While popular cryptocurrency projects have been all over the news in this sudden growth in the markets, there are many more profit opportunities for those that know where to look.
NFTs (or non-fungible tokens) are an example of the diversity that blockchain technology has made available to aspiring investors. Averaging a growth of 150% each month, they have become a hot topic in the crypto industry.
In this article, we answer the question – what does NFT stand for? We explain the concept and delve deeper into their unique properties and applications that are the reason behind their recent popularity boom.
We will also talk about some of the pioneering artists that embraced the medium and the best places where you can purchase NFTs. After reading this article, you will have acquired sufficient knowledge to help you decide whether you should be taking a closer look at NFTs as an investment opportunity.
- What are NFTs?
- NFT standards and examples
- NFT Properties
- What is NFT used for?
- NFTs as an investment and an art form
- Benefits of NFTs over traditional art
- Will NFTs replace traditional art?
- Best NFT Artists
- Where to buy NFTs
What are NFTs?
Non-fungible tokens, sometimes called “Niftys”, are a special type of cryptographic asset that represents a digital item that is inherently unique.
Cryptocurrencies such as Bitcoin are considered fungible by default. This means that any bitcoin has the same value as any other bitcoin and they can be exchanged for one another without any loss of value.
NFT, on the other hand, can’t be seamlessly exchanged between them. While they might seem similar on the surface, they are the manifestation of something very different and have different characteristics. It’s these characteristics that will define the NFT’s price, depending on what the people who use them find more or less valuable.
A good real-life example to explain how this concept works is to look at Pokemon cards. Each card displays a different form of art and is priced differently depending on a wide array of factors, like their grading, print date, the amount in circulation, etc.
Next, and to better understand how NFT works, you need to learn about smart contracts, and how these make it possible to create digital collectibles.
NFT standards and examples
In addition to understanding what NFT stands for, let’s explore in more detail some of the technical advancements of blockchain technology that allow them to exist.
You might have heard of the popular ERC-20 standard on the Ethereum blockchain that is used to create fungible and indistinguishable tokens. Hundreds of cryptocurrencies have already been created through this process. Among them are some of the most popular ones such as Chainlink, EOS, and Vechain, but there are many more to consider since they make up the majority of existing cryptocurrencies.
Similarly, two other standards have been released on this blockchain, allowing for the creation of NFTs.
ERC-721 – NFTs
ERC-721 allows us to use smart contracts to create distinguishable tokens with unique properties. A popular application of this ERC standard is the Cryptokitties app, a game where users could collect, breed, and sell digital cats, each one with its unique set of properties. The most expensive one was sold for an incredible price of 600ETH in early 2018.
Another notable example is Decentraland, where players can buy and sell virtual pieces of land with MANA tokens. And while the MANA token is a fungible, ERC-20 token, the virtual real estate is not and is created on an ERC-721 standard.
ERC1155 – a mix of NFTs and FTs
An evolution of the ERC-721 standard, ERC-1155 allows for the use of smart contracts that support both fungible and non-fungible tokens.
Created by Enjin, this standard is especially useful in gaming software. For example, in an online role-playing game, common in-game currency such as gold can be created as a fungible token, while rare items can be created as NFTs.
An example of this is the SandBox game, a virtual world where players can monetize their gaming experiences. Users can buy virtual land (ERC-721), build games that other users can play, and create rare items (ERC-1155) to sell them as NFTs.
With those technical details out of the way, let’s check some of NFT’s properties that contribute to their value.
NFT’s properties are defined within their metadata on the blockchain, thanks to the aforementioned ERC standards. This technology allows them to be:
- Unique – each NFT contains a set of information that makes it inherently unique compared to other assets of its type.
- Indivisible – unlike cryptocurrencies such as Bitcoin that can be easily split up into smaller denominations, users can’t easily buy parts of NFTs. That being said, the developer community is working on fractional NFTs which would allow joint ownership of a single token.
- Provably scarce – there’s usually a very limited number of NFTs of a certain edition.
And while these properties might distance them from traditional cryptocurrencies, they still conserve some of their benefits such as:
- Guaranteed ownership – cryptography guarantees that users holding the keys to their tokens are the only ones that can access them.
- Easily transferable – NFTs can be seamlessly sent back and forth using blockchain transactions.
- Resistant to fraud – like cryptocurrencies, NFTs are just pieces of data on the blockchain and cannot be duplicated or copied.
What is NFT used for?
Thanks to their unique characteristics, NFTs have found various applications, such as:
- digital collectibles
- gaming items
- virtual real estate
- and many others.
One of the most useful alternatives on how to use NFTs’ perceived value besides trading them, is to collateralize them in DeFi lending protocols. For instance, you could borrow stablecoins on a DeFi lending platform such as Aave by putting tokenized real estate as collateral. In this manner, NFTs would provide investors a means to render illiquid assets such as real estate into liquid ones, while simultaneously conserving their property.
That being said, NFTs gained the most popularity earlier this year, when they were proposed as a solution to the “digitization” of art.
NFTs as an investment and an art form
Just a few months ago, investment guru Anthony Pompliano declared that NFTs could become some of the most interesting investment opportunities in the near future.
