Academy Crypto Basics

What are NFTs?

NFTs are non-fungible tokens that represent claims of ownership of digital objects of almost all kinds: texts, images, audio recordings, digital works of art, game items or characters, domain names, financial instruments, club cards, etc.

If cryptocurrencies are conditionally fungible – for example, one bitcoin in one user’s wallet is equal and identical to the other bitcoin from another user’s wallet, then one NFT token representing a picture is not equal to one NFT token of another user, since these can be different paintings produced by different artists and they also hold different value.

Each of the NFT tokens is unique and exists in the singular version. Non-fungible tokens cannot be copied, as each of them contains identifying information recorded in smart contracts. This piece of information, precisely, makes one NFT different from another.

With the help of NFTs, developers have deciphered the security issue of the ownership of digital objects. Information about the owner and his tokens is fastened in the blockchain where it is impossible to replace or delete any information.

NFT experimenting has begun with the coming of solutions like Colored Coins (in 2013) and Counterparty (in 2014), where the tokenization of assets on BTC blockchain was first made possible.

Most of the non-fungible tokens are issued on Ethereum blockchain in several major standards. The standardization of the NFT issuance guarantees a higher degree of interoperability (the ability of blockchains to interact with each other), which allows such non-fungible tokens to be transferred between different decentralized applications.

ERC-721 is the first and most common implementation of NFT on Ethereum, extending the capabilities of the ERC-20 (the basic standard). This standard requires a separate smart contract for each token type.

Shortly after, some other versions were introduced:

  • ERC-998 – an evolving standard that allows you to create a “compound” token – a digital asset that “owns” another one. For example, the ownership of a playable character in a computer game is represented by one non-fungible token, and the rights to its equipment are represented by another. ERC-998 allows you to blend them into one token
  • ERC-875 allows you to send multiple collectibles in one transaction
  • ERC-1155 is an improved standard that allows you to work with several types of tokens at once through a single smart contract.

NFTs are not exclusive to Ethereum – they also exist on NEO, EOS, Tron, Flow, Cosmos, and other platforms.

Current NFT ecosystem pattern:

ImagesIllustrations, design, photography, stock images
AudioMusic, podcasts, radio programs
Text contentBlog posts, tweets, instructions
Metaverse3D models, indoor games, maps, augmented reality assets
VideoMovies and series, streams, shows, videos
Address spaceIP addresses, domains

List of some of the NFT aggregators may include:

  • Open Sea
  • Rarible
  • SuperRare Async Art
  • Known origin
  • Nifty gateway
  • Foundation
  • Portion
  • MakersPlace

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