What are NFTs?
NFT stands for non-fungible tokens, woah big word! let's break it down and dissect what exactly is a fungible token.
The best example for this would be the US dollar or any fiat currency, as both are interchangeable. I can give my friend a dollar in return for a dollar and I would still be able to use that dollar anywhere as it doesn't change in value.
Now that's in the case of a physical world, coming to the virtual world, an example of an interchangeable token would be Bitcoin Ethereum and dogecoin as their intrinsic value does not different exchanged. These are called ERC20 tokens on the Ethereum blockchain.
An ERC20 token is a standard used for creating and issuing smart contracts on the Ethereum blockchain.
Let's not digress and come back to NFTs which are not fungible or not interchangeable. For example, think about your favorite personality like Christiano Ronaldo, if you go on Instagram you will find thousands of accounts that claim to be CR7 but there is only one account that belongs to him, the one with the bluetick.
And since they are unique they are non-fungible.
NFTs are not always art, Jack Dorsey sold his first tweet as an NFT, a guy in the Philippines sold pictures of himself as an NFT and made millions.
But most of the NFTs on the market is art, for example, the Bored Apes and when it comes to generative art there is something called rarities. And in the case of a bored ape, a golden ape is very rare compared to a robot ape. Making the golden ape more valuable even tho both apes are part of the same collection and from the same creator.
NFTs can also be semi-fungible which means you can launch 100s of the same art under the same creator or symbol.
So to recap, NFTs are not non-interchangeable or non-fungible because they are perceived differently. It can be based on emotional connection, historical significance, or rarity; making each one unique.
Terminologies around NFT :
Collection: A bunch of items or art launched by the same artist under the same symbol.
IDs: Each NFT that is part of a collection has an ID using which we can identify that it is part of the collection.
What is an NFT Marketplace?
In the real world, whenever something becomes popular we see buyers and sellers congregate and a marketplace is formed.
In the virtual world were have amazon or Flipkart where there are sellers selling different products and we go on the app as a buyer.
An NFT marketplace is when a marketplace is designed to buy and sell NFTs and it is a way for buyers to discover cool trending NFTs and a way for sellers to sell their NFTs in exchange for ETH/SOL/MATIC.
A marketplace can be centralized or decentralized.
Some of the popular decentralized marketplaces are opensea
Binance is a centralized marketplace where the transaction does not take place on the blockchain. the good part about this is you get to save on gas which is very high on open sea.
On Opensea the marketplace by itself is a smart contract and all the transactions are provable making it very transparent.
Let's deep-dive into the USECASE of NFTs
- Stunning art: NFTs can be used to create art that is verifiable and provable. Nfts are currently being used as profile pics and this is becoming a hot trend after Twitter integrated NFT profile pics, we get to see crypto punks and bored apes as Twitter profile pics.
- Enables exclusive access: In Web3 NFTS grant you exclusive access to events and these events can only be attended by holders of a particular NFT. For example, the BAYC (Bored ape yacht club) allows holders to attend high-profile parties conducted across the US.
- Enables proof of presence: This essentially follows a proof of attendance protocol which basically authenticates that you attended something, just like how we keep concert tickets or a photo with a celeb. POAP enables us to verify that we were present or completed a certain course/conference.
- Other innovative use-cases: ENS domains are basically decentralized domains that you attach to a wallet address that will be able to shorten your wallet address that can be used as your identity on web3 for example aditya.eth is a better way to identify Aditya rather that an excruciatingly, long wallet address. Bundling of DeFi charge particle, staking an NFT to earn interest in the form of the native tokens are other cool use cases.
But why are NFTs so famous?
- They are easier to understand
- They are better than the previous tech as they enable things like royalties and proof of ownership.
Royalties: When you sell an NFT at a higher price, the original creator gets a certain percentage of the resold amount, this is possible as they are smart contracts and royalties can be programmed.
The blockchain, being decentralized in nature allows everything to be transparent and provable allowing users to validate whatever the creator of the project claims to provide.
3. Provide a foundation for digital fashion, which will be popular in the metaverse as we would wear fashion that defines us
4. Provides connection between artists and their users. And the artist can track their early users or early believers.
To Create your own NFT you need:
- Collection or symbol
- The art for the collection (Doesn't have to always be art)
- Metadata of each item
Metadata is basically the description of the contents or attributes that are present in the NFT.
How to deploy your own NFT?
- Upload it to IPFS which is decentralized storage.
- Pit it using Pinata.
- Put the IPFS URL of each asset in the metadata JSON file.
- Upload each metadata to IPFS
NFTs follow an ERC standard
ERC stands for Ethereum requests for Comments. Which is basically a standard that defines what we want to create.
As blockchain decouples everything, the frontend basically decouples from the backend which in this case will be Ethereum which stores the data & frontend interprets the data, and as they’re now decoupled the data will be on the blockchain.
The backend which in this case Ethereum stores the data and the front end interprets the data. The protocol by which the front end and backend interact is through something called ERC standards.
ERC are standards that improve Ethereum. Some popular standards are ERC-20/ERC-721/ERC-1155.
ERC-721 VS ERC 1151
How to find the best NFT Projects.
Research.Research and more research! There are thousands NFT projects out there and 90% of them will fail, we have to be on the lookout for the diamonds in the dust.
NFT red flags
Make sure you verify that the project and the creators are doxed, go through the community and talk to them to make sure you fit in the tribe, make sure you DYOR to avoid a scam or in web3 terms a rug pull.
Future of NFTs?!
We are still early and there are so many new things being innovative every day.
EPNS is trying to create the communication protocol for web3 space for any smart contract or Dapp to send communications out which are tied to wallet addresses in a gasless way helping wallets to interact with each other much more efficiently.
NFTs are in phase0, we are making the next internet and there is always something you can invent in web3 that will help transcend to something cool and exciting that we probably can't even envision at this moment.
Anything is possible, create your nft create a new standard, solve an infra issue, web 3 loves innovation.