What are NFT Tokens in Cryptocurrency

Cryptocurrency is a popular, but far from the only practical use of distributed ledger technology. The exciting possibilities of blockchain come when you use irreplaceable tokens to certify and ensure uniqueness. In this overview, we’ll talk about irreplaceable tokens. You will learn how unique digital assets are created and where they are used on the blockchain.

What are NFT tokens?

Non-Fungible Tokens are a new type of digital token distinguished by the uniqueness of each piece issued. This is the main difference between NFT and distributed network digital currency or fiat money, which are fully interchangeable.

Let’s try to explain this visually. Suppose you have borrowed 1,000 roubles from a friend and he has made you the condition to repay the debt with the same banknote. When the time comes, you can give the creditor any banknote of the same denomination, without violating the terms of the contract. So fiat currency is a fungible asset.

So is digital money. One Bitcoin, Ether or other peer-to-peer coin can be exchanged for another. You lend 1 ETH paid out as a reward for a block generated a month ago. And after a while, you repay the debt with the digital coin you generated today. Both cryptocurrencies are equal in value.

NFT tokens (Nonfungible tokens) are an entirely different matter. Let’s say you have a football signed by a Russian national team player. You can’t replace it with another ball of the same design and size.

NFT digital assets have the same qualities. They are unique and indivisible. One ruble, dollar, bitcoin or other payment asset, of a certain denomination, is divided into small parts (kopecks, cents, satoshi, etc.). NFT tokens cannot be divided in any way; they are stored and transferred in 100% volume, i.e. in their entirety.

This type of asset secures the ownership of a digital object, such as a computer game character or an Internet meme. If you buy a game object with in-game tokens, it is still owned by the developers, and it can be remade or taken away altogether. But if you tokenize that item in NFT format, ownership is confirmed. Ownership data and NFT tokens are written to the blockchain, making it impossible to lose or correct.

The developers of the Colored Coins and Counterparty add-ons, were the first to provide the ability to create indivisible tokens based on Bitcoin. However, the most striking project of the past decade has to be the tokenised meme with Pepe the frog. In early 2018, this NFT was auctioned for the equivalent of $38,500 in PepeCash tokens.

The Etherium blockchain was favoured by the creators of CryptoPunks, a Larva Labs project. CryptoPunks were initially given away for free, but in the current period these tokens are considered valuable blockchain antiquities. Last spring, even before the price of Ether went up, one of the portraits was sold for 100 ETH coins.

Not to mention the famous CryptoKitties. This is a blockchain-based computer game that gives you the opportunity to “breed” unique NFT kittens. You need to buy a pair of CryptoKitties, and produce NFT offspring from them. In 2018, one CryptoKitties was sold for 600 ETH.

Over time, games began to be released for already existing indivisible tokens. Wrapped Kitties, an app for wrapping cryptocytes with ERC-20 tokens, appeared. This made it possible to sell NFTs in parts. CryptoCelebrities was a popular game. The NFT of this game with a portrait of former US President Donald Trump was bought for $137,000.

The tokenisation of digital objects spread to card and sports games, domain names and traditional financial instruments. The next round of NFT development was the tokenisation of digital art. Marketplaces for selling NFT tokens appeared.

Where can non-exchangeable tokens be used?

This type of digital token has a wide range of uses. These include video games, fine art, and cinema ticket distribution. NFTs could be the backbone, the emerging cyber-economy. Along with cash-like cryptocurrencies, indivisible tokens allow for the digitisation of physical goods.

NFTs work like a record in a database. For example, there are thousands of cryptocurrencies, but each one is unique. By purchasing one, you become the owner of a non-interchangeable token that matches that cryptocurrency.

To explain the usefulness of non-interchangeable tokens for blockchain-based security and identity, here are some examples of how NFTs work.

CryptoPunks are just a legend. NFT’s first collection of 10,000 punks. At the time of writing, there were no more punks cheaper than $15,000.
NBA TopShots is a breakthrough in digital collecting. NFT cards featuring the best NBA shots of all time. First month sales of over $5M. The only really big project not on Ethereum blockchain.
Hashmasks is an interesting project, the result of a collaboration of 70 artists. 16k+ unique randomly generated character masks. Beautiful and expensive.

Collectibles and art

We’ve already looked at one example of NFT-protected collectibles, CryptoKitties. But this segment of the market is very broad and extends in all directions. One of the main areas is art collecting.

Paintings and sculptures can be verified and authenticated by experts before creating an irreplaceable mark for a given work of art. When an owner wants to sell one of the pieces in their collection, they can simply put a non-exchangeable token up for auction as proof that the asset is real and they are the true owner.

This type of certification digitises the provenance process and prevents counterfeiting and fraud in the art world. The same could be done with baseball cards, stamps, jewellery, autographed guitars or any collectible you could imagine. Blockchain security guarantees the legitimacy of the transaction.

