If five years ago had someone told us that pixelated JPEGs would sell for hundreds and thousands of dollars, the chances are we would have laughed in their face. To be fair for the vast majority of people, a Picasso painting or a rare stamp is the kind of art that would sell for $100k+. Instead in 2021, pixelated cartoon JPEGs are selling for thousands and even hundreds of thousands of dollars. This is the strange and unusual world of non-fungible tokens (NFTs) for you- where art meets gaming meets the cryptosphere. While NFTs have been around for many years (since 2014), like big brother Bitcoin, they are only now they are gaining mainstream attention. With this increasing mainstream attention on NFTs, a new 21st century art Renissance could be ushered in which could not only empower artists across the board but also help push the boundaries of both art and investment
What Are Non Fungible Tokens (NFTs)?
Non-fungible tokens (NFTs) are cryptographically unique tokens linked to digital content, such as artwork and music. So in layman terms, a non-fungible item would be a rare stamp or a stamp with some kind of an error/blunder on it whereas ordinary stamps are fungible tokens (one unit is easily interchangeable with another). The “Inverted Jenny” is a misprinted 24 cent U.S. postage stamp issued in 1918 that shows an inverted image of a blue aeroplane. In 2007, an “Inverted Jenny” sold for more than $900K (and as you can imagine normal Jennies and other run-of-the-mill/fungible stamps never have such luck). This example of a unique stamp in some way explains the present NFT craze. NFTs are “one-of-a-kind” assets in the crypto world that you buy or sell like artwork or even a house, but which have no tangible form of their own. The digital tokens can be thought of as certificates of ownership for virtual or physical assets (and these are held on blockchains). Over the past year, NFTs have exploded in popularity with the NFT art sales exceeding $3 billion in 2021. Some of the examples of eyewateringly expensive NFT sales include the You Tube meme sensation Nyan Cat – a pixelated flying feline, that was turned into a gif by its creator Chris Torres. It eventually sold as an NFT for $531,000. In Hong Kong in March 2021, a digital artwork created by humanoid robot Sophia, was sold on auction for $688,888 in the form of an NFT. Ofcourse its not just art that is selling as NFTs.Twitter founder Jack Dorsey sold his first tweet, "just setting up my twttr", as an NFT for $2.9 million. NFTs trading has seen quite a phenomenal rise compared to 2020
So far the vast majority of of NFTs have been created and made available via the Ethereum (ETH) blockchain. One of the earliest ETH NFT project was the now-iconic Cryptopunks which was launched on the ETH blockchain in 2017. Cryptopunks served as an inspiration for the ERC-721 standard for NFTs and the modern crypto art movement, which has since become an ever-expanding part of the cryptocurrency and decentralized finance ecosystems on multiple blockchains. These were originally for free and the buyers had to only pay the ETH gas fees, which was negligible at that time. Their estimated price now varies from $7,000,000 to-9,000,0000 (they can only be purchased via secondary marketplaces). However the growing popularity of NFTs combined with ETH blockchain's hegemony has created its own set of problem owing to which other crypto projects, namely Solana ($SOL), Caradano ($ADA) among others are muscling into the NFT space.
Ethereum (ETH): The King of the NFT Space
Open source blockchain analytics firm Moonstream published a report, which found that around 17% of addresses control more than 80% of all nonfungible tokens (NFTs) on Ethereum. The report found that whales, NFT platforms and exchanges, which comprise the top 16.71% of all addresses, own 80.98% of NFTs on Ethereum. Some of the most widely used NFT marketplaces such as OpenSea, Rarible and Mintable all operate on the ETH blockchain. OpenSea is one of the most popular NFT marketplaces out there. OpenSea is a decentralized P2P marketplace that can support purchases, sales, and trade of rare digital goods-including art, gaming and other collectibles. OpenSea is the preferred platform in the case of many renowned NFT projects such as Gods Unchained, Cryptopunks, Cryptokitties, and others.
Another ETH-centric NFT marketplace is Rarible that works as a decentralized NFT marketplace as well as a minting platform. It enables digital artists with capabilities for creation and sale of tokenized artwork. Rarible also allows content creators to configure smart contracts for the collection of royalties on their artwork in the future. From a more technical perspective, you can define Rarible as a DAO or Decentralized Autonomous Organization. The DAO enables users to create and selling ERC-20, ERC-1155, and ERC-721 tokens with utmost safety while ensuring the security of the Ethereum environment. While Rarible is not as popular as OpenSea yet, its a good blend of NFT technology and a DAO marketplace. Furthermore, Rarible was also the first to introduce a governance token like RARI in the world of NFTs. The RARI token offers the privileges for submitting and voting on proposals such as platform rules and fees management. Another ETH based NFT marketplace is Mintable. Mintable allows users to transform digital content (art, music, books) into NFTs residing on the blockchain. Mintable also enables content creators to monetization of their digital brand without any initial crypto investments. This could make Mintable more attractive for smaller artists than OpenSea.
ETH's hegemony in the NFT marketplace has created another challenge which has opened up the space for other blockchain based NFT marketplaces. The increased traffic on the ETH blockchain has resulted in a steep rise in NFT 'gas prices'. NFT Gas is the term given to the fee that most NFT trading platforms charge. This is incurred to conduct the transaction or execute a contract on their blockchain platform. Gas prices in Ethereum are denoted by unit of Gwei. It is determined by the amount of traffic on the network and the computation power taken to execute a transaction. Gas fees are payments that users have to make to compensate for the computation energy required to process transactions on the Ethereum blockchain. This is very much like the processing fees credit cards may charge for transferring money to various accounts or for paying bills. Speaking from personal experience, I tried to mint an NFT the other day. While my NFT was 0.05ETH, the gas fees almost came up to $40,000. You got that right, $40,000. Now you can imagine why smaller artists and collectors may want to explore other NFT marketplaces on non-ETH blockchains.
