What is a NFT?
We can go on and on about what non-fungible tokens are but we added short videos to explain everything perfectly!
NFTs are currently taking the digital art and collectibles world by storm. Digital artists are seeing their lives change thanks to huge sales to a new crypto-audience. And celebrities are joining in as they spot a new opportunity to connect with fans. But digital art is only one way to use NFTs. Really they can be used to represent ownership of any unique asset, like a deed for an item in the digital or physical realm.If Andy Warhol had been born in the late 90s, he probably would have minted Campbell's Soup as an NFT. It's only a matter of time before Kanye puts a run of Yeezys on Ethereum. And one day owning your car might be proved with an NFT.NFTs are tokens that we can use to represent ownership of unique items. They let us tokenise things like art, collectibles, even real estate. They can only have one official owner at a time and they're secured by the Ethereum blockchain – no one can modify the record of ownership or copy/paste a new NFT into existence.NFT stands for non-fungible token. Non-fungible is an economic term that you could use to describe things like your furniture, a song file, or your computer. These things are not interchangeable for other items because they have unique properties.Fungible items, on the other hand, can be exchanged because their value defines them rather than their unique properties. For example, ETH or dollars are fungible because 1 ETH / $1 USD is exchangeable for another 1 ETH / $1 USD.
No need to read a wall of text enjoy edutainment about what NFTs are.
NFTs and Ethereum solve some of the problems that exist in the internet today. As everything becomes more digital, there's a need to replicate the properties of physical items like scarcity, uniqueness, and proof of ownership. Not to mention that digital items often only work in the context of their product. For example you can't re-sell an iTunes mp3 you've purchased, or you can't exchange one company's loyalty points for another platform's credit even if there's a market for it.
Here's how an internet of NFTs compared to the internet most of us use today looks...
Even if you screen shot this you will never truly own it and cannot resell it.
NFTs are different from ERC-20 tokens, such as DAI or LINK, in that each individual token is completely unique and is not divisible. NFTs give the ability to assign or claim ownership of any unique piece of digital data, trackable by using Ethereum's blockchain as a public ledger. An NFT is minted from digital objects as a representation of digital or non-digital assets. For example, an NFT could represent:
- Digital Art:
- Real World Items:
- Deeds to a car
- Tickets to a real world event
- Tokenized invoices
- Legal documents
- Lots and lots more options to get creative with!
An NFT can only have one owner at a time. Ownership is managed through the uniqueID and metadata that no other token can replicate. NFTs are minted through smart contracts that assign ownership and manage the transferability of the NFT's. When someone creates or mints an NFT, they execute code stored in smart contracts that conform to different standards, such as ERC-721. This information is added to the blockchain where the NFT is being managed. The minting process, from a high level, has the following steps that it goes through:
- Creating a new block
- Validating information
- Recording information into the blockchain
- Each token minted has a unique identifier that is directly linked to one Ethereum address.
- They're not directly interchangeable with other tokens 1:1. For example 1 ETH is exactly the same as another ETH. This isn't the case with NFTs.
- Each token has an owner and this information is easily verifiable.
- They live on Ethereum and can be bought and sold on any Ethereum-based NFT market.
- You can easily prove you own it.
- Proving you own an NFT is very similar to proving you have ETH in your account.
- For example, let's say you purchase an NFT, and the ownership of the unique token is transferred to your wallet via your public address.
- The token proves that your copy of the digital file is the original.
- Your private key is proof-of-ownership of the original.
- The content creator's public key serves as a certificate of authenticity for that particular digital artefact.
- The creators public key is essentially a permanent part of the token's history. The creator's public key can demonstrate that the token you hold was created by a particular individual, thus contributing to its market value (vs a counterfeit).
- Another way to think about proving you own the NFT is by signing messages to prove you own the private key behind the address.
- As mentioned above, your private key is proof-of-ownership of the original. This tells us that the private keys behind that address control the NFT.
- A signed message can be used as proof that you own your private keys without revealing them to anybody and thus proving you own the NFT as well!
- No one can manipulate it in any way.
- You can sell it, and in some cases, this will earn the original creator resale royalties.
- Or, you can hold it forever, resting comfortably knowing your asset is secured by your wallet on Ethereum.
And if you create an NFT:
- You can easily prove you're the creator.
- You determine the scarcity.
- You can earn royalties every time it's sold.
- You can sell it on any NFT market or peer-to-peer. You're not locked into any platform, and you don't need anyone to intermediate.