NFTs 101: How They Work and Which Future Will They Unlock?
Tozex is a tokenization financing platform that combines two essential functions — issuing tokens and trading on the marketplace. As NFTs are nowadays an essential tool in the blockchain ecosystem, it was natural that they be supported on the platform. But do you really know NFTs and their hidden power?
Fungible and Non-fungible, the idea behind NFT ?
The acronym NFT being omnipresent in our life, we won’t dare ask you if you already saw it, but do you know what is really behind these 3 small letters ?
NFT stands for non-fungible token and in case you are already asking yourself “what is a token”, just imagine it as a way to prove a record in a distributed ledger such as a blockchain. Its features allow the token to serve even as money.
Bitcoin (BTC), the most famous fungible token is often represented as digital gold or the currency of the internet. Bitcoin is fungible because 1 BTC is equal to 1 BTC, just like a $10 bill has the same value of every $10 bill no matter how old it is or who owns it in the past.
On the opposite side, NFT are non-fungible tokens because they can not be traded at the same value. If you take a picture of La Joconde and print it, even if it looks exactly the same as the painting, the works behind it are not valued at the same price.
Because of this unique property, NFTs open the door to bring a numerical certificate of any type of assets (physical or digital) to prove the ownership to own it.
NFTs have been traded since 2014, although in the last two years the whole sector is booming as a method to buy and sell digital artwork.
The NFT market is booming harder and harder!
The NFT-market have been expanding and attracting large funds in 2020–2021. About $174 million has been spent on NFTs since November 2017, the trading volume for the year increased by almost 400 times. According to DappRadar, which tracks NFT sales across the top ten blockchains, in 2021 the sales volume was $24.9 billion. In 2020, this figure was only $94.9 million. Moreover, the growth was exponential: in the first half of the year, NFT sold for more than $4 billion, in the second — for more than $20 billion.
The forecasts say that the volume of sales by 2030 will be 240 billion dollars. About 88% of NFT sales, totaling $12.5 billion, come from the largest marketplace, OpenSea. Since the inception of the market in 2017, all-time sales on OpenSea have exceeded $20 billion with 1.2 million traders. Dune Analytics provides charts illustrating sales dynamics on OpenSea as shown below:
This huge boom can be explained by the many celebrities which have started to mint and sell NFTs and introduce them to the whole world. Would you like to tag along?
Be on an equal footing with celebs
Many celebs are indeed already issuing NFTs and making money from it, starting from former first lady Melania Trump to Elon Musk and Twitter co-founder Jack Dorsey.
Jack Dorsey sold his first tweet as an NFT for more than $2.9 million. Melania’s first endeavor was an NFT of a painting of her eyes, titled “Melania’s Vision”. The second attempt was the “POTUS NFT Collection”, which consists of 10 pieces of digital artwork, with 500 to 1,750 editions available for each item; all together are 10,000 NFTs, priced at $50 each.
Elon Musk tried to sell a techno song about NFT as NFT. And his wife Grimes sold over $6 million worth of digital art through NFTs.
Perhaps the most enthusiastic supporter of the NFT is Snoop Dogg, the legendary Los Angeles rapper. For more than two decades he has reigned as an entertainer and globally recognized innovator. He has released 19 studio albums, over 40-million albums sold worldwide, he was No1 on Billboard charts internationally several times and received 20 GRAMMY nominations.
Last fall, he admitted that he also has been collecting NFTs under the alias Cozomo de’ Medici. By the way, Cosimo di Giovanni de’ Medici was an Italian banker and politician of the 15th century who established the Medici family as rulers of Florence in times of the Italian Renaissance. Snoop Dogg (Calvin Broadus Jr) strives to be the founder and leader of the NFT community of the rich and famous. In August 2021 Cozomo de’ Medici popped onto Twitter, tweeting about NFT technology and his big purchases of NFTs. He shortly gained more than 38.5K followers and it appears that the wallet associated with Cozomo de’ Medici held NFTs estimated at $17 million, including 9 CryptoPunks which are supposed to be the most desirable NFTs. Earlier in March 2021 Snoop Dogg released his own collection of NFTs including a track called NFT. And later in collaboration with the artist known as Nyan Cat he released a Nyan Dogg NFT for $35,500.
Later in November, the hip-hop icon minted a rare NFT that was sold for nearly $750,000. Recently he bought the Death Row Records label, which launched his career, and announced turning Death Row Records into a non-fungible token label or a “metaverse label”. And it is obvious that he has released a set of songs on the NFT marketplace OpenSea. “Dogg on it: Death Row Mixtape Vol. 1” issued with the description “Own it. Remix it. Master it” and includes songs called “My Ape”, “Wake Up N Workout” and others with crypto phraseology. The songs exist as NFTs: one NFT for the instrumental, one for the a cappella, and one for the full track.
From CryptoKitties to Sandbox, a brief history of NFTs
NFTs were first brought to public attention by the decentralized game CryptoKitties, launched in 2017. The game had explosive popularity and even overloaded the Ethereum network. The point of the game is to raise unique breeds of kittens, and the ownership of the kitties is fixed with the NFTs. Every CryptoKitty is unique, and there are no two CryptoKitties that are the same. It is impossible and unnecessary to break CryptoKitty into smaller pieces.
