What is an NFT?
Updated: Mar 1, 2022
By now you have likely heard the term NFT, but what exactly is it?
Once obscure and understood by only a fraction of crypto enthusiasts, NFTs have slowly made their way into the public conversation with mainstream media sharing stories about the digital artist known as Beeple selling his NFT artwork for $69 million at Christie's; Visa purchasing a CryptoPunk for $150,000 as an artifact and to show their bullishness on cryptocurrency, and sports stars like Stephen Curry, Von Miller, Dez Bryant, and LaMelo Ball being part of the Bored Ape Yacht Club.
If you haven't seen NFTs in the news, you've likely encountered discussion on social media from friends, family, or work colleagues mentioning an NFT they purchased in their post, changing their profile picture to an NFT avatar, or sharing their thoughts on the future of NFTs.
If you still don't know what an NFT is, no need to worry. We will be sharing a comprehensive look at the logic, technology, and business opportunities of NFTs.
What does NFT mean? Does it stand for something?
To best understand an NFT, let's break it down into all of its parts and describe what each element means in and out of the NFT use case.
Let's break that down further starting with the meaning of the word fungible, which is something that is not unique but rather replaceable in nature due to its likeness or comparableness to something else for example a dollar or even a Bitcoin. The value of a dollar is the same as the value of any other dollar. If you had a dollar and exchanged your dollar with someone else's, you'd still have a dollar. Same with Bitcoin, if you swapped your Bitcoin with someone else's Bitcoin the same value would be assessed. You are no better or worse off for the exchange.
Non-Fungible If fungible items can easily be replaced or exchanged and represent the same value, non-fungible items are the opposite, as in they are unique or one-of-a-kind. Items that could be categorized as non-fungible include art, music, trading cards, memorabilia, a house, or land. Each item is unique and likely has varying values. Even if two items had the same value, they would still be non-fungible as they are different or if part of a series would have identifying markers (ie. 1 of 10).
A token in regards to cryptocurrency serves as an asset or unit of measure with a monetized value often residing on a blockchain. Tokens can be used to pay for use of the underlying platform or to exchange value on the network.
While ETH is a coin backed by the Ethereum blockchain, the most common cryptocurrency token is Ethereum's ERC-20 token which is a standard for building and minting Smart Contracts. Ethereum's token standard allows for anyone to create their own ERC-20 tokens.
A Non-Fungible Tokens is similar to a crypto token, though they store more information and uniquely identify items or assets. Information in the form of metadata is often stored in a locally hosted environment, with the ownership of that information being directly tied to the NFT on the blockchain. NFTs use the ERC-721 token standard which allows for different tokens tied to the same Smart Contract to have different values based on age or rarity. ERC-1155 allows items to be held in a single contract, differentiated by one another with minimal data.
NFTs primarily are based on Ethereums ERC-721 and ERC-1155 standards. There are other blockchains outside of Ethereum that have NFTs such as Solana, Tezos, Polkadot, and others.
Personas of NFTs: Artist, Buyer, and Marketplace
When we think about NFTs, we need to think about who is involved with the NFT process; the Artist, Buyer, Platform, and Collector.
The Artist is the creator of the art. Artists create digital works of art such as painting, drawing, videos, or music, and then add metadata via descriptions, features, and rarity which will be part of the NFT. The flexibility for artists is tremendous as they can create variations of their art, create collections, or one-of-ones.
The Buyer is the consumer of the artwork, just as they would be in the physical world. Buyers can purchase art that speaks to them from the artists they support. A buyer can hold on to the art piece and be a collector, just as they might collect any other item in the physical or digital world. Buyers can also become sellers or flippers of the artwork, purchasing the art for the intention of selling at a higher price in the future.
Marketplaces are currently where people go to purchase NFTs from Artist or from Buyers who have turned into Sellers. The most well know NFT marketplaces are OpenSea, Super Rare, Rarible, and Nifty Gateway. Art is minted (created) to the blockchain from these marketplaces to be listed, sold, and collected.
How to purchase an NFT
In order for someone to purchase an NFT, they typically need to go through a cryptocurrency workflow involving purchasing Etherereum and connecting a cryptocurrency wallet, most often a Metamask wallet. The user transfers their Ethereum to the Metamask wallet and these are the funds used to purchase the NFT on the Marketplace.
There are some Marketplaces that offer the ability to pay with a credit card, though typically this involves purchasing Ethereum in the marketplace at a higher than market rate and then using it for the instant purchase.
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Brands: The newest players in NFTs
While NFTs have primarily been taken up by Artists and Content Creators, there have been several brands that have been experimenting with NFTs. Brands like Coca-Cola, Pringles, Charmin, DKNY, Dolce&Gabanna, Taco Bell, Pizza Hut, Visa, and many others.
Brands getting into NFTs today are guided into a workflow that is not native to their shopping environments and adds layers of complexity that neither they nor their customers are accustomed to.
Niftmint integrates with Brands to simply mint, sell, and custody NFTs on their websites or apps without needing to manage cryptocurrency or a crypto wallet. The thought of selling NFTs can be overwhelming for brands due to cryptocurrency, minting, and custody, which is why Niftmint handles this all on behalf of the Brand and their customer, allowing the transactions to occur via credit card.
If you are a Brand or partner who would like to discuss your NFT strategy and begin selling NFTs, please visit Niftmint.com and fill out the Contact Us form.