The term “irreplaceable/non-homogeneous” is usually used in economics to mean having unique objects and to describe things that cannot be replaced by other objects because they have a unique set of properties.
The “token” as the accounting unit is an account in the distributed blockchain controlled by the computer algorithm of the smart contract, which records the balance value on the token holder’s account, so that they can be transferred from a wallet to another.
Non-fungible/non-fungible tokens (NFT) refer to encrypted tokens that represent digital files, images, audio, video, video game collectibles, and other creative products. Unlike cryptocurrencies that require all tokens to be the same, each NFT is unique or limited.
For simplicity, in each blockchain, all tokens are equal and interchangeable (for example, all bitcoins are the same, one bitcoin can be exchanged for another, and nothing will change) . Among them, due to the emergence of NFT, each token cannot be forged, split or replaced. This technology is very suitable for protecting the rights of unique things, namely artworks, virtual objects for computer games, and even real estate.
NFT was originally created as a specific token standard to support the use of blockchain in computer games, including the Ethereum ERC-721 standard for the acclaimed CryptoKitties game and the updated ERC-1155 standard.
ERC-721 is the first standard to represent irreplaceable digital assets on the Ethereum blockchain. The ERC-1155 standard provides “semi-substitutability” and also provides a set of extended ERC-721 functions (therefore, ERC-721 can be built using ERC-1155).
Unlike ERC-721, which uses a unique identifier to represent an asset, the unique identifier of ERC-1155 tokens represents a whole class of replaceable assets, and users can transfer any number of assets to others.
The components based on the ERC-998 standard are templates. According to these templates, NTF can be either an irreplaceable asset or a replaceable asset.
Although most NFT activities have traditionally occurred on the Ethereum blockchain, other NFT solutions have begun to appear on different blockchains. For example, the DGoods project created by the Mythical Games team focuses on providing multi-functional standards for multiple blockchains, starting with EOS. The Cosmos project is developing an NFT module that can be used as part of the Cosmos SDK. In the Flow blockchain created by the Cryptokitties team , the Cadence programming language presents each NFT as an object that the user stores in his account. It has strong ownership rules provided by the type system. Most importantly, blockchains like Bitcoin Cash , NEO, Tron, WAX, and Tezos also have token standards that determine their use.
Advantages and disadvantages
The main benefits of NFT are closely related to everything that Distributed Ledger Technology (DLT) has provided in recent years. The blockchain technically ensures the authenticity of the NFT and guarantees direct payment to the content creator.
However, although the NFT solution has obvious advantages, it is difficult to not pay attention to several problems that have formed in the industry at the same time as it appears.
Sotheby’s analysts highlighted the following technical flaws related to the rapid proliferation of NFT and encryption art:
- It is difficult to determine the value of NFT;
- It is difficult to evaluate the uniqueness of encrypted art, and it is difficult to understand how many copies exist;
- It is difficult to find the original owner of the NFT.
Regarding NFT sales, copyright protection issues appear more and more frequently. When uploading content to open a non-curated NFT platform, you are constantly curious about the fact that it can sell any media file on your behalf (whether it’s a selfie taken a few seconds ago or a picture found on the Internet ). Many crooks take advantage of this. A typical example is the recent NFT painting incident of Jean-Michel Basquiat. The painting was auctioned in April 2021. Two days later, it was discovered on the platform that the seller did not own it. Just remove it.
All these problems still exist. Researchers and engineers have yet to find a solution.
The prototype of NFT is Colored coins, an experimental asset created on the Bitcoin network in 2012. The illustration of Pepe’s frog character is also one of the first irreplaceable Bitcoin tokens. Many of them were sold on eBay, and the rare Rare Pepes collection was later auctioned in New York.
All NFT images were initially hosted on Counterparty, a peer-to-peer financial platform that supports asset creation and trading, with decentralized exchanges and encrypted tokens. However, in the late 2010s, with the emergence of similar platforms, Counterparty lost its monopoly on hosting NFTs.
The pioneer of NFT based on Ethereum is the CryptoPunks project. The series contains 10,000 pixelated punk pictures, each with a unique set of characteristics. Every punk purchased using popular wallets (such as MetaMask) significantly reduces the barriers to interaction with NFTs. The strange thing is that CryptoPunks does not meet the ERC721 standard because it has not yet been invented and represents a hybrid of ERC721 and ERC20. Today, given its limited supply and mature brand image in the crypto community, CryptoPunks may be regarded as mainstream digital antiques.
It is worth mentioning that the issue of the primacy of CryptoPunks is still open. For example, in 2015, two years before the project appeared on Ethereum, someone created an Etheria game in which users bought NFT virtual land on hexagonal plots.