The ability to sell the rights of ownership using NFTs was quickly appreciated by artists, composers, and other creative people, as well as auction houses. One of the oldest auction houses, Sotheby’s, raised $100 million from the sale of NFTs in 2021. Artist Beeple sold for $69 million at Christie’s, his NFT tied to his painting “Everydays: The First 5000 Days”. This is a digitized collage of 5,000 paintings created by the artist in 5,000 days.
But even without the auctioneers, NFTs pegged to the masterpieces of artists and digital artists are also selling successfully. A collection of 10K CryptoPunks avatars created by Larva Labs has been sold since 2017, with sales exceeding $650 million.
The Bored Apes collection from the BAYC (Bored Ape Yacht Club) community of about 1000 different images of monkeys is also in demand. As a hot commodity CryptoPunks were bought by a number of famous people. A-class celebs and influencers are also putting CryptoPunks as a profile picture on their socials. For sure, Snoop Dogg who is also known as the “Ethereum whale Cozomo de Medici”, bought 10 CryptoPunks.
DJ Marshmello (Christopher Comstock), rapper and entrepreneur Jay Z (Shawn Carter), Jason Derulo (Jason Joel Desrouleaux), an American singer, dancer and famous Tik Tok star, American football player Odell Beckham Jr (ABJ), commonly known as ABJ and even 23 times Grand Slam winner Serena Williams — they all have invested in CryptoPunks and proudly put them on display across all their social media.
With much noise and commotion, The Bored Apes sold out. Big people were queuing to buy them. Justin Bieber, Jimmy Fallon, Post Malone, Neymar Jr, Kevin Hart, Paris Hilton, Von Miller, Lil Baby, duo The Chainsmokers, Stephen Curry from The Golden State Warriors (NBA), venture capitalist Adam Draper, esteemed billionaire Mark Cuban, a retired NBA star Shaquille O’Neal, super-star Eminem — each of them have paid about $200,000 or more for one or two NFTs pegged to the apes’ portraits. And Snoop Dogg owns a full set of BAYC.
Great opportunities are opening up for the use of NFTs in the metaverse.
Decentraland sells 90,601 pieces of virtual land using NFTs; users can buy the land to create their content and then sell it or show it to the rest of the world.
In the metaverse of The Sandbox, which develops on the basis of the gaming platform, it is possible to move from one game to another and transfer game artifacts or trade them using NFTs. More than 16,000 people have bought virtual plots of land in Sandbox and the best world brands too. Among them: Carrefour — a global leader in food retail; Groupe Casino — a pioneer of innovation since1898; AXAFrance — an insurance giant; Gucci and many-many others.
There are a lot of cases when real estate objects also are sold with the NFTs. And all this is just the beginning of global tokenization.
These NFT standards you use without knowing them
If you have already launched a project in the crypto space, you are already familiar with the fungibility standard of the Ethereum blockchain, but are you with the non-fungible one?
Like we said earlier, unlike fungible tokens, which are absolutely the same, can replace each other and can be divided into parts, NFTs have the properties of uniqueness and indivisibility, because they protect property rights that are not shared, but transferred or sold in whole.
The first NFT standard was ERC-721. It is pretty similar to ERC-20 in functionality so that users can store NFTs in the same wallet as ERC-20 tokens, and for less concern for developers.
To compare the two standards, ERC-721 additionally describes the ownership of a particular token by its ID, and the conditions for transferring the ownership. According to the ERC-20 standard, property rights are also registered in a smart contract, but only for any token. After all, these tokens are interchangeable.
At last ERC-998 was launched as an extension to the ERC-721 standard that adds the ability for non-fungible tokens to own other non-fungible tokens and ERC-20 tokens. For example, an in-game character can now be composed of all underlying NFTs like sword and shield, and so on. In case if a player sells the character, it takes just one transaction to pass it to the new owner with all underlying assets.
As the NFT market continues to boom, the Ethereum community is still worried that ERC-721 NFTs could cause an overload of the Ethereum network, as each NFT requires a separate transaction. To counter that, several EIP (Ethereum Improvement Proposal) were evaluated such as the EIP-2309, a Consecutive Transfer Extension, which enables minting any number of tokens in a single transaction. After this update, the cost of transactions (GAS) to mint a batch of NFTs decreased significantly.
New platforms like Tozex support this updated ERC-721 standard which means that users can enjoy minting and trading NFTs on the best terms.
Well, some more words about Gucci. It was the first luxury fashion label to launch an NFT in May 2021 when it auctioned on Christie’s a short movie inspired by ‘Gucci Aria’. The Italian luxury fashion brand is expanding its presence in the digital world step by step. After launching the Gucci Garden Experience on the Roblox platform for gamers Gucci sold there a digital version of its Dionysus bag for $4100, $700 more expensive than in real world. Last month Gucci and Superplastic, the world’s premier creator of limited-edition designer art toys, started a collaboration to create SUPERGUCCI NFTs to be sold in metaverses. And now it is entering The Sandbox metaverse by buying a virtual plot of land… The circle is complete.
Want to plunge into digital worlds too? You can follow the A-class celebs and world brands by simply minting your own NFTs on Tozex!