September 8, 2021
Non-fungible Tokens (NFT’s)
What are non-fungible-tokens (NFT’s)?
Non-fungible Tokens (NFT’s) are one-of-kind digital items. The details of ownership are governed by the blockchain. When something is non-fungible it means it cannot be replaced by another item. When something is fungible (such as traditional currency, or an item of furniture) it means it can be replaced by a similar item.
Examples of NFT’s include collectibles, digital and crypto art, and skins and purchases inside of video games. NFT’s don’t have to be limited to entertainment or collectibles. They can also be used to prove ownership of things such as domain names or health records.
How do non-fungible-tokens (NFT’s) work?
NFT’s are sold on decentralized networks that utilize blockchain technology. They are most commonly sold for ether (ETH) on the Etherum network. The Ethereum network is unique because it uses a series of standards (ERC-20, ERC-721) that allow for the creation of smart contracts. These smart contracts help to clearly define ownership, as well as establish the rules of trading or reselling an NFT. NFT’s can be sold in any Ethereum marketplace and some companies also have built their own networks to govern the buy, sell and trade of NFT’s.
NFT’s work similarly to digital currency, utilizing cryptography to store transactions on the blockchain. These transactions can be accessed with both a public and private key. Once you purchase an NFT, you’re able to transfer the token into your digital/crypto wallet.
How do you create a non-fungible-token (NFT’s)?
In essence, anything that is unique can be turned into an NFT. However, the most common use cases are collectibles, digital art, and games. The first step is to set up a crypto wallet on a trusted crypto exchange, such as Rubix. Once you’ve created your wallet you need to add ether (ETH) to it, as this is the most common way that NFT transactions take place at the moment. The next step is to connect your wallet to an NFT marketplace specializing in the type of unique digital item you’re looking to sell. It’s important to remember that the value of an NFT is often placed in the hands of the purchaser, so make sure to create unique items that others might find value in.
How do you buy & sell a non-fungible-token (NFT’s)?
You’ll need a crypto wallet with ETH for both the buying and selling of an NFT. As a seller, you’ll need to also create a standard smart contract (ERC-20 or ERC-721) that manages ownership and explains whether or not a particular NFT can be bought, sold, or traded by the owner. You’ll also need to deploy the contract, using a tool such as the web3 CLI tool. Once these things are in place, you can choose an NFT marketplace to sell your work. This process is called minting and involves adding your NFT to the blockchain.
Before you mint, you’ll need to decide if your NFT will be sold auction-style or if there is a set price. You’ll also need to be mindful of gas fees, which are additional fees that are incurred anytime something is bought or sold on the blockchain. Either you or the buyer is responsible for these fees and the cost fluctuates based on the amount of traffic on the platform. After you’ve sold an item, you can also get future royalties from additional trades on the secondary market.
As a buyer, you can choose from NFT’s that are hosted on a variety of marketplaces, including Open Sea, Foundation, Rarible, Foundation, Zora, and Nifty Gateway. Once your wallet is attached to the marketplace you can browse a wide variety of NFT’s. Some will be offered at a fixed price and others will be sold via auction. Once the transaction is agreed upon, the seller will transfer the NFT to your wallet.
Non-fungible Tokens FAQ’s
1. Can non-fungible tokens be copied?
Anyone can make a digital copy of an NFT but it’s not possible to copy ownership as this is registered in a public ledger on a blockchain. However, because it’s hard to prove the value of items that can be easily copied, many NFT’s include additional content or other items that can only be unlocked by the owner. The problem of copying has always been a problem in fine art and collectibles, and this is also prevalent with digital assets.
2. Who makes non-fungible tokens?
Non-fungible tokens are simply units of data that exist on the blockchain. They can be made by anyone as long as they’re uploaded to a blockchain network that supports the buy, sell, and trade of these items. While Ethereum is widely used, other blockchains such as Flow, Tezos, and Polkadot are emerging to support this new market.
3. What is non-fungible token artwork?
NFT artwork is a unique artwork that is usually sold as 1 of 1. Some artists are also choosing to do limited editions which include a series of connected works. Other artists are including a physical artwork that coincides with a digital NFT art piece. NFT artwork can be Crypto or Digital Art, or a way to prove ownership of a physical piece.
4. What are examples of non-fungible tokens?
Non-fungible tokens can be connected to real-world assets or can be skin in a video game. Some common examples of NFT’s are digital art, collectibles, games, music, trading cards, domain names, and contracts.
5. What are non-fungible tokens for music and movies?
The concept of NFT’s in music and movies is the same. For an album or movie to be an NFT, it must be completely unique and ownership must be stored on the blockchain. While there is also a rise in tokenization, if an item isn’t a 1 of 1, in theory, it’s not an NFT.