27 October 2021
Each non-fungible token or crypto NFT represents a unique identifier that assigns and proves the ownership of digital goods via cryptographic means. Though many people are unfamiliar with the concept, claiming that NFTs are popular would be an underrate of their value. So far, owners have cashed millions by selling NFTs for digital art. As an illustration, NFT sales reached $2.5 billion in the first half of 2021 only. To this end, we’ll make sure you grasp the idea of how crypto NFT works and the technology behind the concept.
NFT is an abbreviation for a non-fungible token. But you may wonder what non-fungible is? Fungible is an economic notion that stands for goods or assets people can exchange for other goods or assets of equal value. For example, pound bills are fungible since you can swap them for pound banknotes of the same value. When it comes to non-fungible, it refers to assets you cannot exchange for something of equal value. For instance, every house is unique and finding another one worth the same is almost impossible. Since art value is always subjective, it also belongs to the non-fungible assets group. And that’s where NFTs reach their full potential. These tokens show exclusive ownership of digital assets, such as art pieces, tweets, or in-game purchases. More so, you might procure crypto NFT at one price and then sell it for a higher one. The explanation lies in its non-fungibility, which means the market value is prone to fluctuations.
The NFT concept got on stage in December 2012 with the introduction of the Coloured Coins. These coins issued for satoshis paved the way for creating other asset types besides the blockchain. Moreover, the idea was to use the Coloured Coins to allow Bitcoin users to issue everything from in-game items to company stock.
Ethereum creator Vitalik Buterin was fascinated by the concept, but it didn’t gain much popularity at the onset. Still, Coloured Coins opened up new horizons and laid the foundations for the development of NFTs in the following years.
In 2014, a peer-to-peer financial platform and open-source Counterparty built protocols on the Bitcoin blockchain. This project led to several crypto NFT collectible sets. Users could also create tradable assets and currencies.
In 2017, NFTs reemerge as Cryptopunks launched the first rare digital art marketplace. The project megaminds created 10,000 unique cartoon characters on the Ethereum blockchain for anyone to claim for free. Once snapped up, Cryptopunks started to get traded online. Following the inception of the ERC-721 standard, CryptoKitties in 2017 was the next NFT momentum. As a $12.5-million investment, the CryptoKitties were virtual, breedable, and collectible creatures. Each cat was 100% authentic with a 256-bit DNA sequence and distinct traits passed onto their digital offspring.
In 2021, crypto NFT platforms have gone mainstream. For instance, Mintable and Mintbase let users with the right equipment mint their NFTs. Some of the most prominent NFT marketplaces include OpenSea, Super Rare, Nifty Gateway, Cargo Marketplace, and Known Origin.
Even rock stars started to release their albums on NFT. Artists publish their work on these platforms and get cryptocurrency donations like tips. The Cent platform, for example, enables buying and selling tweets in NFT form once the creator signs and verifies them.
The Ethereum network is the home to most NFTs, though blockchains, such as Polygon, Tezos, and Flow, also host NFTs. Blockchains are available for anyone to review, and crypto NFT possession can get traced and verified fast. Meanwhile, the token owner can remain anonymous. Similar to cryptocurrencies, NFTs get recorded on a blockchain to ensure that the asset is one-of-a-kind. This technology further renders it difficult to alter or counterfeit any crypto NFT. The typical tokenized digital goods include artwork, game items, and live broadcast videos and stills. The process involves adding the crypto NFT that bears ownership to the blockchain. Yet, the digital item size is irrelevant since it is a separate file from the blockchain.
NFTs enable content creators and designers to monetize their labour. Thanks to crypto NFT, artists can skip galleries or auction houses and sell their artwork to consumers as NFTs. Plus, they can opt for royalties and get a percentage of each subsequent sale. Besides, art isn’t the only field that can benefit from non-fungible tokens. Musicians can send NFTs to one owner and limit digital reproduction. Companies including Taco Bell and Charmin managed to raise funds for charity by auctioning themed crypto NFT art. The NBA has also been selling clips in digitalized token form. Owners can then trade those clips and make money. For example, a 20-second LeBron highlight NFT generated over $200,000. Even celebrities like Snoop Dogg release unique artwork and moments as securitized NFTs. As blockchain technology advances, non-fungible tokens will have several applications besides art. Schools can issue crypto NFTs instead of degrees and allow employers to verify them when hiring. Moreover, venues may sell event tickets with the help of digital tokens and track resale fraud.
NFTs follow the same type of programming as cryptocurrency, but that’s the only similarity between them. Like money, cryptocurrencies can get exchanged or traded. Their value always remains the same, and one Bitcoin always equals another Bitcoin. NFTs take another path. Each crypto NFT contains a digital signature making it impossible to exchange or equalize NFTs. For example, an unreleased music track doesn’t equal an NBA Top Shot clip only because both are non-fungible tokens.
Nexthash is continually helping brands create their crypto NFT products. Their blockchain platform is a state-of-the-art exchange that allows streamlined and liquid access to crypto NFT trading. This way, investors can easily integrate into the new security tokens realm. Nexthash also has an upcoming project with Team Qhubeka - a charity aiming to help people in Africa get a bicycle. Monthly donations help fight poverty levels by addressing basic socio-economic challenges.