At the end of 2017, the online game CryptoKitties, which allows users to breed digital cats, gained significant recognition, opening the way for mass adoption. The game runs on five Ethereum smart contracts, and users can easily interact with them through their Ethereum addresses. The game is very intuitive, very simple, and very popular. Soon after it was released, it accounted for about 25% of the entire Ethereum network traffic. The project quickly raised US$12.5 million in investment, and due to hype, some kittens have sold for more than US$100,000.
CryptoKitties became an example of the first deployment of large-scale non-financial applications on the basis of blockchain. At that moment, the crypto community realized the potential of NFT and its supply increased significantly. After the excitement caused by CryptoKitties ended, the audience of existing projects increased, and more than 100 NFT projects appeared in the following years (2018 and 2019). The NFT landscape began to develop with unprecedented enthusiasm, so much so that even the Cryptotitties project appeared.
2021: Part 1
In 2021, the NFT ecosystem will continue to grow at an unprecedented rate. According to NonFungible.com’s NFT industry statistics report, the NFT market will exceed $250 million at the beginning of 2020, an increase of nearly 300% over the previous year. In addition, within a few months, cryptocurrency investors poured in US$90 million for NFTs and digital collectibles, resulting in an increase in the overall market value of the digital market by 1785%, from US$23 million in early 2021 to 3 $432 million at the end of the month.
In all NFT market segments, virtual worlds and artworks account for the majority. Despite this, the number of transactions for computer games is still leading (nearly 50% of NFT transactions in 2020 are related to them), and collectibles are not far behind.
The most commonly used NFT market is a general OpenSea platform that allows users to mint and trade NFTs, including ERC721 and ERC1155 standards, and check their data and check statistics from the web. Founded in 2017, today, it provides more than 300 types of assets and more than 10,000,000 minted tokens. Almost all encrypted collections are available to users, including CryptoPunks and Hashmasks, as well as projects from many popular blockchain games, such as SoRare, CryptoKitties, Axie Infinity, Gods Unchained, etc. In June 2021, OpenSea sales reached a record high of approximately US$150 million.
Another popular market for buying, selling, and creating NFTs is Mintbase, which specializes in covering niche NFT categories such as music, photography, and news.
The Rarible and Zora platforms have won great success among the fans of crypto art and the artists themselves because they were not curated. To upload art-NFT to them, users only need to register and pay transaction fees to mint tokens. Unlike them, in planning services such as SuperRare, Nifty Gateway, MakersPlace, or Known Origin, to start selling digital art, content creators need to submit an application form, which has quite strict selection criteria and long waiting for experts The timing of the decision, which usually scares off the creator of the NFT.
In addition, many digital art works have been placed in online collections in the virtual world.
Cryptovoxels is the first blockchain- based virtual world with multiple art galleries where users can purchase artworks in the form of NFT. As virtual reality spaces become more and more popular, displaying digital art in them becomes more common and exciting for the crypto community.
Experts believe that 2021 has become a prosperous year for art NFT. In the first few months alone, sales were amazing. For example, in February, Canadian singer Grimes sold 10 digital paintings on the Nifty Gateway platform for approximately US$6 million. Later that month, NFT with Nyan Cat meme sold for just under $600,000.
“Everydays: The First 5000 Days” is a digital image in JPEG format with a resolution of 21069 × 21069 pixels. It is a collage of the “Daily” series of images created by American artist Mike Winkelmann (Beeple).
The most notable event was the auction of Beeple’s “Every Day: First 5000 Days”, which was the first NFT artwork to be auctioned at the famous Christie’s. It was sold for $69.3 million, making the NFT created by Winkelmann the most expensive NFT in the entire history of cryptographic art.
After the record auction of Beeple’s works, the auction house announced that it had auctioned 9 CryptoPunks for US$16.9 million in early May. This is the first time NFT has been provided with works by Andy Warhol and Jean-Michel Basquiat.
All of these events and many others have resonated with a wide audience and potential new content creators, and their numbers have grown exponentially in the first few months of 2021.
2021: Part 2
Although people’s interest in the non-functional financial sector is low, their market is still growing. Sales have been maintained at a high level and continue to break records.
In the first six months of 2021, NFT sales reached $2.5 billion (according to DappRadar data). At the same time, this number is greatly underestimated because the statistical source only tracks on-chain sales, that is, on the blockchain, and does not consider the large number of off-chain sales of NFTs, such as auctions. NonFungible.com’s figure is 1.3 billion U.S. dollars, excluding DeFi NFT, which is about 8 billion U.S. dollars.
DappRadar is a company that tracks NFT transactions on multiple blockchains including Ethereum, Flow, Wax and BSC
The weekly NFT trading volume of major exchanges increased from the beginning of the year to the peak in February, and fell 82% in May to 35.3 million U.S. dollars. However, since then, NFT activity has increased, with transaction volume in the last week of June reaching $78 million, an increase of 120% from the previous month.
This rebound can be attributed to players’ renewed interest in the NFT ecosystem. So far, the creators of NFT solutions have learned how to interact with the community and invest in incentives on their NFT platform to properly motivate the audience and cultivate local evangelists.
