The year 2020 was one of the most significant in the history of the crypto space. Many digital assets like Bitcoin and Ethereum gained massively in price value. Also, 2020 was the year the DeFi space began to amass popularity amongst crypto users. However, one of the sectors of the crypto space that also got recognition is the Non-fungible token (NFT) space. The young NFT space market capitalization tripled in 2020 and was worth $250 million. However, that would signal the beginning of other groundbreaking achievements in the ecosystem.
What Are NFTs?
As the name sounds, Non-fungible tokens (NFTs) are cryptographic assets on a blockchain with unique identification codes. They also possess metadata that makes them unique and different from each other. Unlike cryptocurrencies, which are fungible tokens, they are not identical and cannot be used for transactions. These unique tokens can not be traded or exchanged as they do not possess equal value. This is because no two NFTS are the same. NFTs are tokenized versions of digital or real-world assets like real estate and artworks.
They also act as proof of authenticity and ownership within a blockchain network. Their presence on the Blockchain means that they can remove intermediaries, simplify transactions, and create new markets. One benefit of owning an NFT is that it contains information distinguishing it from other NFTs and is easily verifiable. This makes it impossible to create and circulate fake NFTs. This is why one can trace it back to the original issuer. NFTs can exist in the form of any media, i.e., picture, sound, or video.
To understand the concept of NFT, one must understand what fungibility means. Fungibility is the property of an asset whose individual units are interchangeable and indistinguishable from each other. Fungibility is present in fiat currencies and regular cryptocurrencies like Bitcoin, Ethereum, etc. This is why one Bitcoin is interchangeable and equal to another Bitcoin, the same as a dollar bill. However, NFTs tokens are unique, different, and unequal. A typical example of an NFT is your digital passport, which contains unique information that cannot be transferable.
Another example is an event ticket containing the purchaser’s name, event date, and venue. This information is unique, non-transferable, and unexchangeable with another person.
Most NFT tokens were built using the Ethereum token standards- ERC-721 and ERC-1155. This token standard empowers software developers to quickly deploy NFTs and ensure they’re compatible with the ecosystem. The ERC-721 token standard covers the ownership details, security, and metadata. This information is required for the exchange and distribution of gaming tokens. The ERC-1155 token standard use case involves reducing the transaction and storage cost of NFTs. Its use case also involves batching multiple types of NFTs into a single contract. Unlike cryptocurrencies that one can buy on exchanges, NFTs are primarily available on digital marketplaces. Examples of digital marketplaces you can find NFTs are Nifty Gateway and OpenSea. Cryptokitties, launched in November 2017, is one of the earliest NFTs. Cryptokitties, created on the Ethereum blockchain, are digital representations of cats with unique identifications.
Features Of Non-Fungible Tokens (NFTs)
Listed below are the uniques features of NFTs and why the digital assets have amassed popularity recently.
- Non-interoperable: Like regular cryptocurrencies, NFTs are non-interoperable, as one can’t use them interchangeably. A typical example is a crypto punk collectible, which cannot be used on the CryptoKitties game. Alternatively, CryptoKitties cannot also be used in a Cryptopunk theme.
- Indivisibility: NFTs are not fungible tokens that can be divisible into smaller units, like fiat money or cryptocurrencies. For example, a dollar bill is divisible into smaller units like cents or lower denominations. Another example is a cryptocurrency like Bitcoin, divisible into Bitcoin satoshis.
- Immutable: The ownership of NFTs is immutable and solely belongs to the digital artist or creator, not the company that creates them.
- Indestructible: It is worth noting that smart contracts store NFT data on the Blockchain. This is why you cannot alter, remove or duplicate a NFT token.
- Verifiable: Storing NFTs on a blockchain means that they can be easily verified and traced back to their owner. This is why it is easy for the buyer to authenticate its ownership easily.
- Extensible: Another unique feature of NFTs is that they are extensible. One can create another NFT by adding one or more NFTs together.
