What are NFTs?

Token Takeaways ✍

✨ NFTs are a type of cryptocurrency token that offer provable ownership of an asset or piece of content.

✨ Unlike regular tokens, NFTs are not interchangeable with one another because they are unique or “non-fungible.”

✨ NFTs first gained popularity in the digital art space, but they could disrupt many industries.

The token universe has evolved staggeringly over the past few years. Undoubtedly, one of the most significant developments has been the growth of the NFT ecosystem. Typically minted on smart contract networks like Ethereum, non-fungible tokens have unlocked boundless potential for the world by creating a way to tokenise any type of asset on the blockchain. NFTs exploded into the mainstream world in 2021 through the medium of digital art, offering an early glimpse of how the technology could transform the creator economy. However, NFTs have also sparked some controversy. As the developing crypto niche has become a key part of the token universe over the past few years, we curated a Collection of tokens dedicated to NFT Staples. Read about it and find out why NFTs are so powerful below.

NFTs explained 🧠

“NFT” stands for non-fungible token. An NFT is a type of cryptocurrency token that lives on a blockchain like Ethereum. But unlike major cryptocurrencies like BTC or SOL, NFTs are not interchangeable or “non-fungible.” You can always exchange 1 BTC for 1 BTC, whereas every NFT is unique. 

NFTs are typically found on smart contract blockchains and first gained attention on the Ethereum network. On Ethereum, they usually take the ERC-721 or ERC-1155 token standard, while most other exchangeable crypto tokens on the network are known as ERC-20 tokens. Ethereum NFTs are typically sold in the network’s native token, ETH, or for stablecoins. Similarly, Solana NFTs are typically sold in SOL. 

CryptoPunk #4156, part of the iconic CryptoPunks NFT collection on Ethereum (Source: Larva Labs)

As every NFT is unique, they can be used to tokenise many different types of assets. Today, NFTs are popularly used to tokenise digital art, music, video, writing, concert tickets, and certificates, but they could take the form of practically any type of content.

Creating a token for an asset can be useful because it offers a way to prove its ownership, scarcity, and authenticity. As blockchains like Ethereum have a public ledger recording every transaction, they provide a transparent way to verify content in a way that was never possible before.

NFTs use smart contracts, and they are often sold on marketplaces that include a royalty fee on secondary sales. This means that an artist can sell a piece of work and receive a portion of every subsequent sale forever, which could be a game-changer for many creators.

What are tokens? Token vs. NFT

Tokens, within the expansive crypto landscape, serve as cryptographic representations of assets or utilities on a blockchain. They primarily function as fungible entities, enabling fluid interchangeability akin to traditional currencies. A notable example lies in the MATIC token, a significant asset entrenched within the Ethereum ecosystem. This token's value, depicted by the MATIC price, dynamically responds to market shifts and ecosystem advancements, vividly illustrating the volatility and versatility inherent in blockchain-based assets.

On the other hand, NFTs constitute a specialised token variant, each boasting unparalleled and non-divisible attributes. Unlike tokens, which can be effortlessly substituted with identical counterparts, NFTs carry an intrinsic uniqueness that renders duplication impossible.

Moreover, while tokens commonly denote units of value, NFTs redefine ownership paradigms by meticulously verifying the authenticity and distinctiveness of digital or physical assets. This distinction underscores the transformative nature of NFTs in the blockchain landscape, fostering unparalleled ownership validation and asset uniqueness.

The power of NFTs ⚡

NFTs are a hugely disruptive technology, and while the space is still in its infancy, many use cases have already emerged. Digital artists have embraced NFTs as they’ve created a way for them to sell their work for the first time. Musicians have found that they can tokenise their work and sell it directly to their fans without relying on royalties from extractive streaming platforms. Celebrities have begun using NFTs to build loyal communities and engage with their fans at a closer level. Games have integrated NFTs to offer gamers true ownership of their in-game assets. Concert promoters have experimented with NFTs to eliminate ticket scalping, as tokenised tickets can be verified. Designer brands have also jumped onto the trend, releasing “wearable” digital fashion items and exploring ways to issue certificates of authenticity for real-world items.

Nike x RTFKT NFT wearable sneakers (Source: Nike)

NFTs could usher in a revolution in the creator economy by offering new opportunities for thousands of creators. In 2021, the technology showed early signs of how it could change the creative world as digital artists, celebrities, musicians, blockchain games, and community-led avatar projects began to explore the space.

However, it’s possible that NFTs could have many other use cases in the future. In offering a way to tokenise any kind of asset, NFTs have created a new asset class and economy with almost limitless potential. It’s easy to imagine a world in which any asset that has value, whether it’s a piece of art, house, song, or historical artefact, is tokenised to verify its owner and authenticity. Thanks to NFT technology, that world could be just around the corner.