Best NFT projects

SuperRare is one of the first venues. For rare (1\1) editions of digital works. High average quality works and prices. Moderation.
Foundation – a young moderated boutique marketplace.
Rarible is the most democratic site. Notice (i.e. tokenize) their work can anyone. Made by Russian guys. But in general, Rarible is not just for crypto-art. It’s a marketplace for any NFT.
OpenSea is the biggest NFT marketplace in general and crypto art in particular. Mostly secondary sales are done on OpenSea. But actually they have everything to mine their work. It’s just a little less convenient to promote them on OpenSea. But if you rely on your subscribers, OpenSea is a great choice.
NiftyGateway is a popular site for crypto art. They love mass drops, where one work is sold in multiple copies, + separately some VIP version 1\1 for dearly. They’re the ones who organise most of the biggest sales in terms of proceeds. Beeple sold $3.5m worth of artwork on NiftyGateway in one weekend (although he had been painting it for 13 years before that). Tough pre-moderation, of course.

Famous NFT artists

Their Twitter profiles say it all:

@Beeple
@Coldie
@MBSJQ
@Muratpak
@Hackatao
@fewocious

NFT online games

NFTs are completely changing the world of gaming. Gamers often purchase various in-game assets such as weapons, clothing. The creation of irreplaceable tokens for these assets enables the in-game blockchain economy to function. Traditional multiplayer video games and even casinos are also getting involved in the craze for irreplaceable tokens. They understand that blockchain tokens allow players (and companies) to extract real value from gaming. The gambling content market continues to expand.

Tickets for any show or sporting event can be issued digitally on blockchain. Each ticket is unique, which is what the NFT is all about. It standardises the ownership of a certain category of assets, but assets within that category can have very different market values. Ticketing is a great opportunity for NFS to revolutionise the industry.

Best NFT projects

Axie Infinity – The most ambitious crypto game. You have to breed mythical creatures, Axie. Inspired by the Pokemon universe. The pets can fight. You can buy land for them and build your own kingdom.
Gods Unchained is a classic collectible card game.
Neon District – RPG in a cyberpunk style.
Sorare – Football manager + collectibles.
CryptoKitties – A game about breeding cryptocots. We talked about it earlier.
Identification and Certification

You can get a non-saleable digital token as a birth certificate, passport and driving licence. They cannot be traded, but they will be able to interact and verify them with the relevant authorities. You can also voluntarily share this information with employers, doctors or anyone else who needs your personal information.

Maybe you could get your university degree as a digital token. You could ask to see a validated NFT – a diploma from a family doctor. Data that companies usually collect about customers, such as visit history or preferred products, could be tokenised and stored.

NFT token standards

A common type of NFT is the ERC-721 Ethereum. The standard codifies the creation of an irreplaceable token guides developers through the process of setting up a smart contract. The standard is important because it means that tokens communicate well with each other and with the Ethereum network. Based on ERC-721, digital collectibles and gaming assets are produced.

An extended version of the ERC-721 standard is ERC 1155. The development team released this standard based on the idea of semi-exchangeability. The identifier is not tied to a single asset, but to a particular asset class. For example, with a sword class identifier you can have a thousand in-game items.

The ERC-998 standard combines conventional assets with NFT. Few such digital assets exist yet, but there are many interesting possibilities and applications, and over time, the number of tokens of this standard will grow.

NFT token standards for other blockchain ecosystems are being developed and have already been released. The DGoods project, for example, is preparing to release a multi-standard of undivided tokens compatible with various cryptocurrencies. The Cosmos project is also developing an NFT standard for the Cosmos SDK.

Releasing your NFT

Issuing your NFT, that is, tokenizing an object, is called mining. The easiest way to token your drawing or work, even if you drew it in 5 minutes in Paint Cinema 4D, is to do it on Rarible or OpenSea.

On Rarible, your work is mined immediately, so you have to take a risk and pay for gas on the Ethereum network. And it depends on your work whether you’ll buy it or not. We suggest to look at other artists’ work and then take your chances.

Opensea uses lazy minting, which means you only prepare everything for minting, but the actual release of NFT with writing to the blockchain and thus gas consumption, will only happen if there is a buyer for your work.

How to trade unique NFT tokens and where to store them

First, decide which area you are most interested in. If you’re a gamer, you can start with Axie Infinity or Sandbox.

If art is more your thing, you can try and buy something inexpensive from OpenSea or Rarible or minify your NFT.

Buying and owning an NFT is different from traditional cryptocurrency trading. To buy a digital collectible or tokenised asset, you will need digital currency (such as Ether). Although some sellers may accept fiat money. Each token is unique and is put on the market linking buyers to sellers. You will have to negotiate a price and make a transaction directly with the counterparty.

We suggest using Metamask as your primary wallet. The wallet is installed as an extension in Google Chrome, allowing for quick and convenient transactions.

To buy cryptocurrency and send to Metamask wallet use Binance cryptocurrency exchange. Do a quick registration and account verification from your mobile phone.

Important: Don’t forget, apart from the cost of NFT itself, you will need to pay a GAS fee. Depending on your network load, this may cost you between 0.02 and 0.08 ETH.

Perspectives on NFT-assets

Non-exchangeable assets, help you digitise anything. Personal data, qualifications, property and digital collectibles can reside on a blockchain. This means you can do business anywhere.

Conclusion

Mass adoption of NFT is just around the corner. As the founder and CEO of virtual platform Somnium Space, Artur Sychev, told CoinTelegraph: “The art industry today is a serious and fast-growing area for NFT. Buying a digital copy and getting the physical equivalent is becoming a lucrative business. The world around us is changing rapidly, and NFT will be the foundation of the economy of the future.

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