The NFT Market has exploded exponentially bringing billions of dollars in revenue to both NfT creators and Investors and we are not surprised. This beginner’s guide to NFT will help a first-timer with first-hand knowledge of NFTs and Cryptocurrencies generally. It will you understand what NFTs are and how best to position you in this fast-paced industry.
The concepts and ideas of NFT has been within the works since 2012, most folks have argued that colored coin is the stepping stone to what we know and calls non-fungible tokens today
NFT is a game-changer and it aims to revolutionize many industries, the role NFT will play in the valuation of digital arts and crypto-collectibles is truly infinite, and we’ve just begun to scratch the surface of these possibilities. So far, non-fungible tokens are being used to create industries around digital art, collectibles, digital land, and many more.
The NFT market has proven one timely truth, value is all about perceptions and human disposition, in 2017, crypto punks began galvanizing support for digital arts, and not much attention was given to their concepts until the Q2 of 2021, and suddenly seems Crypto punks were right after all.
NFT still illustrates one cardinal fact; that blockchain technology is a gateway to endless possibilities and so many other innovative ideas that will generate billions of dollars are still yet to come. The disposition of any person who wants to the get best of this industry is to constantly learn and be up to date with the latest information.
We believe that guide will be an all-encompassing read and after reading this piece, you must have all the necessary information you need to kick start your NFT journey.
Take a dive-in
What is an NFT
NFTs or Non-fungible token is a digitally rare and unique image that has value and is recorded on the blockchain for the public to verify its authenticity and worth. It can be an image, an artwork, a painting or portraits, music, sports collections, etc. Each NFT represents a one-of-a-kind item or one unique number of a series of limited editions of an individual item. This is the simplest definition of an NFT.
Technically speaking, a non-fungal token is a little bit more complex than the above definition, for a thing to be “fungible”, it simply means that it is interchangeable with another unit of the same asset. It represents the same value and can be traded for the other without bias. For instance, if you give me a $20 bill old note and I give you a $20 bill new note, we both agree that these two dollar bills have the same value, both the old and new notes are fungible, they share the same value. It means they are “fungible” they are a different unit of the same asset and share the same value. On the other hand, “non-fungible” assets mean the same unit but distinct value. They may be both belong to a member of the same class but have a different value. For instance, an artist can draw two artworks, out here they are the same artwork, once it is minted on the blockchain say Ethereum or Cardano they are now “fungible” same piece arts but now one can’t determine the value of the other, in OpenSea.io one can be sold for a million and the other a few bucks.
A BRIEF HISTORY OF NFTs
Like I stated earlier, What is known today as NFTs today started with the colored coins concept. This concept of NFTs has been in the works since December 2012 with the inception of “Colored Coins” Surprisingly, Vitalik Buterin the creator of Ethereum was among the first who tried building colored coins on the bitcoin blockchain but the bitcoin scripting language was able to run the program due to certain limitations. This opened the doors for the exploration of NFTs and laid the foundation for what we have today.
A few years down the line, in 2014, Counterparty, a peer-to-peer financial platform and open-source online protocol built on the Bitcoin blockchain were created. It included several projects with its assets, including card/meme trading. In 2015, the Spells of Genesis game creators became the first to issue in-game assets on a blockchain via Counterparty. By October 2016, memes issued as collectibles were issued with the recognizable green frog “Rare Pepes” on Counterparty.
CryptoPunks launched the world’s first marketplace for rare digital art in Oct of 2017 on the Ethereum blockchain. Creators of the project showed 10,000 different cartoon characters for anyone with an Ethereum wallet to claim freely. All were quickly claimed, inspiring a robust secondary marketplace where collectors would trade them for increasing prices. The Cryptopunk NFTs were creatively issued on a hybrid of the ERC20 and ERC721 Ethereum tokens since the ERC721 had not yet been developed.
This began an upward spiral movement for the NFT that has metamorphized into a 2.1 billion dollar and counting market.
HOW DO NFTs GET VALUE
Most NFTs today has grown from digital art with no value to digital art that is worth millions of dollars, it is quite hard to place a hold as to why some NFT have value and others don’t but as a rule of thumb, they are few reasons as to how NfTs get their value.
- Use Case: the value of a token is often derived from the use case of the art, just like in everything crypto, people don’t just look at the figures, and they also look at the functional utility of the art, high utility also means high value. Digital art can have more value than another from the use case.
- Scarcity of supply: the less supply, the more demand. From history, NFTs with small supplies tend to have more value.
- Ownership history: fame also influences the price of NFTs, most NFT that was held by a famous person or famous brand tend to sell more because of brand exposure and credibility.
- Speculation: just like everything else in the cryptocurrency industry, speculations also drive the value of an NFT. Most NFT has just value by speculation. No history, no scarcity, no use case just speculations.
The NFT Market Place
What is an NFT Market Place
NFT Market place is a digital platform where NFTs are displayed, sold, stored, and bought, just like any market where buying and selling take place, NFT Market place is built for non-fungible token. Some NFT Market places include Opensea, mintable, Nifty gateway, superare and rariable.
To access this marketplace and get the best out of it, you need to do the following;
- Create a user account on the marketplace
- Have a wallet that supports Ethereum Erc721( the Ethereum standard token for NFTs) like MetaMask and have some funds in your wallet
Features Of An NFT Marketplace
NFTs are usually purchased directly for a fixed price or through an auction. In some cases, prospective buyers can submit offers to the owner and attempt to negotiate a better price.
Selling unique digital assets can be a more technically complicated process than buying them, particularly if the user is attempting to sell something they have created themselves (artwork, a soundtrack, a tweet, etc.).
- You will need to upload the chosen digital asset onto the marketplace and enter a fixed price or opt to sell the NFT via an auction.
- Next, the platform will verify the asset. If approved, it will be listed for sale.
- When the seller accepts a bid, the marketplace conducts the transfer from buyer to seller.
If you want to create an NFT, you may consider starting with Ethereum, because it’s the easiest and largest blockchain system for these types of assets. You will need to have an Ethereum wallet that supports ERC-721 (Ethereum’s token standard for NFTs), such as MetaMask. Also, you will have to top up your wallet with ether to cover transaction fees depending on how busy the network is
Once you have completed those steps, you will be able to access and use platforms such as OpenSea, Rarible, or Mintable. Most platforms have a “Create” button in the top right corner that will take you to the page where you can begin minting your NFTs.
Commonly Used Terms In NFTs
- Non-fungible: A non-fungible token (NFT) is a type of cryptographic token that represents a unique asset
- Fungible: A fungible or fungibility is an asset of the same group whose value can be interchanged.
- Wallet: where NFTs are stored, they are usually smart contracts and ERC 721 token standard wallets.
- Dapps: decentralized applications are open-sourced applications that run on decentralized computing systems.
- ERC 721 tokens: ERC-721 tokens differ from ERC-20 tokens in the sense that ERC-721 tokens are non-fungible. This means that each token is unique and as a result, not interchangeable.
A popular Ethereum decentralized application, Cryptokitties, utilized ERC-721 to create unique digital collectibles in the form of kitties.
Each different kitten was worth a different amount on the marketplace, dictated by the users of the platform. Each different kitten commands a different price, and as a result, each token needs to be unique.
The creation of blockchain-based non-fungible tokens allows for
- physical property (houses, artwork, and vehicles)
- Virtual Collectibles (Cryptokitties, rare pepes, collectible cards)
- Assets with negative value (loans)
I believe this guide lays the foundation for your journey into the world of NFT, we would appreciate your feedback on the comment section, what do you think about NFTs? Thank you.