DEV Community

Tezos Club NSUT
Tezos Club NSUT

Posted on

Introduction to NFT

Hero Image
“NFTs are risky because their future is uncertain, and we don’t yet have a lot of history to judge their performance. Since NFTs are so new, it may be worth investing small amounts to try it out for now.” Arry YU

NFTs can be used to represent physical objects, digital content, or even intangible concepts like intellectual property too. It’s crazy to think about it beyond digital content, beyond 2D or 3D images, from art and music to tacos and toilet paper, these digital assets are selling like 17th-century exotic Dutch tulips—some for millions of dollars.

Instances of an NFT garnering more than $ 69 million or a tweet fetching $ 2.9 million are not a fantasy, but an incredible reality. (but now he is ready to sell it on a very low price that’s the uncertainty)

Although they’ve been around since 2014, NFTs are gaining notoriety now because they are becoming an increasingly popular way to buy and sell digital artwork.

What are NFTs and how it is different from cryptocurrency?

cryptocurrency and NFT

NFT stands for Non-Fungible Token. “Non-fungible” means that it is com-pletely unique. “Token” means that it can be transferred on a blockchain. Essentially, NFTs are assets that carry a unique digital identity and can be traded between users on a public blockchain like Tezos.

They are digital assets or a type of digital certificate for owning goods or an asset that represents a great variety of intangible and tangible items such as paintings, virtual real estate, postcards, videos, and so on. NFTs cannot be replicated or equated with an asset that is similar, because every non fungible tokens asset is unique on its own.

Let’s take another example of how they are different from regular cryptocurrency.

$100 dollar has the same value as another $100 bill. When someone lends you a $100 bill, you don’t necessarily have to refund them with the exact same note, as another note with the same value is worth the same amount. NFTs have common characteristics like rareness, indivisible, and uniqueness.

So finally now you should be able to differentiate between currency and NFT.

Now, lets understand about the place where you can buy or trade NFT.

NFT Marketplaces

NFT marketplaces are platforms where NFTs can be stored, displayed, traded and in some cases minted (created). These marketplaces are to NFTs what Amazon or eBay are to goods. NFT marketplaces are built on a blockchain, making them different from other online marketplaces. Most NFT marketplaces are decentralized applications, allowing them to be secure and run by the community.

You might be curious about how people buying nfts about digital cats or apes, tweets or even the virtual artwork of Donald Trump. That’s where the role of NFT marketplace comes in.

So, you might be thinking that how can one access these marketplace.

In order to access and use these types of marketplaces, you will need to have the following:

  • A crypto wallet: You’ll need to choose a wallet that is compatible with the blockchain network that supports the NFTs you wish to buy (below). For example, if you plan to buy or sell NFTs based on the Tezos blockchain platform, you will need to use a compatible Tezos wallet such as Temple Wallet, Galleon or Kukai.

  • An amount of coins in the wallet: You will need to pre-fund your wallet before buying, listing or minting an NFT. Again, you will need to find out which cryptocurrencies are supported by the marketplace you intend to use.

  • A user account: You will need to set up an account on the particular marketplace you wish to purchase NFTs from.

After following the fore mentioned steps you are ready to dive into the world of uncertainties, we mean NFTs. Here are the list of most popular Tezos NFT marketplaces.

Now you have a decent knowledge of marketplaces, but why one should buy NFT in the first place ?

Why do NFTs have value?

Let’s visit one the most popular NFT marketplace on Tezos and pick one NFT among them. In this case the NFT is Tezzardz 3362.

tezzardz 3362

Now we can download and save the image for which people are paying 1234.00 XTZ. You might be thinking then what’s the point of even buying that when you can have it for free? Is there any any difference left between NFT and online copies?

The answer is yes — NFTs are completely different from regular images online. They have unique identities and a trackable history, allowing them to be scarce and carry provenance.

As an example, consider one of the most famous art pieces, the Mona Lisa. At any point, it’s possible to commission an artist to recreate the Mona Lisa. You can even take a picture of the Mona Lisa or order a print to hang up on a wall.

As the original, the real Mona Lisa will always be more valued and sought after than any recreations or printouts - this is due to provenance and originality. NFTs provide a similar uniqueness for digital images that were once only reserved for physical art.

Also, some NFT marketplaces have a feature where you can make sure you get paid a percentage every time your NFT is sold or changes hands. That makes sure that if your work gets super popular and balloons in value, you’ll see some of that benefit.

Applications of NFTs

applications of nft

  • Majority of the games have their virtual currency within their ecosystem that helps users make their progress easier.The different uses of NFTs will allow players to easily trade in-game collectibles with proper validation and security.

  • Real Estate NFTs could be used to transfer land deeds, provide proof of ownership and even keep track of changes in property value over time using timestamped NFTs.

