What is a NFT (Non-Fungible Token)?

29 Oct 2023 by Harry Newman 5 min read

Have you heard of NFTs or Non-Fungible Tokens? They have caused a craze in the last few years, transforming how we view and interact with digital assets. Most of the popular NFTs live on the Ethereum blockchain, other blockchains have NFTs also but they are not as popular as Ethereum.

The most popular types of NFTs are art and music, however, they can have many other use cases. An example is within video games or fashion as they hold a uniqueness and are non-interchangeable, changing the way we navigate the digital world.

What is an NFT?

NFTs are tradable digital assets that contain information, such as art that a user owns, using blockchain technology to establish a proof of ownership, created with the help of smart contracts.

Proof of Ownership allows verification of who owns the NFT to eliminate fakes.

NFTs operate on blockchains such as Ethereum, Solana and Polygon to name a few, the current NFT Market Cap is $2,268,169,964.39. Other live data for NFTs can be seen here.

The potential applications of NFTs within the real world are vast.

One such example is legal documents or signatures as they provide proof of ownership, if anyone searches your wallet address they will see what assets you have tied to that address, such as owning an NFT that someone wants to verify you own, this is viewable on the blockchain.

How do you make an NFT?

Making an NFT requires a few steps, most marketplaces will give guides on how to go about creating and uploading an NFT, it may vary depending on the marketplace but below is a general overview of how to make an NFT.

Pick what item you want to turn into an NFT, this could be a tweet or a picture, some music or a video game collectible, or something you own the intellectual rights to. You can create a set of NFTS ranging from one to a few hundred or thousand.
Choose the blockchain you want to have this NFT on, the most popular blockchain for NFTs is Ethereum.
If you don't already have a digital wallet such as MetaMask set up, create one and add some of the cryptocurrency for the blockchain you will be using, Ethereum is the most popular but the gas fees are high for that blockchain
Select your NFT marketplace, for Ethereum the most popular marketplace is OpenSea.
The marketplace should guide you on how to upload your file to the platform and how to mint it which is writing the item onto the blockchain, establishing an immutable record of authenticity and ownership.
You can choose options such as creator royalties, where every time that NFT is sold the creator will receive a percentage, this varies but is usually around 3-5%. Other options include traits for the NFT. A guide to different NFT traits can be found here.
Deploying the smart contract for the NFT requires a gas fee from the network. The cost of Minting an NFT for other users is based on the price set by the creator on the marketplace. This does change when all items have been minted, the price changes based on supply and demand. There will always be projects that are more popular compared to other projects, those NFTs would be more expensive to purchase based on their popularity.

Examples of popular NFTs

There are a lot of different NFT projects out there, an extensive list which outlines the most popular ones can be found here.

NFTs first made an entrance onto the Ethereum blockchain in 2017, whilst this isn't the only blockchain to have NFTs, it is the most popular.

The first project launched on Ethereum in 2017 was by Dapper Labs called CryptoKitties, launching on the ERC-721 standard which is a standard for NFTs on Ethereum, they were very popular and some sold for as much as $170k or 600 ETH at the time, you can find it here.

NFTs have since exploded into the mainstream crypto ecosystem and have become extremely popular, Beeple an artist sold an NFT, in a first-of-its-kind auction through Christie's auction house for $69 million, which they say positions him amongst the top three most valuable living artists.

The NFT project that has received mainstream appeal and probably the most well-known NFT collection is Bored Ape Yacht Club which many celebrities own like Justin Bieber and Eminem, an extensive list of celebrities that own bored apes can be found here. They are a collection of 10,000 unique Bored Ape NFTs that live on the Ethereum blockchain.

Buying a Bored Ape isn't just for the art, you gain membership access to a club that grants additional benefits with a community

Final Thoughts

NFTs have transformed the way we view ownership, art, collectables and the value of digital goods. They no doubt are here to stay and the type of NFTs are constantly evolving.

By providing proof of ownership, NFTs allow two users to verify that one person owns that asset.

The popularity of NFTs has reduced recently with a lot of projects losing significant value, but this doesn't necessarily mean that they are all going to zero, more of a reflection of the market as a whole.

NFTs impact in the future is yet to be seen but it is an exciting time ahead.

Want More Cutting-Edge Crypto News?