2021-05-07

Tamilore Lawal

Tami

What are NFTs?

NFT stands for non-fungible token – a digital token that's a type of cryptocurrency, just like Bitcoin or Ethereum but unlike a standard coin, an NFT is unique and can't be exchanged like-for-like (hence, non-fungible).

While NFTs seem like they’ve popped out of nowhere, they can be traced back to a few years ago. NFTs originated from Colored Coins as early as 2013-2014. Colored Coins were initially issued on the Bitcoin blockchain for the smallest unit of currency and it had a lot in common with the current NFTs.They were used to represent a multitude of assets and had multiple use cases, including properties, coupons, cryptocurrency, subscriptions, access tokens, and digital collectibles. Colored Coins exemplified a huge leap in Bitcoin’s capabilities, however, their downside was they could only represent certain values if everyone agrees on their worth. 

Colored Coins flaws are apparent; the system worked best in a licensed environment which means in some instances it’s better to simply use a database. Nonetheless, Colored Coins opened the door to further experimentation and laid much of the groundwork for NFTs. The immense potential of putting real-world assets onto distributed ledgers was clear, but implementation required a more malleable blockchain.

Recently, NFTs have seen explosive growth. They have created opportunities for new business models that didn't exist before. Artists can attach stipulations to an NFT that ensures they get some of the proceeds every time it gets resold, meaning they benefit if their work increases in value. Admittedly football teams have been using similar contractual clauses when selling on players for a while. NFTs also give musicians the potential to provide enhanced media and special perks to their fans. And with sports souvenirs, between 50% and 80% of items are thought to be fake, by putting these items into NFTs with a clear transaction history, the creator can overcome this counterfeiting problem.

 However, beyond all these use cases, the potential of NFTs goes much further because they completely change the rules of ownership. Smart contracts can be used in place of lawyers and escrow accounts to automatically ensure that money and assets change hands and both parties honor their agreements. NFTs convert assets into tokens so that they can move around within this system.

This has the potential to completely transform markets like property and vehicles. For instance, NFTs could also be part of the solution in resolving issues with land ownership. Only 30% of the global population has legally registered rights to their land and property. Those without clearly defined rights find it much harder to access finance and credit. Also, if more of our lives are spent in virtual worlds in the future, the things that we buy there will probably be bought and sold as NFTs too.

How to create your own NFTs

Getting into the world of NFTs has never been easier, so how do you get started with NFTs and how do you create yours?

The technology being NFTs can sound complex but in reality it’s not that difficult. Creating your own NFT artwork, whether it be a GIF or an image, is a relatively straightforward process and doesn’t require extensive knowledge of the crypto industry. NFT artwork can also be used to create collectibles like sets of digital cards.

 First, you’ll need a Metamask. This is a Chrome extension that serves as your virtual wallet and can interact with platforms to buy and sell your artwork on the blockchain. It functions as both a wallet and an e-signature in one. To get started, download Metamask, create a wallet on it, and then send some ETH to that wallet. You can buy ETH with your credit card on exchanges like Coinbase, Kraken or Binance. Once the transaction is complete and you’re verified, you can send it to Metamask. That process can take up to five days, but you only have to do this when you’re getting started. 

Once you have these, several NFT-centric platforms allow you to connect your wallet and upload your chosen image or file that you want to mint and sell on the NFT market. Several Ethereum based marketplaces allow you to mint and list NFTs for sale. The most popular are OpenSea, Mintable, and Rarible. 

These marketplaces enable users to share their original pieces and also buy the work of others. Moreover, looking at the type of work others are selling will give you a good sense of what’s popular in that moment so you’d be able to create an NFT of something that’s in vogue. 

One of the advantages of creating NFT is the joy of owning something unique - NFTs are unique, and there’s something special about owning a piece of art that is like no other. This of course ties into the above-mentioned benefit of profitability. That in itself makes your investment more interesting.

What does the future hold for NFTs? Right now, the future of NFTs looks very promising but it’s too soon to tell how far they’ll go so we can really only sit back and watch.