"Money and Art are far apart"
: Langstone Hughes
NFTs always makes me think of this quote.
If you have been in the crypto world for a while, you may have heard of the term "NFTs". They shocked the world with their charm.
Let’s look at some of the most expensive NFTs of the year 2021,
CryptoPunk which was launched by Larva Labs studio was sold at 4200 ETH. Beeple’s Human one was sold at 28,000,000 dollars, and the most expensive Beeple-everyday the first 5000 days was sold at 69,000,000 dollars.
Yes, there are six zeros after 69.
But, have you ever thought about why people spend so much money on jpegs, gif-type NFTs. They can also right-click on them to get it. Isn’t it?
A few months back, I also thought the same. But after reading, researching, and lots and lots of googling, I think I know about NFTs or at least some basics of it.
So let's jump right in and try to understand a few most important things about NFTs, and, of course, we'll start with the most basic thing first.
What is an NFT?
Non-fungible tokens (NFTs) are cryptographically distinct tokens that are connected to virtual (and sometimes tangible) content and serve as proof of ownership to us. They have a wide range of applications, including art, digital trinkets, songs, music, jpeg, GIFs, and computer game items.
“But, we can't start with NFTs right now.”, “We need to know a few things before we can dive into the realm of it.
So, before we know anything about NFTs or Non Fungible Tokens, let's try to learn about the term “fungible” first.
What is fungible?
In the simplest form, fungible is,
“Whatever is replaceable is fungible”,
Yes, that’s it.
Now, let’s make sense of it.
Let's say you have a $10 bill. You can change it into two five-dollar bills or vice versa, in this whole conversion the value of that money will still be the same.
Or in other words, if you have ten dollars in your hand whether it has two- five-dollar bills, ten-one dollar bills, or one-ten dollar bills, the value of all of them together is always the same.
So, the currency which we used in our daily lives is fungible, because it can be replaceable with its same value.
Now, let’s take a look at the crypto world.
In cryptocurrency, let’s take BTC for example; the value of 1 BTC is always the same as the value of another BTC. This is called fungibility.
What is Non-fungible?
Non-fungible means, something that can’t be replaced.
Let's understand with an example.
Let’s say you just bought a new phone. You've added some contacts into it, taken some pictures from it, and made some calls. So, this phone has become a Non Fungible Asset for you.
You might be wondering, "There are millions and millions of phones in the world which have the same model, the same specifications, and the same features. We can exchange it for one of those phones”.
Of course, you are right.
But just think about it, the phone you are using right now has all of your contacts and pictures that no other phone in the world has.
Do you trade your phone for something else now? I don’t think so. That’s why I said, this phone which you are holding right now is a NON FUNGIBLE ASSET for you.
Now, if you go by this definition then all of the stuff you owned, the bed you sleep on, the sofa you sit and the laptop you use, all of this stuff are falls under Non-fungible assets.
And if you go digitally, if you purchase in-game items, or domain names you use daily event tickets, and even handles on social networks like Twitter or Facebook, all fall under Non Fungible assets.
The same things applied in blockchain but with a slight change in its name, in blockchain, it is called Non Fungible Tokens.
Let’s take an example: if you have created a unique digital art or music, or anything on any blockchain that makes it scarce (limited amount), provable (smart contracts enabled), and valuable (rare) is called a Non-fungible token.
So, to conclude, NFT is a unique and non-interchangeable piece of data stored on a blockchain.
I think you now have a better idea of what an NFT or Non-Fungible Token is.
What are the properties of NFT?
Before blockchain-based NFTs, things were scattered all over the place. For example, the system for domain names is very different from the system for event tickets, or the system for buying things in games has different from the system for collectibles.
But now with blockchain-based NFTs being first invented, developers can build a standard that could be used by all NFTs or Non Fungible tokens.
Token interoperability comes into play when an artist makes an NFT.
When an artist makes an NFT, his main goal is to spread the word about his NFTs on different platforms and marketplaces so that more people can see and trade his NFTs.
Interoperability allows the artist to share his work from one ecosystem to the next in a convenient way.
Let’s take the above example, what if an artist wants to move his art from his original ecosystem to a marketplace where he can get more money and more reach.
Blockchain allows that kind of feature to NFT artists, where an artist can enjoy free trade on the various marketplace.
Now with interoperability and traceability, there is something called liquidity. Liquidity in the NFT simply means an abundance of buyers and sellers of NFTs in the market, and this liquidity is always maintained in the NFT marketplace where an artist can sell his art with ease.
Immutability and provable scarcity
That means, you can create only a certain number of special NFTs with the conditions that nobody can change that property, and you can sell them based on their rarity. It makes them unique and rare in the NFT marketplace.
NFTs are fully programmable.
Who can create NFTs?
The answer is anyone.
Yes, anyone can create NFTs.
Whether you are an artist or an entrepreneur, whether you are a corporate person or an author or videographer, influencer, or even a normal person like jack, you can create NFTs. There is no experience required of any kind.
All you have to do is, learn some basics of it.
I think you know what some of the most important things about NFTs are. Please let me know if you have any problems with it in the comment box below. Thank you! I will explain it to you.
