on its own blockchain. The project piperium It was announced on Reddit and, like Counterparty, was supposed to offer special crypto tokens that could be used to purchase frog memes.
In October 2017, the first modern NFTs invaded the market. The Cryptokits It is a blockchain-based virtual game that allows players to adopt, breed and trade virtual cats. The cats took to the mainstream media and made hundreds of thousands of dollars in profits. CryptoKitties paved the way for NFT, but they could not have done so without previous projects that laid the foundation for building unique digital assets. CryptoKitties are still very popular today, and they have also become noticeably more expensive with the rapid increase in the value of the Ether (ETH) coin.
Types of NFTs
What are NFTs in practice anyway? a lot of things. The most famous NFTs are still artworks, specifically digital art collectibles. One of the most famous NFT art series is Kryptoponics, which are among the first modern NFTs with Cryptokitties. On December 9, 2021, the first generation of CryptoPunk was sold for 2,500 Ether, which is equivalent to $10,256,825.
NFTs also have applications in the gaming world. Illuvium is a strategy game on the Ethereum blockchain with its $ILV cryptocurrency. The game is often promoted in the crypto community as the first game of three. It caters to both casual gamers and hardcore gamers. Players must be able to collect game content which they can sell to other players for $ILV and the in-game crypto can then be exchanged for ETH. The game should have its own NFT market.
However, NFTs can also find application in the real world. There are already companies in the USA that use NFT technology to sell real estate. Other assets, such as jewelry, are also sold as NFTs where the blockchain can help establish legal ownership when selling. Digital blockchain certificates for valuables such as diamonds, rare wine bottles, gems and other luxury goods are already provided by the company. Everledger progress.
But there are also strange applications of NFTs. CEO Twitter Jack Dorsey sold his first tweet in 2006 as NFT for $2.9 million to Bridge Oracle CEO Sina Estafi for a good cause. With his presentation, Estavi wanted to highlight the importance of NFTs to the future of the field of cryptography and technology. Additionally, he wanted to encourage charities to get involved in the crypto space. By the way, only a digital version of the tweet was sold. Therefore, Estavi did not obtain any rights to delete the tweet.
How to create an NFT
Surprisingly, creating an NFT is not complicated and there are platforms where one can get guidance on the whole process. NFTs are created and backed by a specific blockchain, with Ethereum NFT being the most popular. Besides Ethereum, two other crypto-blockchains, Flow and Binance, are also commonly used to create NFTs. One needs a crypto wallet and cryptocurrency, mainly Ether, to make transactions. The NFTs can then be sold for crypto or fiat currencies via smart contracts and the transfer is recorded on the blockchain.
What is the value of NFTs?
On March 11, 2021, the concept of NFTs’ profitability changed dramatically. digital artwork Every day – the first 5,000 days, by artist Mike Winkelman, also known as Beeple, was sold as a non-fungible token for 42,392 Ether, equivalent to $69.3 million. The artwork is a collection of 5,000 different digital artworks by Beeple and purchased by Vignesh Sundaresan, a cryptocurrency investor and founder of the Metapurse NFT project. Sundaresan is currently displaying her newly acquired artwork in a museum within the Metaverse.
If you are interested in the topic of the Metaverse, you will find interesting articles here.
The market exploded especially after Beeple’s artwork was sold. Of course, not all NFTs are worth Beeple’s massive artwork. However, the value of NFT is still dependent on supply and demand, as we know it from the real world.
On November 15, 2021 there was another big increase. Musician Post Malone bought the BoredApe NFT for the equivalent of $750,000 and sparked a brief boom in the NFT.
One of the biggest criticisms of non-fungible tokens has to do with the concept of NFTs, but rather how they are used. From sports leagues like the NBA to celebrities and other entertainment companies, they all sell forms of NFT. Fans of these groups often feel that the NFTs sold have no resale value, but are only there to take advantage of the distinctive non-fungible hype. marvel She was recently criticized for promoting a new NFT series of Hero Chakra via the Twitter account of late Marvel founder Stan Lee. A limited number of photos will be sold, all of which must be “unique”. Marvel does not specify whether these images differ only on the blockchain or are also visually unique.
Game publisher Ubisoft also recently announced in-game NFTs Ghost Recon: Breaking Point To install fans were not too enthusiastic about this news and accused the publisher on Reddit of offering non-fungible tokens solely out of greed. Reddit also regrets that NFTs have no value as they cannot be physically exchanged for redeemable cryptocurrency.
Criticism of NFTs has also increased recently for their environmental risks. The carbon footprint of some NFTs is equivalent to that of the average EU citizen over a two-month period. The reason for this is the high power consumption of the non-fungible token, especially when creating the token and the blockchain that regulates the sale.
The principle of NFTs is interesting and shows a lot of potential, and unfortunately it is not without flaws. Tracking digital transactions using the blockchain could find more and more areas of application in the future. Whether NFTs have a future in their current form remains in the stars. NFTs are often sold from identical artworks that differ only in the blockchain, so they are often different “technically”, but not visually. At the moment, non-fungible tokens appear to be more of a status token than a source of investment. It’s hard to say if these tokens really hold their value. As more companies jump into the NFT hype, the market gets weaker. So it will be difficult to determine which NFTs will really add value.
Cover image by Alexander via adobe.stock