Pushback against NFTs 👎

While NFTs offer massive promise in the token economy, they have received criticism. Much of the pushback to date has been against the speculative nature of the early NFT market. When NFTs went mainstream in 2021, the cryptocurrency ecosystem was in the midst of a rush of demand in the market, causing asset prices to soar in value. NFTs also experienced a price boom, with the most valuable assets selling for millions of dollars. Arguably the most high-profile NFT sale to date was the Christie’s auction for Beeple’s “Everydays: The First 5,000 Days” NFT in March 2021. The digital art piece sold for over $69 million, causing a storm in the art world and making news headlines worldwide. While the landmark sale brought attention to the space, the subsequent boom also led many sceptics to criticise the nature of the market. Critics have also argued that monetising assets such as digital art or in-game items serves no real purpose.

Beeple’s Everydays: The First 5,000 Days, sold for $69 million in March 2021 (Source: Christie’s)

Aside from the wild price surges some NFTs have experienced, many critics have also raised concerns over the technology’s environmental impact. This is mainly because the majority of NFTs are minted on Ethereum, which previously used an energy-intensive Proof-of-Work consensus algorithm (Ethereum upgraded to Proof-of-Stake in September 2022, making the network 99% more energy efficient). When NFTs went mainstream in 2021, mainstream journalists and other critics rushed to sound the alarm on the technology’s environmental impact, often relying on misleading data to argue that it is harmful. 

The current pushback against NFTs draws some comparisons to early attitudes towards the Internet (Source: Daily Mail, 5th December 2000)

The current confusion surrounding NFTs highlights that the space is still in its infancy. Just as the Internet did when it gained popularity in the late 90s, NFTs have won criticism from those who do not yet understand the potential of the technology. However, like the Internet did, NFT technology should become more widely accepted once the token economy hits mass adoption. 

The NFT Staples Collection 💫

As NFTs have become such a vital part of the token ecosystem, it made sense for us to dedicate a Collection to the technology. NFT staples features a list of some of the most essential NFT-related projects in the space today. 

ApeCoin is the official currency of Otherside, the Metaverse world created by Bored Ape Yacht Club powerhouse Yuga Labs. In 2021, Bored Ape Yacht Club became the world’s biggest NFT brand after crypto natives, celebrities and new NFT adopters rallied around its collection of 10,000 avatar-based apes. The team’s next project is Otherside, and ApeCoin is integral to the game. It also features in our NFT Staples Collection. 

A preview of Bored Ape Yacht Club’s Otherside Metaverse (Source: Otherside/Yuga Labs)

Chromia offers an accessible way for developers to build decentralised apps. It hosts many of the leading gaming titles in the NFT space and also has its own NFT platform. It’s also included in our NFT Staples Collection. 

Enjin is a pioneer in the NFT space, known for creating the ERC-1155 Ethereum token standard. ERC-1155 allows for managing multiple fungible and non-fungible token types through one interface, which offers increased utility in the token ecosystem. Enjin also has its own wallet and is working to bring NFTs to mass adoption. It also features in our Collection.

The NFT Staples Collection also features the token ecosystem’s top network dedicated to licensed NFTs: Ethernity. The platform already hosts NFTs from the likes of Lionel Messi, Pelé, Marilyn Monroe, and Bruce Lee and hopes to grow as NFT technology increasingly pervades the mainstream. Additionally, it includes Flow, an energy-efficient NFT network developed by CryptoKitties and NBA Top Shot creator Dapper Labs. 

NFT marketplaces are a key part of the ecosystem, and NFT Staples includes one of the space’s leading trading venues. While OpenSea is the market leader, LooksRare is a leading decentralised alternative that features its own native token. This means its users get paid in tokens relative to the amount they use the marketplace, which rings true to the ethos of Web3. 

NFT Staples also includes SuperFarm, a cross-chain platform that lets users launch NFT “farms,” drop and earn NFTs, and much more. 

Finally, the Collection features STEPN, Web3’s first “move-to-earn” application. STEPN rewards users with tokens when they exercise with a special pair of NFT sneakers and soared in popularity when it launched. 

A view of Decentraland’s in-game play (Source: Decentraland)

NFT Staples also features four of the biggest Metaverse projects in the token ecosystem today. In late 2021, Metaverse hype exploded after Facebook rebranded to Meta in a bid to tap into the space. Though not yet fully formed, the Metaverse refers to a next-generation Internet in which users can play, work, and connect with others inside immersive virtual realms. Many believe that the Metaverse could experience huge growth over the coming years. Blockchain technology could underpin the Metaverse because it offers a way for projects to issue tokens and host NFTs, and some crypto-native projects have already established a footing in the space. Decentraland, Illuvium, Star Atlas, and The Sandbox are crypto’s four biggest Metaverse projects today​​—and they all feature in our NFT-based Collection. 

Discover more of the token universe 👀

The NFT space is one of the most vibrant and exciting areas of the token ecosystem today, but it’s also proved divisive. While the space is still in its infancy, the explosion of innovation seen over the past few years proves that it should be around for many years to come. To learn more about it, explore our NFT Staples Collection and discover some of the key tokens within the ecosystem today. 

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