NFTs, also known as Non-Fungible Tokens are digital assets similar to in-game items such as skins. They are traded on marketplaces built on cryptocurrency networks such as Ethereum and Solana. “Fungible” essentially means interchangeable, which means that NFTs are tokens that cannot be interchanged. An example of something fungible would be fiat, a $5 note would be interchangeable with another $5 note. Unless the $5 has a unique trait that makes it special such as a unique serial number, which makes it “collectible” hence it is non-fungible.

As for the “token” part of NFTs, tokens are crypto-assets that serve as transactional units on blockchains such as Ethereum. This is commonly seen with ERC20 tokens such as Tether, NFTs use a different token standard known as ERC721 and ERC1155. NFTs can be anything digital from drawings, pictures, audio files, and videos.

Where to Buy NFTs?

Depending on which network you decide to buy NFTs on, here are a few sites you can use.

Ethereum — Opensea
Solana — Solanart
Cardano — CNFT
Flow — NBA Top Shot

There are multiple NFT marketplaces running on each chain but those mentioned are the ones with the biggest volumes traded. Sushiswap and Coinbase also have Ethereum NFT marketplaces opening up in the near future.

When did NFTs become popular?

NFTs were actually around since 2017 with the CryptoKitties craze which also caused the gas price at the time to surge to levels unseen at that point in time.

NFTs had an explosive month in the month of August 2021, with roughly 3.4 billion USD in traded volume, and volume has been trending down ever since.
View the Charts here.

Who owns NFTs?

NFTs used to be owned mainly by cryptocurrency investors who have been in the space for a long time with money to spend and certain sports fans who adopted NBA Top Shot. But recently, many public figures have been adopting NFTs from blue-chip collections such as BAYC, MAYC, Cool Cats, and of course Crypto punks.

Adopters

BAYC/MAYC- Jimmy Fallon, JJ Lin, Post Malone

Cool Cats- Mike Tyson, Faze Banks

CryptoPunks- Jay-Z, Snoop Dogg, Steve Aoki

Why NFTs?

NFTs provide an opportunity for digital assets to have provable ownership while on the blockchain which separates them from normal audio files, jpegs, and gifs. Similar to the transition from physical cash to digital cash, the world is transitioning into a digital world and provable ownership of a digital asset is a necessity in the future of our digital economy. High-Value physical assets such as Gold require high-security costs such as a safe and are susceptible to theft, damage, and wear and tear. Artists from countries that lack access to a big local market of art collectors are able to share their artwork with buyers from all over the world and create a new source of income for themselves.

Criticisms of NFTs

The misconception is that NFTs are pointless because their digital file can be “right-click and saved” by any regular user. This is where the majority misses the point, the NFT proves ownership of the token on the blockchain, and the art is just what is on the surface, you still own the underlying token which gives you the right to sell the NFT, access to the NFT project’s community events and more.

NFTs also bring up environmental concerns among many among the general public. This is mainly a misunderstanding, as this is an argument against Ethereum’s proof-of-work consensus model rather than NFTs. Blockchains such as Solana are already on a proof-of-stake model that does not require electricity to secure the network with puzzle-solving, Ethereum is also looking to move to ETH 2.0 with sharding and L2s to remove the electrical usage and environmental concerns.