  • Intellectual Property and Patents NFT tokens also allow users to prove their ownership of any piece of content, which is not possible with traditional IP rights tools like trademarks and copyrights. Ownership of an IP can be distinguished, especially with the timestamps, the entire history of the IP. The NFT chain would be immutable, which means that the NFT owner could prove they were the original creator of a piece of work at any point in time.

  • Voting NFTs can help solve this problem of bringing a photo ID and proof of residence with them when going to polling booths to vote, since they would provide a digital identity for people without physical documentation that proves who they are and where they reside in the country.

Now you have a pretty decent understanding about what are NFTs, how they are traded and even the reason behind their increasing hype. Though we’ve understood pretty much everything about NFT leaving us with one last question : Why Tezos for NFT ?

Tezos for NFT and FA2

The original non-fungible token standard was the ERC721 built on Ethereum, each token is unique and can be priced independently. This is why unique digital assets such as an artist’s digital art creation can be stored on such a token. Each token is unique and cannot be destroyed or duplicated. Each token can be thought of as a collectible based on the uniqueness and rarity of its properties. This was the first non-fungible token standard to be created. But then, the Tezos community has produced exactly that in the FA2 token standard. Similar to Ethereum’s ERC-1155 standard which has been seeing significant growth and interest, FA2 supports a wide range of token types (e.g. fungible, non-fungible, non-transferable, etc) all in one interface.

But why the switch ?

tezos green

One of the most common criticisms of NFTs, and something that tends to chase away many artists, is that traditional NFTs aren’t eco-friendly. Tezos runs on a Proof-of-Stake (PoS) consensus mechanism, as opposed to the

Proof-of-Work (PoW) mechanisms that are used by Ethereum and other blockchains. Herein lies the origin of both Tezos’ ecological and economic selling points.

PoW requires computers to compete with one another to solve complex puzzles to add blocks and transactions to the blockchain. As such, blockchains that use PoW (like Ethereum) require a lot of computer power — meaning a lot of energy — to work.

PoS, on the other hand, allows users to stake an amount of their cryptocurrency for the chance to be randomly chosen as a block validator. This type of mechanism rewards loyalty while reducing the computational work needed to verify blocks and transactions on the blockchain. Because of this, Tezos runs efficiently and also charges much lower fees than other blockchains. In fact, it uses about two million times less energy than Ethereum.

You can learn more about Tezos and its consensus mechanism on our previous article. Read more about FA2.

Future of NFT

While Ethereum was the first blockchain platform with NFT capabilities, it wasn’t specifically built for NFTs. Platforms like Flow and Tezos were built with an NFT first attitude. There is no doubt that there will be more NFT standards to choose from in the near future.

future of nft

The promise of NFT technology to democratize and reward community participation grows every day. But it financial part of it might hurt too many people and it won’t be mainstream.

That was pretty much it! We would like to end this article by quoting founder and CEO of NFTically(a Polygon-backed NFT marketplace):

“NFTs are slowly but surely becoming a part of our everyday lives. Not only are NFTs a great business opportunity, they are also a new way for people to enjoy themselves while making money. That’s why NFTs are here to stay”.

Discussion (2)

nombrekeff profile image

NFT are just a way for some people to get rich while many more lose it...

I doubt they will stay for much longer IMHO, it seems the bubble is already popping and I doubt it will fully recover.

They don't prove much neither, they just prove you have a token that points to a link that points to an image... Not that you own the image... so what's the point?!

I can't lie, I freaking hate NFTs, they seem to me like the culmination of capitalism and consumism. They offer little value in my eyes, hopefully we can find a way of making them usefull and valuable... But that will not be the case if we keep on the same track. They're like microtransactions but worse xD

armousness profile image
Sean Williams

My gut tells me that NFTs are best understood through looking at the 2009 global financial crisis. Or rather, the housing bubble that preceded it.

If you're a producer whose market has become a bubble, then your incentive is to produce as much as possible. So in that 2004-2007 time frame, new home construction went crazy. Trouble is, the actual product during that bubble wasn't houses, it was mortgage-backed securities: houses were just a means to an end.

Thus the incentive was for lenders to get as many borrowers approved as possible, which led to a sharp degradation of lending standards. It didn't matter for the bank, since they were gonna sell the debt off; it was only a problem for the buyers, which unfortunately seemed to mostly be pension funds.

When you degrade lending standards, you still have to gussy it up with smart-sounding terminology. First we had adjustable-rate mortgages, which have lower interest rates today so you can squeak by with lower income. Once all the blood was pulled from that stone, we moved on to "low-doc" and "no-doc" loans, which are more colloquially known as "liar's loans."

Still, banks have no reason to scrutinize, because they aren't holding onto them. And nobody else had reason to scrutinize, because the ratings agencies gave them great marks. The end goal was always just to produce more and more debt securities, since that's what the incentives told you to do.

So that's how I see NFTs: they're a solution to the problem of being able to produce enough assets to keep a bubble growing. I mean, that fact is baked into the very design of NFTs, since while crypto"currency" has issuance rates baked in, anyone can create any number of NFTs.