- Utility: NFTs use cuts across many sectors, even outside the crypto ecosystem. Traders use them in DApps to allow the creation and ownership of unique digital items and collectibles. They also have the potential to be critical components of a new digital economy using blockchain. Apart from video games, they also cuts across digital identity, licensing, certificates, and fine arts.
Why Are Non-Fungible Tokens Important?
Recently, NFTs have become very popular amongst crypto users because of their impacts on the collectibles and gaming space. They are an evolution of the relatively simple concept of cryptocurrencies. Thanks to Blockchain technology, gamers, and collectors, can now own unique assets and generate revenue from them. Its use of Blockchain technology also implies that ownership of assets is transparent and secure. This was a driving factor in the market capitalization of the space, which rose by 50% from 2019 to 2020. At writing, the market capitalization of the NFT space is now at a whopping $21.33 billion.
Also, for the creators, the ability to make money from their work without an intermediary is a massive plus for them. This is due to the high market efficiency of the space, which connects creators to the audience directly. NFTs make investing accessible to all by fractionalizing physical assets like real estate. It is easier to divide a digital real estate asset among multiple owners than a physical one. This use case can also extend to other assets, such as artwork. This means a single owner cannot own a painting. Its digital equivalent can have multiple owners, each responsible for a fraction of the painting.
Such arrangements could increase its worth and revenues for the creator. Also, like other crypto assets, supply and demand drive the value of NFTs. People are ready to pay a lot for them because they are scarce and in high demand, especially gamers. One of the advantages of NFT is that anyone can invest in it. The market is open to all, especially newbies with little or no knowledge of cryptocurrencies. Users interested in them can also benefit by learning more about cryptocurrencies and their trading. This will further explore them in the world of cryptocurrencies.
Top 5 Most Expensive NFTs In History
Since 2017, many NFTs have traded for vast sums of money, amassing creators colossal revenue. While creators were making money, gamers and crypto users were also buying these unique pieces. The top five most expensive NFTs in the crypto marketplace are;
#5 CryptoPunk #5822 — $23.7 million
In fifth place is CrypoPunk’s 5822 super expensive alien style NFT. When it sold for $23.7m on February 12, 2022, it broke the internet and sent the market into excitement. It remains one of the most valuable pieces on sale at Cryptopunks. At the time of sale, it was double the cost of #7523, known as Covid Alien, which CryptoPunk sold for #11.75 million.
#4 People – Human One – $29.985 million
Beeple is an NFT creator that has sold three of the most expensive NFTs in history. However, on December 9, 2021, the digital artists auctioned his HUMAN ONE piece for a fee close to $30million. The Human One is a life-generative sculpture consisting of an astronaut wandering across shifting environments. According to Beeple, it can change, and he will update it in the future so as not to remain static.
#3 Clock- $52.7m
Created by Pak and Julian Assange, Clock is an NFT that acts literally as a clock. The masterpiece, at first, was counting the days that WikiLeaks founder Assange was in prison. His followers used it to raise funds for Assange’s legal defense. A collection of over 10,000 people pooling their money via AssangeDAO bought it.
#2 Everyday: the First 5000 Days — $69.3m
This is Beeple’smost expensive work and the most expensive piece ever sold to one sole owner. The masterpiece is an essential artwork in the cryptosphere, paving the way for mainstream audiences to explore the NFT space. MetaKovan, the pseudonymous founder of Metapurse, bought it on February 21, 2021.
#1 The Merge — $91.8m
The Merge is a masterpiece from the creator – PAK. Twenty-eight thousand nine hundred eighty-three collectors bought it for almost $100m on December 2, 2021. Apart from the clock, it is the only NFT on this list with multiple owners, and it shows in its crazy price tag.
You might also like
More from Blockchain
While there has been issues in the stablecoin market, DAI offers massive benefits to traders. Enter the benefits of this …
Can Cardano smart contract lead to Ethereum being replaced in the future? In this article, we discuss whether Cardano or …