If you think everyone is talking about NFT, you’re not. NFT is the word of the year 2021 according to Collins Dictionary. And the technology will continue to grow in popularity. The NFT market will reach $25 billion in 2021. That number is projected to reach $35 billion in 2022 and grow to $80 billion by 2025.
Through NFT, digital objects are sold and bought for cryptocurrency. Prices of digital properties go into the thousands and millions in dollars. The main target audience for buying NFTs are gamers, collectors and advanced investors who invest in NFTs instead of stocks of companies. The value of digital items is growing, and NFT may soon replace documents in the real world.
What is an NFT?
What is the NFT meaning?
NFT (non-fungible tokens) meaning is a technology which assigns ownership of a digital object to a single user and confirms the uniqueness of digital property. The concept comes from the world of cryptocurrency and works on blockchain: a technology that records data in digital blocks in a specific order. Blockchain information cannot be deleted or changed. The blocks are stored on different devices around the world, not on a single server. It is virtually impossible to hack a digital object on a blockchain.
A token is a blockchain element or digital record that can be compared to securities or stocks in the real world. There are fungible tokens, partially fungible tokens and non-fungible tokens (NFT token).
Let’s look at some examples of what NFTs means. To better explained what NFT is, let’s understand what tokens are.
If you borrow a banknote of a one dollar and then give the same one back, there won’t be any difference. Although the bills are different (each with its own number), they are equivalent and replace one another. In the digital world, cryptocurrency works the same way. Any bitcoin is equal to one because each has an fungible token.
A partially fungible token
If you buy a train ticket, it’s not unique: other passengers have the same ticket that can be exchanged. But if you take a train ticket with a specific seat, there can’t be a second one. In the digital world, this ticket would combine the characteristics of an fungible token (passengers can exchange tickets for the same train and still get to their destination) and a non-fungible one, because a specific seat is specified, which is unique to the train. So a train ticket with a specific seat specified would get a partially fungible token.
Non-fungible token (NFT)
If you buy a painting that is sold as a single copy, you can’t replace it with a copy-it’s another work of art with its own characteristics. When such a work exists only in the digital world, the object is assigned a non-fungible token (NFT).
An example of an NFT that has conquered the world is the game CryptoKitties. Here you buy digital pets with a unique token. NFT crypto cats are bred – crossed and get a new kitten. The blockchain code here works like a genetic code: each new kitty will turn out to be unique and one-of-a-kind.
How NFT technology emerged
The technology appeared in 2017 and is based on the smart contracts of Ethereum cryptocurrency. Smart contracts are spelled out codes of agreements and the way an object is used. In the real world, the contract is secured with a signature; in the digital world, the token performs this function.
Initially, NFT technology supported blockchain art: protecting the copyright of unique content. Determining the authorship of a picture in the digital world is difficult. A JPG image of a SEAL is no different than a copy. When copied, uniqueness is lost, the author remains unknown unless users include his name under each publication. When an image gets an NFT token, the copying history is preserved and each user knows the exact author and owner.
The first transition of a real artwork into a digital one was a performance art piece. Injective Protocol bought Banksy’s 2007 “Morons (White)” stencil for $95,000. The work was burned, leaving only a virtual version in the form of an NFT token.
Now tokens get not only NFT pictures, but also author images, gifs, music, photos and videos, game items. Even real-world objects: cars, real estate. Maybe in the future you won’t have to produce paper documents, because NTF will replace even passports.
How NFT works
A token can be pinned to any digital commodity – images, music, videos, and other types of digital content. Blockchain services and virtual wallets are organized in such a way that the user can store tokens for an unlimited amount of time.
The tokens themselves are stored in an open distributed blockchain system. Information about transaction histories and commodity data is always reliable and accessible. Thanks to this chain, it is possible to find out who is the creator of the virtual product and who has the rights to own it.
Many people ask – why buy an NFT token with an image, if you can just copy the picture on your computer? The thing is that by copying a virtual object, the user does not become its owner. The file has no value unless it is part of a blockchain. Physical objects, such as an oil painting, can be lost, corrupted or destroyed. NFT files are not subject to destruction or damage. They cannot be lost.
Any digital file can be tokenized. Physical objects are more difficult to write to a blockchain, but such possibilities exist. Images and animations in gif format are at the peak of popularity now. Thus, the most expensive and popular gif on blockchain is an animation called Nyan Cat. The video shows a cat with a body made of cookies, which flies through space and leaves behind a rainbow trail. The sale of the hyphenated image brought the author a profit of 590 thousand dollars. Chris Torres created this animation back in 2011. The picture went viral and went for more money on a crypto auction.
In 2020, online game lovers showed interest in NFT tokens. The fact is that 2 years ago sales of virtual heroes and other game virtual items increased dramatically. For many users it turned out to be more important and valuable to own some character from an online game than a picture of a famous artist in digital form. Experts suggest that the activation of NFT buyers in the gaming industry is due to the fact that thanks to the virtual world it is easier for people to understand what tokens are and what they are needed for.
