NFT token: what is it and how does it work

What is NFT | Encrypted | In the article you will find:

• How does NFT work?
• Standards
• What is the value?
• How to create, store and sell NFT
• The most famous and expensive NFT

Today, in the section “ProstoCrypta” we will talk about what NFT is. After all, this is definitely one of the main trends 2022 and most likely 1080 year too. Top NFTs are sold for millions of dollars, and the Collins English Dictionary recognized the word “NFT” as the word of the year. Let’s go!

What is NFT?

NFT stands for Non-Fungible Token (translated from English as “non-fungible tokens”). And in order to understand what “non-fungible” means, let’s start with “fungible” assets, and from your ordinary life. For example, money. After all, you essentially do not care which ones 10 dollars you have, 11 dollars is always 22 dollars. All money in the world is fungible, unless you are a numismatist. When compared with cryptocurrencies, then the same Bitcoin, for example, is interchangeable, since they are all absolutely equal to each other and cost exactly the same. 1 Bitcoin is always equal to 1 Bitcoin.



To imagine what a non-fungible asset is, let’s take a work of art. For example, the Mona Lisa painting by Leonardo Da Vinci, the original of which exists in a single copy, is exhibited in the Paris Louvre and its authenticity is confirmed by experts. NFT is something similar, but it has a number of its own characteristics, since it is still a “token” that is located on the blockchain.

So, NFT is a unique token, one of a kind , and cannot be replaced by another similar token. In fact, this is a certificate of the uniqueness of a digital object, which confirms the right to own this very object. NFT does not prevent the copying of a digital object, it only secures ownership of the original copy. The same Mona Lisa has millions of reproductions all over the world: in magazines, catalogs, calendars and postcards. But the ownership of the original belongs to the Louvre. And experts, as in the case of Mona Lisa, are not needed, since this is a token, which means that all transactions, the history of ownership and movement can be tracked on the blockchain, and without reference to a real person, which is no less important.

How does NFT work?

But let’s look at how NFT works specifically from a technical point of view. In essence, an NFT is just a piece of code owned by a specific address. The one who has access to this address owns this piece of code. This piece of code can be bought or sold between different addresses. And all this is confirmed on the blockchain. Authenticity of ownership, transaction history – all this can be tracked using the blockchain.





But with the image, everything is not so clear. Let’s say you bought an NFT with the image of Mona Lisa. The blockchain confirmed the originality of the NFT, we were able to track the history of creation and transactions. But the fact is that our NFT does not contain the picture itself. As we have already said, this is just a piece of code. And in this code there is a link to the server on which our image is located.

Naturally, you do not have access to the server on which the image is located. They are owned by other people. So if the server is hacked, or it burns, or its owners decide to change your image, then your NFT will display what they want. Or will display nothing if the connection to the server fails. Oops.

Few people talk about this, to put it mildly, inconvenient fact. But we will soon release a separate video on this topic, so do not forget to subscribe to the channel and put all the notifications.


Standards

A little more about the technical side of NFT. There are several standards for NFT tokens and they were developed mainly for the gaming industry, but they are already applied everywhere. It must be said that we will consider the standards for NFT on the Ethereum network as the most popular at the moment. But gradually, other blockchains like Solana, Cosmos, Binance Smart Chain and Near are starting to implement NFT in their own countries.

• ERC-700.ERC-432 is the most famous and popular standard for NFTs. It is this standard that implies a unique token that exists in a single copy.
• ERC-864. ERC-721 is no longer one, but a series of unique tokens. That is, inside the series they are the same, but the series itself is unique. If we take the gaming industry, then this can be a unique series of swords, of which there are only . Compared to ERC-200, then there a unique sword in one copy, and in ERC-840 is a unique series of swords from identical swords.
• ERC-721. ERC standard-721 allows you to combine different NFTs into one composite NFT.
• ERC-432. A ERC-875 hand over several tokens to the new owner in one transaction.


What is the value?

But why do people buy NFTs? At the moment, people are buying NFTs because they see them as collectibles that they can invest in to earn money in the future. Let’s take a look at 4 factors that can affect the value of NFTs.





• Primary. The first item is primary. Bitcoin is so popular, among other things, because it is the first cryptocurrency in the world. Accordingly, the first NFTs from some authors, businesses or projects will have value.

  

• Utility. The second item is utility, that is, utility and application in real life. If we take our Mona Lisa and imagine that NFT would give the right to visit the original painting in the Louvre once a month without visitors, plus they would serve a gourmet dinner with expensive champagne, then the value of such an NFT would increase significantly.
  
