NFTs: What it is, Where to buy, and What’s it’s potential

Basics about Non-Fungible tokens

5 min readMay 7, 2022

The news of individuals (or organizations) buying NFTs spread like wildfire on the Internet when people pour in millions of dollars worth of money. The charm of NFTs came into the limelight very recently, where everyone started exploring the options to buy one. However, not everyone understands the term ‘NFT’ correctly. This post decodes NFT, its working, use-cases, marketplaces, and vital statistics.

What is an NFT?

Non-Fungible Tokens (or NFTs) are digital assets that represent real-world collectibles recorded in smart contracts. NFTs are unique, non-interchangeable, and harness the power of a digital ledger called blockchain technology. Blockchain helps to establish proof of ownership to its buyers.

Cryptocurrency is a ubiquitous word that you might have already heard somewhere. NFTs are pretty similar to cryptocurrencies as they both work on blockchain technology. However, NFT tokens are non-fungible, i.e., they can’t be exchanged like-for-like. While, fungible tokens such as Bitcoin, Ethereum, etc., are divisible and can be directly replaced by the other token.

The token standard that was common for the use of NFTs was ERC-721. It is the first of its kind that fueled the craze for NFTs. As the NFTs are unique assets that no one cannot replicate, the ERC-721 token standard represents the same scenario. It led to the birth of various other token standards, out of which ERC-1155 rapidly covered the market.

ERC-1155 token standard was the team’s mastermind behind the Enjin project, introduced in 2019. It is also known as a popular gaming token and is a mix between the ERC-20 standard and the ERC-721 standard. The major challenge that ERC-1155 overcomes is the inability to easily manage the number of instances of non-fungible tokens, as well as inability to conduct batch transfers.

We have already read about fungibility, non-fungibility, and the prevalent token standards in the industry. But, how does an NFT function? How is blockchain helpful in this regard?

How does an NFT work?

Non-Fungible tokens receive fuel from blockchain technology, which is also the powering source of cryptocurrencies. People can also create the tokens on smart-contract-enabled blockchains with non-fungible token tools. As we already read about the Ethereum standards (ERC-721, ERC-1155), the race is run by Solana, NEO, EOS, and TRON, as these blockchains also have their NFT standards.

Non-fungible tokens and smart contracts help store important information such as the owner’s identity, rich metadata, or secure file links. The potent of non-fungible tokens to immutably prove digital ownership is an essential progression for an increasingly digital world. It helps instill a sense of trustlessness and promises security applied to the exchange of almost any asset.

Blockchain technology has progressed quite rapidly, leading to an increase in the number of developers working on their projects without any protocol. The tech stack has successfully opened the use cases of NFTs beyond the artwork. Let’s read about them.

How are NFTs used?

Non-Fungible tokens are high-value collectibles differentiated from each other. NFTs exist not just in the form of artwork but also in music, videos, or tweets. In short, a person can reproduce a digital file that will act as an NFT for identification purposes. It guarantees them proof of authenticity and gives the ownership credits to the buyer. An interesting point worth considering is that you can make NFTs from almost anything unique stored digitally and holds value.

NFTs are a lot-trendy these days as they provide value to the owner while at the same time saving the space (as you do not have to opt for a physical asset). NFTs help artists and content creators with an opportunity to monetize their work sitting from any corner of the world. It helps to skip the fees of auction houses and provides direct profit to the creators.

The recent years were fruitful for NFTs as the brands like Charmin and Taco Bell have auctioned off themed NFT art to raise funds for charity. Charmin got sold out in minutes for a price of 1.5 wrapped Ether! NBA Top Shot is another silver lining that generated more than $500 million in sales. Now you realize the potent of NFTs and why people are so excited for buying them.

Popular NFT Marketplaces

People planning to purchase can check the below marketplaces for buying non-fungible tokens.

Opensea

OpenSea is a decentralized NFT marketplace for buying, selling, and trading NFTs.It is the biggest marketplace to date for digital goods that comprises artwork, music, etc. In November 2021, the platform hit $10 Billion in sales volume.

SuperRare

SuperRare is a marketplace that hosts rare and valuable pieces of work. It is also one of the leading players in the NFT-powered digital art space that runs on the Ethereum blockchain. The platform has also clocked with over $127 million earned by the artists.

Rarible

Rarible is a decentralized application that allows artists and creators to issue and sell NFTs. It also launched RARI, a governance token to reward creators and collectors. In 2021, Rarible clocked more than 2.1 million monthly active users on the platform.

Several other marketplaces also exist in the market spaces, such as Foundation, Decentraland, etc. While the highest-grossing NFT is Pak’s ‘The Merge,’ which got sold for a whopping $91.8 Million, the NFT market cap has successfully crossed the barrier of $22 Billion, growing multifold from the year 2020.

Conclusion

Non-Fungible tokens add potential to creating security tokens, tokenizing digital and real-world assets. The power that NFTs hold is immense as they can tokenize any real-life assets. Even if you buy a physical piece of land at any place, turning them into an NFT will help prove the property’s ownership.

The blog briefed several forms other than artwork that you could make into NFTs. Certificates, documentations, licenses, or anything you dream of could turn into a non-fungible token. NFTs have already swept significant industries in the market and plan to acquire other sectors. The future seems quite positive as we possibly explore different concepts of interest that can bring a revolutionary change to the way we look at them.