How to create, sell and buy NFT
How to buy NFTs
First you need to choose one of the platforms. NFT-platforms trade digital objects in cryptocurrency, sometimes in dollars. Examples of platforms: Juggerworld, Treasureland, Blockparty, Nfty Gateway, Rarible, OpenSea, NFT STARS, NFT-X and others.
The buyer receives a digital certificate with unique blockchain data and stores the object on any device: smartphones, computer memory or a flash drive. The object itself stays in the IPFS (Inter-Planetary File System), a perpetual repository. Other users will be able to download and view the object, but the private key (certificate) remains with only one user. The owner has the right to give the public key to other users when copying to confirm the authenticity of the object.
How to create and sell an NFT token
The same platforms are used to create and sell. The user needs a cryptocurrency wallet to pay the platform fee (not always the case) and the object itself. The owner uploads the content to the platform and puts a price.
NFT is created in one of the blockchain formats: ERC-721, ERC-1155, ERC-998, EIP-2309 and others that NFT platforms offer.
The author of the NFT has the right:
- Limit the number of copies.
- Receive royalties from each sale (sometimes this happens automatically).
- Not to prove copyright, which is spelled out in the blockchain.
Why NFTs are needed
It is known that blockchain technology was first used in 2010, then it was experiments based on bitcoin, which is the very first cryptocurrency in the world. In 2017, tokens began to be created on the basis of etherium. Since then, the world of cryptocurrency has changed. Users have been able to buy not only virtual money, but also other valuable digital goods. Before that, bitcoin and other cryptocurrencies were only used to buy and sell physical goods. For example, Elon Musk sold Tesla electric cars for bitcoins.
NFT tokens were created to make the concept of digital property finally make sense. Thanks to blockchain technology, virtual items gained value and the storage system became secure. The problem of confusing the original and the copy has disappeared. Now the code of the original file and the copied file are different and this information is also encrypted in a token.
Popular artists’ songs and works of famous artists are also being digitized. For example, in March 2022, the company Injective Protocol purchased Banksy’s painting “Morons (White)” for a very large sum of 7 million rubles in Russian currency. The painting was first digitized and then burned during the broadcast. Thus, the physical embodiment of the author’s work no longer remained. Now the black-and-white work will exist only in the digital space. Experts believe that this move is justified: the fact of destroying a paper copy of the picture only increases the cost of the digital version.
So, there are several possible applications for NFT-tokens.
Earnings for content authors
Typically, authors promote their content to the platforms where they publish. In return, they receive advertising and virality, but not money directly. With NFT the author has access to royalties from the use of his content.
Before NFT, you had to sign objects to keep the author’s name. The method worked poorly, the author’s name was often lost. The blockchain records the creator of the object, the current owner, and resale history.
Replacing digital documents and tickets
With NFT, ownership of real estate or a car is confirmed with a token instead of a paper document. The technology is also used to sell tickets for events. The difference with ordinary electronic tickets and documents is in the security level: NFT cannot be faked or stolen.
Interactivity of content
NFT adds interactivity to the media content and includes the user in its creation.
Example. The creators of the comedy series The Gimmicks gave away free tokens with which users vote each week for story options. Participants also get a unique NFT character from the world of the series and even become an assistant on the production team.
Buying digital objects is a lucrative investment. NFTs get expensive, digital objects resell for impressive sums, but there’s no telling which NFT will skyrocket in value. Not all NFTs are valuable: it depends on the author and the characteristics. That’s how Elon Musk put his tweet in the form of an NFT up for sale. The value of the lot at auction exceeded one million dollars.
Using NFTs in Games and Metaverses
NFTs can be used as playable characters or items in various games or Metaverses. We’ll talk more about this a little later in a separate chapter article.
What is an example of NFT?
Some NFTs are becoming world famous, not just among collectors. Such objects are sold at the famous Christie’s and Sotheby’s auctions. Sometimes NFT art seems primitive, but even simple images are worth millions of dollars. A few examples of digital objects that are worth as much as millionaires’ yachts.
An example of a very simple, but prohibitively expensive NFT. The objects in CryptoPunks collection of unique pixel avatars can only be afforded by wealthy collectors.
At an auction at Christie’s, a collection of nine rare pictures of the project sold for almost $ 17 million.
“The First Five Thousand Days.”
The artist Beeple published a new work every day for 13 years, and then combined all the images into a collage of 50,000 elements and sold it as an NFT at Christie’s. The image is called “The First Five Thousand Days” because the author decided to create a new picture every day for the rest of his life. The collage with the first days is worth $69 million.