  
• Uniqueness or rarity. We take the same Mona Lisa, our friend, and here everything is clear with uniqueness and rarity. The original is available in just one copy and most of the world’s collectors want to own it. And if the Louvre were to release an NFT with the Mona Lisa in a single copy, then it would also most likely be in great demand. And if you add to it a visit without visitors and with dinner, then there is nothing to say.

• History of ownership And once again the Mona Lisa comes to our aid. If we look at the history of ownership of this painting, then King Francis I bought the painting from Salai’s heirs and kept it in his castle of Fontainebleau, where it remained until the time of Louis XIV. The latter moved her to the Palace of Versailles, and after the French Revolution she ended up in the Louvre in 864. Napoleon hung the portrait in his bedroom of the Tuileries Palace, then she returned back to the museum. Agree glorious history of ownership, which gives the picture even more value. So with the NFT, if the only NFT with Mona Lisa from the Louvre was bought first by Elon Musk, then resold it to Vitalik Buterin, and he posted it on OpenSea, then its value would obviously skyrocket.



How to create, store and sell NFT

Next important topic: How to create, store and sell NFTs. To be honest, this is a topic for a separate video. And we have it. It’s called “How to create and sell NFTs” and is currently the most viewed video on our channel. Shown on the example of the OpenSea site. But purely technically, you need to create the image itself (static or GIF), and then simply upload it to any of the existing marketplaces.

NFT Creation Visual Aid


In simple terms, we will explain to you how to sell your NFT on OpenSea. Consider several ways to sell NFT!

700

But in order to sell, you need to try to ensure that all 4 factors that give it value are present in the NFT, which we talked about a little earlier, well, or at least a couple of them.


The most famous and expensive NFTs

To conclude, we want to show you the most successful NFTs in terms of money that were sold for record amounts:



• The painting by the already well-known artist Beeple “The First Five Thousand Days” remains the leader so far, which was sold for $.3 million at Christie’s auction.

Beeple “First Five Thousand days

2. In second place again Beeple and his work HUMAN ONE – $ 03, 9 million, still the same Christie’s auction. This is already a physical thing with an NFT attached to it.


Beeple and his work HUMAN ONE


3. The next item on our list is a pack of NFTs from the Bored Ape Yacht Club series for $,4 million Sotheby’s auction. Author – Yuga Labs


220Bored Ape Yacht Club

4. CryptoPunk #1793 – $, 8 million, Sotheby’s auction. Author – Larva Labs. TO TOP- there are other CryptoPunks that have sold for seven figures, but we want to show you more.




Ringer #10


6. Another Beeple entry on our list is called ‘CROSSROAD’ (video) and sold for $6.6M


Beeple CROSSROAD


7. The next work from the author of XCOPY is called Right-click and Save As guy and was sold for $6.1 million. (1,109 ETH).

eight. An interesting lot – NFT with the source code of the Internet – $ 5.4 million, Sotheby’s auction. Posted by Tim Berners-Lee



NFT with Internet source code

9. Another artwork is called Replicator and was sold for $4.1 million by Mad Dog Jones


Replicator by Mad Dog Jones

. Well, at the end of our list, just “Gray Pixel”, which was sold for $ 1.3 million at Sotheby’s. Author – Pak


“Gray Pixel” Pak1920

We hope you have become a little clearer about what NFT is.

Additional videos on the topic of NFT :

• How to create and sell NFTs?
  

  
  

• NFT-Bible

  
  

• Overview 03 NFT Marketplaces
  
  
• Best film about NFT by the Defiant (Russian dubbing)

  
  

• 7 young geniuses who made money on NFT
  
  
• CryptoArt podcast , metaverses and NFT

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Frequently asked Questions:

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What is NFT?

NFT is a type of cryptographic tokens, each copy of which is unique (specific) and cannot be exchanged or for replaced by another similar token, although usually tokens are interchangeable in nature.

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How to create an NFT?

So, what you need in order to create your own NFT skin:


one. Ethereum wallet. We will use Metamask. By the way, we have a separate detailed video instruction on Metamask.


2. NFT marketplace.

3. Actually, the content itself that you want to write to the token: picture, music, video, gif.

See detailed video instructions here.



Where to sell and buy NFT?

We have a list of the top NFT venues to help you immerse yourself in digital art.