Other NFTs Marketplaces
Solana ($SOL) has been dubbed the 'Ethereum-killer' and some $SOL NFTs have made a huge splash in the recent past. The two of the most common $SOL marketplaces include: Solsea (https://solsea.io/) and Solanart (https://solanart.io/), although the latter is still in a beta phase. The biggest collection of NFTs on the Solana blockchain is the Degen Ape Academy series of ape digital collectibles. So far, the Degenerate Ape Academy has sold ape NFTs worth about 986,300 SOL, or nearly $227 million. Additionally the popular cryptocurrency exchange FTX has also launched its Solana NFT Marketplace in the USA (with plans to launch an ETH marketplace at some point). All tokens on the FTX Solana NFT platform will be using the Metaplex Solana protocol, which means it is unlikely that they will be compatible with other leading marketplaces unless they integrate the technology. One advantage of the FTX's Solana NFT marketplace is that you can buy NFT items using fiat currency. This makes transactions simpler whereas the ETH NFT marketplaces need you to connect your Metamask or Coinbase wallets and pay in ETH. I prefer to buy NFTs with fiat currency as opposed to crypto transactions. Another area where $SOL NFTs could thrive are in the crypto-gaming space. Recently Game studio Faraway raised nearly $30M for Solana-powered browser games. This endeavour is also being supported FTX, Lightspeed Venture Partners and Solana Ventures. The popularity of the NFT game Axies Infinity shows how NFTs could blend with the traditional gaming space by deploying collectible, resellable NFTs within the game. only time will tell if Solana powered NFT games has make a dent in the burgeoning NFT gaming and the Metaverse space. But these are positive signs for $SOL's NFT outing.
Worldwide Asset eXchange (WAX) protocol is another commonly used blockchain for NFTs. $WAX made news recently when Mattel has signed a partnership with the WAX blockchain to bring Hot Wheels to the NFT world. As part of its Hot Wheels NFT Garage, Mattel will be minting 40 different cars and selling them. Coming in packs of four to ten, Mattel has already announced that there will be over 5,000 NFTs. Collectors will also be able to redeem any of them for exclusive, physical versions too. This represents a classical example of bridging the gap between physical and virtual collectables make perfect sense. $WAX passed 6 milllion MAUs in August 2021, and many other NFT projects such as Topps’ Garbage Pail Kids and Street Fighter have launched on it.
In addition to $SOL and $WAX, other blockchains that have been making waves in the NFT space include Cardano ($ADA). One of the biggest marketplaces for $ADA NFTs include CNFT (cnft.io) and SpaceBudz. The latter scored an $ADA firs by making a $1 million sale. The SpaceBudz consists of 10,000 unique NFTs which users can personally own after they purchase it. The project broadcasts its sale on Twitter via a bot that reports every listing and sale of a SpaceBudz NFT. $ADA NFT marketplaces are relatively new but with the introduction of smart contracts, this space could grow. Polygon ($MATIC) too has entered the NFT race with dynamic NFTs. Popular NFT-based gaming projects such as Aavegotchi and Polychain Monsters have launched using Polygon’s scaling technology, with both having integrated Chainlink Verifiable Random Function (VRF) to create a more dynamic experience for their users. Dynamic NFTs can be used to represent dynamic assets, such as a player’s stats during a sports match. Cryptographically secure, decentralized, and fraud-resistant trading cards can be created using data and updated in real time when the data changes—when a new point is scored or a successful assist is recorded, for example. This creates a new level of novelty for NFT collectors, and unlocks new utility in NFT-based gaming applications.
Some other advances in the NFT space include the Spores Multichain NFT Marketplace. This is a full-stack decentralized cross-chain NFT marketplace which aims to bridge multiple blockchains so the transfer and utility of non-fungible tokens can be more efficient. This will ensure the sale and transfer of non-fungible tokens between major blockchains like Cardano, Binance Smart Chain, Polkadot, Solana, and Ethereum. As more and more blockchain projects enter the NFT space, such interpolability maybe invaluable. Outside the blockchian space, the cryptoexchange Binance too has entered the NFT space.
Why NFT-Newbies Love NFTs To Pieces
Gucci shoes and LV bags are a status symbol in many settings and so are iconic NFTs such as Cryptopunks. The cult status enjoyed by designer brands has fuelled the rise of a multi-billion dollar counterfeit products industry ( I am not condoning counterfeit products in any way) and the growing popularity of NFTs such as Cryptopunks is fuelling the phenomenon of fractionalised NFTs. As the name suggests, fractionalised NFT projects allow users to buy a proportion of well-known NFTs at a lower price- essentially ordinary NFT enthusiasts can buy shares of their favourite collectables the way more conventional buy shares (and even fractional shares) of their preferred stocks. One such fractionating project is spearheaded by the blockchain company Otis which is fractionating Cryptopunk #543 to be sold for $1/share. Some other fractional companies include Fractional and Unicly. Russia’s State Hermitage Museum launched two NFT projects. It recently reaped $440,500 from an auction of tokenised digital copies of five historic masterpieces from its collection, from Leonardo da Vinci to Van Gogh, hosted on the Binance NFT Marketplace.
While the NFT space is infamous for its illiquidity, fractions are more relative and available on blockchains. Buying fractions of a unique digital asset offers a much higher chance of getting in and out while using volatility in your favour. As the NFT space grows, so will the demand for fractional NFTs.
Bibliography
https://bettermarketing.pub/nfts-10-exciting-trends-in-the-world-of-non-fungible-tokens-39c9fbca98e4