Internet Source Code
English scientist Tim Berners-Lee created a token for the Internet source code that he invented in 1989. The value of such an NFT at a Sotheby’s auction is $5.4 million.
Campbell’s soup cans
Andy Warhol’s famous painting of Campbell’s soup cans also turned into an NFT. Untitled (Campbell’s Soup Jar) sold at Christie’s for $1.1 million.
“Transition” by Pokras Lampas
Calligraphy artist Pokras Lampas digitized and sold a photo of his work projection on the Chirkei hydroelectric power plant for $29,000.
Nyan Cat meme creator Chris Torres turned an Internet cat into a token and sold it for more than $560,000.
How do you make money with NFTs?
Is NFT worth the money? Owning a unique creative object, you can try to make money on it. Or it is enough to be an enterprising person.
NFT technologies offer new and good prospects for making money. You only need to know how to use them correctly. Experts advise to start with a single method, gradually plugging in and trying the other options.
Here are a few ways to make money from NFTs:
Creating your own token
All you need is to think up an interesting project, bring it to life, digitize it with a special platform. Then sell it, and transfer the proceeds from cryptocurrency to regular fiat currency. This scheme seems simple only at first glance. After all, to create something really interesting and exciting, something that will resonate in the hearts of many people, you have to try or be a genius.
Without talent and certain digital art skills, it will be quite difficult to compete with other token creators. After all, there are already hundreds of thousands of works on platforms that no one buys. To hook a potential buyer with something – that’s what aspiring authors should be aiming for. If a person’s work was familiar to the public outside of the NFT venues, this will greatly increase their chances of success. Style is also important: you need to be able to be different from the others, to find your own unique way of expression.
Promotion is a great way to tell about yourself to those who do not yet know such an author. It is possible to show your work and draw attention to it in any social networks, where there is an active, lively, interested audience. Any creative work, the original product of which can be digitized, is suitable for this method. Video clip, music composition, e-book, illustration, animation. To sell your own product as expensive as possible, it should exist on the marketplace only in one copy. It’s worth starting with platforms like NiftyGateway, OpenSea, SuperRare, Rarible, and Foundation.
Probably one of the easiest ways to make money on NFT. All you need to do is to constantly monitor interesting offers at nice prices, buy other people’s tokens, and then sell them to other users at a higher price. To take advantage of this method, you will first have to buy a certain amount of cryptocurrency, because NFT tokens can only be bought with virtual money.
In this business, a good judgement is important. A beginner is unlikely to cope with it. But an experienced user, who already has knowledge about tokens and an idea of digital art, can use this method as a source of additional income. It is also useful to be interested in graphic and web design to keep abreast of the latest fashions. You can train your skills on sites like Designspiration, Muzli, The perfect grid, Fubiz, Behance and Dribbble.
Free token giveaway
Often platforms and projects that have just entered the NFT market give away free tokens to their subscribers and users in order to generate interest in buyers, to promote themselves, to find sponsors. This is called an airdrop. Airdrops can be traditional or non-traditional. Non-traditional is affectionately known as a “bounty”.
Traditional airdrop involves giving away tokens between holders of a certain digital currency or tokens. That is, in order to get a free token, you must first buy some token or purchase virtual coins. Only those users who have performed certain actions to promote and recognize the project participate in the “bounty”. That is, it is a reward for the accomplishment of the plan.
You can not rely only on this method. This is a long process, you need to participate in as many giveaways as possible. Free tokens do not always increase in value a lot. However, there are cases when initially free NFT got the value of 10 thousand dollars. A typical example is the CryptoPunks avatar project. Now the price of a single image ranges from a few thousand dollars to millions.
Services for token authors (digital artists)
If you already have knowledge of NFT or a great desire to get that knowledge, you can try producing novice token writers. When you have experience in selling tokens, it is easier to do such work. Therefore, you will need to present yourself as an expert in order to increase the trust of potential clients.
Authors are unlikely to appear themselves, so you will have to look for them on your own: on cryptocurrency exchanges, on NFT-token sales platforms, in thematic forums on the web, in various groups and publishers in social networks. Before starting cooperation, it is desirable to conclude an agreement that will spell out all the terms and conditions. There is a risk that the author may get greedy and not share the profit if the token is presented on the marketplace under his name and his account.
Paid consultations on NFT
You can’t do without sufficient experience and baggage of knowledge. Training for beginners can be structured in different ways. Some people are more interested in communicating personally with future authors during individual consultations. Some people find it easier to write a mini-course with video lessons and promote it on the Internet. But in both cases you will have to invest in advertising and promotion. And in the second case, you will need the cost of video editing or quality equipment and a lot of free time to process the footage.
But there is a significant advantage of this method. This is that the expert gets the money right away. A person pays for a consultation or training course, but it does not give a hundred percent guarantee that he will be able to earn money by selling unique tokens.
Various technical services for NFT digital artists
There’s an ocean of ways to make money from NFTs.