Now, another question you may ask is, how this all has started.
What is its history?
Let me tell you a secret. All of this NFT stuff; is not a new thing that has come out of a Pandora box.
We always deal with it from the past. For example, when we own a dress in an e-game, put our name on Facebook, or buy an e-ticket for a play, all of these things are fall under non-fungible assets.
So it’s not that we got everything all at once. Non Fungible assets are always been a part of our daily digital life. But now the difference between traditional non-fungible assets and these blockchain-based NFTs is ownership. I will explain ownership in a different blog.
Bur right now, let’s talk about its history.
It was all started with the colored coins of Bitcoin. The first colored coins were made on the Bitcoin blockchain in 2012 and 2013, and at that time colored coins can be used to show that you own any kind of real-world asset.
These real-world assets could be anything, from rare metals to automobiles to estate, even equities, and bonds.
The original idea was to use the Bitcoin blockchain to store things like digital collectibles, coupons, real estate, company shares, and more.
Even though it wasn't as complex, this idea was still good.
Those colored coins were said to be new technology that could be used in the future, and they gave ideas for how they could be used now.
But they are were not that successful.
The actual NFT experiment was cryptopunks.
Cryptopunks consisted of 10000 unique collectible punks, each of which has a set of unique characteristics. And right now, they were the most antique collectibles in the NFT world.
But Cryptopunk was not the first project that take NFTs to the mainstream. It was (drumroll) Cryptokitties.
Cryptokitties was founded in late 2017 as a social media platform. People could breed digital cats together to create new cats of varying rarities, and this quality led to a path of profit; for example, you could buy a couple of cats, breed them to produce a rarer cat, flip the animal, and repeat the process.
Crytpokitties were adorable, shareable, and fun, and the idea of buying a thousand-dollar digital cat was made great news in the crypto industries.
And the success of Cryptokitties has opened a path of all new layer two crypto projects or also known as games. In 2018 cryptoCelebrities launched in which you can buy a collectible celebrity NFT, and after that immediately the celebrity becomes purchasable for a higher price from the previous price.
And this became viral at that time.
Then came 2019, all the hype of NFTs settled down for a while and people went to their respective fields. But then came 2020 and with the starting of the platform like Rarible (it provides a whole lot of options for NFTs), has again started this NFT trend to the surface.
And right now, The NFT market which was around 100 million dollars in 2021 has become a giant 22 billion-dollar market in just one year, and it is said that, is going to surpass in 2022 with a massive margin.
You have heard of the first 5000 days picture by Beeple that was auctioned for 69 million, and a multimillion-dollar NFT franchisee called Bored ape yacht club has raised around 26 million dollars till now.
Even in Cardano, a project named Spacebudz holds the record of selling the first-ever one million dollars NFT on the Cardano blockchain.
And because of this, right now, several huge mainstream industries like Coca-cola, Gucci, Nike, Adidas are entering directly into the NFT sector.
How do choose the best NFTs?
Right now the NFT market is booming with a 22 billion dollar market cap, people taking a lot of interest in the rare NFTs which has a strong backing of communities.
So, if you are researching any NFT project whether it is in Cardano or Solana, or any other blockchain, the first and most important thing that you should look into is who created it.
Let’s take the example of Spacebudz.
Spacebudz was created by two people, Alessandro and Zieg.
Alessandro is the owner of the berry pool and the creator of the Nami wallet, which is one of the most well-known Cardano wallets, while Zeig has been an active member of NFTs since the beginning of cryptopunk.
So, when they launch their NFTs, people are well aware of who they are and what they are doing, and when someone that big launches its collection it is obvious that it will be going to benefit the masses.
The same can be said for any major NFT project available in the world
So, if you decide to invest in any project, you should make certain that the creators of that project are capable of delivering on their promises, because it is important to understand that, when you invest in NFTs you are investing in the team behind the project, not the project itself.
So, before investing you should keep in mind that the creators of the projects have a good history, a good reputation, and a team that knows how to build brands.
Now, the second most important thing which you should look at in NFT is community.
Community is a very important part of an NFT project because it’s the community that makes the wheel turn.
So, when you will research about communities you should keep a few things in your mind,
First is, NFT projects you will choose have a healthy group of people who are not only following them and but also taking participation in all sort of activities,
Secondly, they should have a good vibe, and
The third is, people who are behind the curtains of that project should be very active on all sorts of social media, like discord, and other media, like blogs and videos, as well.
Now the third and most important part is the project itself.
As you can see there are around 4k projects currently running in the Cardano ecosystem, but if you pay close attention to them, you will realize that all of them are not good.
And you should remember one thing, if an NFT has no usage in the real world, its demand will be automatically down,
So, when you choose an NFT project, you should choose
A project which has strong usability,
A project that draws people in and keeps the demand high, and most importantly
It should have uniqueness and huge community size.
You should remember that if any project is not clear on the inside, it will never be clear on the outside.
If you follow these steps, you will be on the right track to discovering the most suitable NFT projects for you.
This is for now; I hope I have answered most of your questions if you still have any queries left. Drop me in the comment section. I will address it ASAP.