Take a moment and think about how the world
around you has changed. Retail has become Amazon, libraries have become
Wikipedia, and instead of visiting museums, you may soon be appreciating
In our article, we will show you why NFTs are
more than just art and whether you will soon receive your university diploma as
NFTs (Non-Fungible Tokens) are digital proof of
ownership of intangible assets. These assets are typically unique, non-fungible
digital assets (tokens). Blockchain technology allows ownership of these tokens
to be clearly proven and transferred.
Examples of this are digital artwork, computer
game objects, digital tickets, or domain names. But, it can also be digital
proof of ownership of physical objects like paintings or other individual
The opposite of NFTs is fungible assets (fungible
tokens). This interchangeability means that such a token can be replaced with
an identical token at any time. Cryptocurrencies are fungible digital
1 Bitcoin is always 1 Bitcoin, regardless of when
it was created and what block it is currently in. A bitcoin can always be
exchanged for another bitcoin without limitation
In the real world, $10 is always $10, whether
it's in a bank account, a PayPal account, or a crumpled bill in your wallet.
Interchangeability is there per se. You can also exchange a $10 note for two $5
notes or five $2 coins. But, interchangeability can be relative and subjective.
A coin can one day become a rare and highly valuable collector's item due to
its special characteristics.
A business class flight ticket is not
interchangeable with an economy class ticket. And in economy class, a window
seat is not the same as an aisle seat.
This small difference creates new challenges for
NFTs on the blockchain. Of course, there can be several identical NFTs and yet
they are rare and relatively unique if only 10 of them exist worldwide.
technology and NFTs
Before blockchain, many non-fungible digital
objects already existed. Be it computer games, digital tickets, domain names,
or individual elements of access to social networks, the computer world was
practically full of NFTs.
But, ownership could not be clearly proved, nor
was there any possibility of the formal transfer of ownership of the object to
someone else. There was no consistency and thus no standardized way to trade
these digital things with sufficient liquidity.
And this is exactly where blockchain technology comes
in. Entries and transactions on the blockchain are immutable, making ownership
of an NFT secure and verifiable. This means that the original and complete
ownership history is stored forever on the blockchain.
NFTs on a blockchain thus enable unique ownership
of copyable files. Fast and cheap shipping allows for a safe exchange and
NFTs so valuable?
Why is the demand for NFTs increasing? It's not
just digital deficits or uniqueness. Rather, it is personal benefit and passion
stemming from the origins of NFTs.
The benefits are most obvious. When an NFT ticket
grants access to a very important event, there is a clear reason to buy that
NFT. It applies to objects in a computer game that gives special powers to the
But why would you pay a lot of money to buy an
NFT artwork? Many are asking this question. And some doubt whether art can even
be digital. But still, the question arises as to why people buy expensive
paintings or expensive collector's stamps.
It is an emotion that triggers the origin of
collector's items. The story behind it creates real value.
An autograph card is also a piece of paper with
some ink on it. But if the signature comes from a very distinguished person and
the reason for the signature was very special, the value increases accordingly.
In the era of digitization, even works of art and
signatures of celebrities can now be dematerialized and displayed on the
the Ethereum Blockchain
Ethereum is currently the largest smart contract
blockchain. Even with NFTs, Ethereum has been clearly ahead since 2017. Be it
Crypto Punks or CryptoKitties, the first Jack Dorsey tweets, or Beeple
collages, all of them, as well as most marketplaces, are part of the vast NFT
world on Ethereum.
All Ethereum tokens, whether cryptocurrency or
NFT, can be assigned to the Clear Standard. Standards are an important building
block for how tokens work. Essential features such as ownership, access, and portability
can only be ensured with appropriate standards.
Standards are also essential for software
development. In this way, basic functionality and behavior are clearly evident
to all involved.
The three most common Ethereum token values are
ERC20, ERC721, and ERC1155. ERC20 for fungible tokens (exchangeable tokens like
cryptocurrencies). and ERC721 and ERC1155 for non-fungible tokens (non-fungible
tokens = NFTs).
NFT project Azuki has established a modification
of the ERC721 standard with ERC721. It is often used by new NFT projects. The
advantage here is significantly lower network fees.
The ERC20 standard defines the number of
addresses. The exact number of cryptocurrencies held for each Ethereum address
is always visible.
With the birth of CryptoKitties, the important
NFT standard ERC721 was created, on which most NFTs are still based today.
ERC1155 is another NFT standard developed by Enjin.
ERC1155 is a hybrid of exchangeable and
non-exchangeable tokens. ERC721 maps owners to unique IDs, while ERC1155 has
nested mappings from IDs to sets of owners.
of Ethereum for NFTs
Although Ethereum is the largest NFT platform, it
is not always the first choice for every type of NFT. Ethereum is still
struggling with the challenge of increasing capacity limits. Thus, creating and
trading NFTs sometimes carries extremely high fees.
A $100 fee might be trivial for a highly valuable
NFT like Beeple artwork. But for many smaller artists who want to sell their
work for $100 to $200, such high amounts are a clear deterrent.
Against this backdrop, several alternative
blockchains have cleverly come forward to bridge this gap in the market.
Depending on the NFT use case, there is also a suitable NFT blockchain that
promises faster and cheaper trading of NFT. In the next section, we look at
alternative NFT blockchains.
Since 2020, the value of many NFTs has increased
drastically. A major reason is that the cryptocurrency Ether (ETH), on which
most NFTs are traded, has risen in price.
Also if for deep market knowledge, you have luck
or a sixth sense that NFTs may be in high demand in the future, you may be able
to make a fortune with NFTs.
But, if such speculation is not for you, you can
invest in selected NFT coins instead. This is roughly equivalent to investing
in ETH. Because these NFT coins are required for fees on the respective
blockchains where NFTs are created and traded.
The more NFTs are in demand, the more fees are
incurred, which increases the demand for these coins and automatically affects
How do you
create an NFT?
In principle, it is not difficult to create an
NFT and offer it for sale. But, you need some "tools" and some
To put it very simply using the example of a
digital work of art, you need a file that can be marked by copyright, a wallet,
and enough cryptocurrency, such as ETH.
With the wallet, you can easily connect to an NFT
marketplace, for example with the Metamask wallet on the Opensea platform. As
soon as you log in there with the wallet, you can upload digital files in
prescribed file formats. NFTs are created and added as entries to the
blockchain. This so-called minting is not free but requires fees.
We have tested the best NFT wallets for you.
After the NFT is generated, the digital artwork
will be visible in the marketplace's gallery and available for sale. Then the
sale proceeds in cryptocurrency are credited to the respective wallet address.
Many experts agree on two points. First, NFTs
have been hotly debated since 2020 and could be a crypto bull market bubble.
And second: NFTs have the potential to change the sports, art, and music
industries in the long run.
In general, the tokenization of all physical
assets and items through NFTs could turn many industries upside down.
Some even go so far as to predict a future where
almost all activity and economic activity will shift to the Internet. We are
talking here about the so-called metaverse, where NFTs can play a central role.
It has already started in gaming and the virtual world. GameFi's expansion is
already in full swing.
For example, in the financial economy of the
future, NFTs could serve as collateral for lending. This is already possible in
DeFi, as NFTfi and the ETNA network show.
Of course, there are no guarantees for such
future situations. Many questions remain unanswered. But NFTs probably won't
disappear entirely. In the 1990s, few people believed that the Internet would
become what it is today.