For example, to batch upload a large number of NFTs to the OpenSea Marketplace the smartest way is to create a smart contract. Only a programmer can do that. There is even a specialized Solidity programming language for this.
Also, to promote and get a large audience of NFTs, digital artists may need to develop mobile apps or metaverses. These can be small projects for freelancers, or large ones for large companies.
And there’s no need to talk about website development services for all of this. As is the case with Internet marketing services.
NFT Marketplace is a platform (website, mobile application) where NFT tokens are “minted”, sold and bought.
Token trading platforms are now multiplying at an enormous rate. You should not go to every possible platform in order to buy your first NFT. You can use any search engine to run through the most popular marketplaces and read reviews. The list of trusted NFT marketplaces includes sites such as:
- Binance NFT;
- NBA Top Shot;
NFT in games
What does NFT mean in gaming?
In NFT games, the universe evolves with or without the player: it’s like an online game, but with stronger dynamics and radical changes within the game world. Here are just a few examples of the most interesting games that use the mechanics of non-fungible tokens.
Axie Infinity is a Ethereum-based blockchain game with fantasy characters (axics) that is a lot like the acclaimed CryptoKitties. It is used not only for entertainment purposes, but also for making money. The project has been supported by many large companies, including Binance and Samsung.
Players in Axie “do not suffer” from the imposition of donations, as all content can be obtained through gameplay. The cost of items and characters on the secondary market is determined solely by the players.
Axics are the NFT. The developers claim that despite their cute appearance, these creatures are warriors who love to fight. Particularly rare Axics can be sold on marketplaces for impressive sums of money, which attracts both players and those wishing to make money.
The “simplicity + tangible benefits” formula has attracted millions of players worldwide to the project, and the Axie Infinity (AXS) token capitalization reaches nearly $2.3 billion and is comparable to that of large international companies.
Sorare is a new platform where players collect digital cards, trade them, and participate in fantasy tournaments. Each card is a digital asset, officially licensed by a club or league.
Sorare cards can be sold on NFT marketplaces, which are protected by blockchain. The same cannot be said about dubious marketplaces for trading items from classic games: when dealing with them, the user relies solely on the honesty of the site’s developers.
Collection cards have been a favorite hobby of sports geeks for decades. It was impossible to collect digitally. Blockchain, which guarantees the uniqueness of each card, came to the rescue.
Currently, the platform is a partner of 100 clubs, including Juventus, PSG, Atletico, West Ham, Schalke and others. Given the speed of connection to the platform of new clubs, there is no doubt that soon the choice will be much wider.
Crypto Kombat – the heroes of this NFT-game are the real Influencers, entrepreneurs, developers and scientists of the cryptocurrency world. Users play as blockchain creators Satoshi Nakamoto or Vitalik Buterin or confront “crypto-heroes” by playing for the SEC (US Securities and Exchange Commission).
Unlike hacked and stolen accounts of classic games, Crypto Kombat is accessed via a cryptocurrency wallet. It is protected by a unique key and no one can steal the user’s assets and in-game items.
There are four types of cards in the game: common, epic, rare, genesis. The latter can only be picked up by the hero himself, who is represented in the game. Charlie Lee (Litecoin), Anton Bukov (1inch), Giancarlo Devasini (Tether) and Devin Fincher (Opensea) have already accepted cards, showing interest in the project. Now every player can meet the hero himself on the battlefields.
The core of the blockchain game is the internal KOMBAT token, which allows you to unlock new heroes, earn money, and influence changes in the project. The cards are freely traded on the NFT marketplace Opensea, and the largest transaction was for 8 ETH or $32,000 at the time of writing.
These projects have managed to solve some of the “pains” of the classic game industry, through the use of NFT and blockchain. Among the achievements of crypto games are:
- Multi-platform. One wallet fits all games. You just need to connect and you can play right away.
- Security. The process of generating new blocks is built so that it is almost impossible to hack.
- Fair prices determined only by players.
- No censorship. It is impossible to block access to the blockchain.
- Achievements in the game can literally be sold to other players, earning money on it.
Gaming and NFT: the near future
Blockchain for gaming is still in its infancy and beginning to develop its potential. But right now it allows developers to explore new horizons in a virtually unlimited and vast infrastructure, augment VR and AR, and create previously impossible projects.
Blockchain brings digital property rights to the gaming industry, real protection for players’ data and assets. In-game blockchain items are valued not only by players, but also by collectors and represent property in web auctions.
Many blockchains are already building infrastructure for the development of NFT and GameFi in particular. These include BSC, Solana, Tezos, and others. And the capitalization of the NFT game industry tends to be in the billions of dollars. In addition, play-to-earn mechanics will attract even more players. Such games can become a full-fledged way to earn, in addition to an interesting pastime, which cannot be said about traditional games.