The main reason behind this is the constant growth of the digital art industry over the past few years. And while it’s been trailing behind the traditional art market ($10 million vs $65 billion), a similar parallel can be drawn to the growth curve we are already experiencing when looking at traditional stores of value (gold) and digital stores of value (bitcoin).
Recently, analysis has shown that investors’ interest has shifted towards bitcoin, due to its superiority in terms of transportability and usability compared to gold.
Benefits of NFTs over traditional art
NFTs allow digital art to gain some serious benefits over traditional art as well, just like bitcoin has its advantages over gold. For example, tokenized digital art:
- Can be easily shared and transferred.
- Cannot be damaged.
- Can be instantly authenticated.
Will NFTs replace traditional art?
Just like the transition to a digital store of value took more than a decade, the transition to a digital art market will be a lengthy process, and most likely, inevitable. Artists are bound to increasingly adopt cryptoart as it enables them to start making a living immediately and chase their dream while being remunerated for it.
This means that now is a great time to hop on the bandwagon and become an early adopter. NFTs might just be the next big thing in the blockchain industry, especially for long term investors.
To help you get acquainted with the medium, we’ve researched some of the most promising names in the digital art industry.
Best NFT Artists
Below are some of the most influential and successful digital artists that use NFTs to mint and distribute their artworks over the internet.
Fewocious (real name Victoria), is a 17-year old high school senior and a self-taught digital artist that is making waves in the NFT industry. She believes that the traditional art industry is ripe for a change and that cryptoart is the much-needed disruptor.
Her animated artwork named “Bittersweet” which sold for 20ETH in October 2020 is now listed at over 100ETH, which rounds up to over $60.000 at the moment of writing.
This Canadian artist discovered Bitcoin and the cryptocurrency world in late 2016 and has since made it an integral part of his art. Always attracted to technology, he began experimenting with creating artistic QR code patterns as early as 2011 and integrating augmented reality into his artworks.
Below is a video of one of “Ethereum Girl with Mandolin” one of his recent works that sold for a hefty 70ETH in 2019.
Recently, a collaboration between Trevor Jones and comic artist Jose Delbo of Batman artwork was bought by mysterious collector “Maxstealth” for a record-breaking 302.5ETH.
Is an artistic studio formed in Milan in 2007 by two Italian artists – Sergio Scalet and Nadia Squarci. In addition to their physical paintings and sculptures, they decided to expand their work into the blockchain.
Today, they have become one of the most prolific NFT artists, with more than 100 artworks sold, many of them breaking the 20ETH mark.
This American artist began made his name with traditional oil paintings back in 2004. However, he elevated his artistic style by embracing technology and learning code.
He became a self-taught programmer and designed a proprietary software that allows him to create intricate designs with code. One of his most renowned works is the digital piece “Right Place & Right Time”. This one-of-a-kind programmable piece generates a new image each day and reflects the past 24 hours of BTC/USD price volatility.
Beeple (real name Mike Winkelman) is arguably the most famous NFT artist at the moment. With a background of creating music videos and concert visuals for superstars like Nikki Minaj and Eminem, his work is the most sought out on the marketplace.
Only recently, one of Beeple’s collections including 20 pieces of art sold for an astonishing $777.777 on Nifty Gateway.
AND THAT’S ALL SHE WROTE!!! The auction ends on a ridiculous last second bid of $777,777. This brings total PRIMARY MARKET sales from @beeple‘s collection to over $3,500,000+— Nifty Gateway (@niftygateway) December 13, 2020
CONGRATULATIONS TO THE LEGEND BEEPLE and thank you to the entire community!!! https://t.co/pp4fm0j6iJ
Where to buy NFTs
By now, you should know what does NFT stand for and your interest in acquiring some should already be growing.
In contrast to cryptocurrencies, NFTs aren’t bought and sold on traditional exchanges, but on specialized NFT marketplaces. Here are some of the most reliable places where you can buy or sell your artwork.
- OpenSea – called the “eBay of crypto assets”, this is the first, and largest peer-to-peer marketplace where you can buy and sell various types of NFTs. Users can purchase collectibles, virtual land, and artwork, all through a single platform.
- SuperRare – Super Rare is the most popular tokenized art marketplace, situated on the Ethereum blockchain. Here, the content is curated and authorized by a central authority before it gets posted on the market.
- Rarible – is the first community-owned, decentralized NFT exchange. Unlike SuperRare, Rarible is governed by the community, and with the help of the RARI token which incentivizes users to actively participate in the network.
- Async Art – this marketplace declares itself as an art movement that offers a place for artists to sell programmable artwork on the blockchain. Using smart contracts, the art pieces update their appearance automatically either by following a set of rules or on a fixed timeframe.
- Nifty Gateway – backed by crypto exchange Gemini, this premium digital art marketplace partners with top artists, athletes, brands, and creators to offer exclusive NFTs.
In addition to answering the question – what does NFT stand for, we covered some crucial aspects of this emerging market, such as:
- The technology behind NFTs and some examples.
- The unique properties of NFTs and the vast array of possible uses.
- NFTs’ investment potential as works of art.
- The best NFT artists and where to acquire their works.
All in all, the NFTmarket is still in its infancy, making it perfect for aspiring investors looking to diversify their portfolios. The constant growth in sales shows us that the concept is beginning to catch up and that it’s only a question of time when NFTs eventually surpass the multi-billion traditional art market.