What is NFT?

NFT is a fairly new phenomenon that has made a splash in the cryptocurrency world and often appears in news headlines. In 2021, the Hermitage was planning to hold an exhibition of NFT collections. Prior to that, Twitter co-founder Jack Dorsey managed to sell his first NFT tweet for $2.9 million, and artist Mike Winkelmann sold his NFT picture for a record $69 million.

Let’s see what NFT stands for and why is everyone talking about it.

An NFT or non-fungible token is a unique digital item whose originality can be proven using blockchain technology. Each NFT token is authentic. Unlike bitcoin, which is divided into satoshi, non-fungible tokens cannot be faked or replaced with another coin of the same value. Usually, you can buy or sell NFT through the Ethereum blockchain cryptocurrency.

Like other tokens, NFTs are also created on the blockchain system, which is the database storing all transaction information. The blockchain is responsible for the uniqueness of non-fungible tokens. In other words, any user can check the origin and history of a specific NFT token through blockchain technology.

When buying an NFT token, the user purchases a certificate for the work. In this case, the work itself is stored in IPFS. This certificate is a line of code that proves the owner of the original digital artwork.

NFTs are created and issued based on the ERC-20 standard, as well as ERC-223, ERC-721, ERC-777, and ERC-1155. Each new standard improves, becomes faster and safer to use, and also allows users to utilize new functions.

History of the creation of NFT

Work on the development of NFT tokens has been carried out since 2010. In 2012, there were experiments with Colored Coins. Colored Coins are the base units of bitcoins that were used as coupons, company assets, access tokens, or just collectibles. In 2017, NFT smart contracts were created on the Ethereum blockchain, and the first NFT projects were presented, including the CryptoPunks pixel art.

What can become an NFT token?

Almost any digital item can become an NFT token. This can be a picture, music, photography, animated GIF, movie, and various virtual game items. Such digital artworks are unique and exist in a single copy, therefore they are valuable for collectors. 

How does NFT work?

NFT can work on the Ethereum, Harmony ONE, Polygon, Solana, BNB Smart Chain, Near, Tron, Cardano, PolkaDot blockchains, and many others. All the necessary information of NFT is stored in the blockchain. With this information, these tokens can take the form of images, music, videos, and other digital items that users save in JPEG, MP3, or GIF format. Like any kind of art, NFT has value. Therefore, the people who purchase these tokens can resell them at a higher price and receive financial gain. NFT price depends on the demand of the user and the market.

As with any other art market, you can find copies of NFT. But they don’t have value. For example, if you find a sold NFT picture on the net and decide just to save a JPG image to the disk, it will not allow you to become the owner of that digital item. Since this type of file will not contain information that you are the owner of this token. You can only become the owner of an NFT token if you buy this token on one of the special NFT art marketplaces.

Where can people buy NFT?

Among NFT collectors, the OpenSea site is most in demand. On the site, users can purchase rights to real estate, a domain name, some collectibles, programs, and even crypto cats. Transactions are carried out in digital coins using the MetaMask crypto wallet.

Also, there are other sites. For example, one of these sites is SuperRare, where you can buy the most expensive and original digital artwork. 

Among the active platforms, in turn, one can single out Rarible, which is aimed at fans of virtual art. On this platform, you can purchase digital artworks from over 20,000 creators.

If one of the users has a desire to create virtual artwork on their own, they can use the Async Art platform.

We can also note the Nifty Gateway site, which is currently gaining popularity and is considered one of the most promising for the sale of NFT. The owners of this platform are representatives of the well-known crypto exchange Gemini.

In addition to all of the above trading platforms, users can also purchase NFT collections directly on the websites of the developers of these projects.

The Best NFT collections

According to CoinMarketCap, the top 10 best NFT collections include the following projects:

Advantages and Disadvantages of NFT

 Advantage

• The most important advantage of NFT is the tokenization of various types of tangible and intangible assets. This token is non-fungible and safe thanks to the blockchain. It is blockchain technologies that guarantee the owners of NFT tokens the right to own unique assets, including their sale for fiat money.
• Users have the ability to create an NFT by themselves, reliably linking it to a unique item.
• The use of this type of token is absolutely safe since the personal data of their owners are reliably protected. Thus, users can digitize any important information. It is also worth noting that copyright remains with the creator.

Disadvantages 

As for the shortcomings, the following points can be highlighted:

• Risk of buying a digital item that is not valuable.
• Low liquidity of collectible items.
• The high threshold to enter the market, as the initial cost of these digital art collections can be started at thousands and millions of dollars.

What’s coming next for NFT? 

At the moment, it is very difficult to predict the future of NFT, since it appeared relatively recently. However, it is safe to say that NFTs are spreading rather quickly in various spheres of activity, including the gaming industry.

Social networks are also interested in NFT technology. There was news recently that Instagram is looking at the NFT marketplace as a way to monetize content. This is due to the fact that various creative people such as artists, photographers, and musicians often promote their digital products on social networks.

In the near future, NFTs may also be used as digital documents. Thus, it will help eliminate the risks of forgery of documents (for example, diplomas, contracts, certificates) by recording them in the blockchain.

As we can see, with the help of NFT technology, authors can protect their digital content from illegal copying.

Also, it is impossible to deny the fact that transactions with tokens are much faster than usual ones when you purchase physical items.

Despite some disadvantages and the high cost of NFT tokens, this industry is actively developing and attracting huge interest, which shows a promising future for this industry.