Now, news related to NFTs continues to cause a frenetic revival in the cryptocurrency and art communities with roughly the same level of excitement.
As far as the latest iconic auction is concerned, Sotheby’s auction house sold Banksy’s “Love is in the Air” for $12.9 million, marking the first time an auction of physical works of art that can be paid in cryptocurrency has been organized.
Sotheby’s was founded in 1744 and sold this 101.38 carat rare diamond for approximately $12.3 million in cryptocurrency. The transaction took place in Hong Kong on July 9. The auction accepts betting on traditional currencies, Bitcoin and Ethereum. However, the auction house did not specify information about the buyer and the sale of cryptocurrency.
These events are critical to the adoption of cryptocurrency in the global art world.
In late June, the media giant Twitter distributed 140 NFTs through the Rarible platform, which contained various Twitter logo images and virtual Tamagotchi pets, supporting and continuing this trend.
It is worth mentioning that The Bored Ape Yacht Club, a set of 10,000 unique digital ape NFTs, has recently become a hot topic among collectors. Their total sales jumped to 61 million U.S. dollars, and the average selling price on OpenSea in July exceeded 3,500 U.S. dollars, a 1500% increase from the April release price.
As another potential use case of NFT technology, music also provides an opportunity to monetize the creativity of artists. In the spring of 2021, Justin Blau (3LAU) became the first artist in the world to tokenize his music album and sell it for $11.6 million. At the same time, the American band Kings of Leon released their eighth studio album, which was also sold as an NFT for $2 million. Artists such as Steve Aoki, Linkin Park’s Mike Shinoda, and Deadmau5 used their own examples to support the frenzy surrounding the advantages of NFT technology.
In addition to visual arts and music, video NFTs are also becoming more and more popular. For example, recently, CNN sells historical news in the form of NFT. These include exclusive information, presidential election results, space travel and other major events. In addition, the new feature film “Zero Touch” with Anthony Hopkins as the protagonist will only be distributed on the professional market NFT Vuele in the form of NFT. It can only be accessed after purchasing the corresponding token.
The popularity of crypto games is steadily rising. In this type of game, cryptocurrency and NFT are usually used as in-game items for player transactions and exchanges. Probably the most famous of these games is Gods Unchained, which is a card game based on Ethereum, in which each collectible card is confirmed by a smart contract.
Another popular crypto game is Axie Infinity. The crypto community remembers that one of the players bought land for 1.5 million U.S. dollars. Specifically, this land consists of nine consecutive genesis blocks-the most valuable land in the game. The price is so high because there are only 220 such packages. As more players join the game, the cost of this limited number of fragments may become higher.
NFT-related activities go far beyond this. The changes in their creations never stop.
In early June, Tim Berners-Lee, a British computer scientist and inventor of the World Wide Web, auctioned some source code as NFT. An anonymous collector bought it for $5.4 million.
At the same time, biology pioneer George Church and his company Nebula Genomics announced their intention to sell Church’s genome as an NFT. This idea has sparked controversy in the scientific community, because the geneticist Church of the University of Cambridge is well-known in academia for his controversial proposals, including the creation of DNA-based dating apps and the resurrection of mammoths.
Speaking of resurrection, I would like to mention a few words: This summer, Gone to Mars, a virtual decentralized cemetery project based on Ethereum, was launched. 1089 NFT capsules are ready for sale, waiting for future owners. Sealed to 2050, they will be passed on to the next generation together with the holder’s information.
Since 2020, the advantages of combining the advantages of NFT technology with the functions of decentralized finance have emerged. For example, in the Aavegotchi game, each character is the collateral of the user stored on the Aave lending platform. NFT can be borrowed and loaned on NIFTEX to maintain partial ownership. On NFTfi, irreplaceable tokens are obtained. It can be used as collateral for loans. These are just a few examples.
Thanks to Berners-Lee’s original invention, the limits of imaginative representations of digital content and irreplaceable token use cases are limitless. NFT exists in the fields of fashion, art, photography, finance, etc.
Today, the NFTs ecosystem continues to develop and prosper. Many of the projects listed above have successfully used blockchain technology for a long time and already have a large number of creative human capital, collectors and loyal audiences.
At the same time, more and more content creators are discovering the possibility of monetizing their creativity. Blockchain technology and NFT are gradually being recognized by influencers and major players in related fields. The masses have always shown interest in this field. According to NonFungible, between 100,000 and 20,000 people are interested in buying NFT every week. Projects based on beautiful and original ideas continue to appear, opening up new possibilities for the use of irreplaceable token technology at the boundary of science and industry.
After the boom in early 2021, one thing remains clear. The once-seemingly niche NFT ecosystem emerged from the small crypto community and became equal participants in finance, art, gaming, and many other leading creative industries.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/nft-ecosystem-the-present-and-future-prosperity-in-2021/
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