The most comprehensive analysis of NFT: the potential of the new digital golden age

In the first few months of 2021, non-fungible tokens (NFTs) have entered the public eye: art auction houses such as Christie’s and Sotheby’s are able to sell works by digital artists Beeple, Larva Lab’s team, and others High price. So, why do collectors pay more than $69 million for a JPEG file? Well, when you buy NFT, you are not only buying JPEG, you are also buying Token.

Regardless of your experience in cryptocurrency, you will be familiar with the idea that scarce assets and resources are often valuable. Provable scarcity, immutability, and programmability are just a few aspects of NFT gaining its value.

From an artist’s point of view, NFTs offer the potential of a new digital golden age. This article aims to be their first stop for in-depth research that is inevitable in the rapidly evolving and evolving world of non-fungible tokens. good luck.

What are non-fungible tokens (NFTs)?

Investopedia defines unforgeable tokens (NFTs) as “encrypted assets on the blockchain that have unique identification codes and metadata that can distinguish them from each other. Unlike cryptocurrencies, they cannot be traded or equivalent. Exchange. This is different from replaceable tokens such as cryptocurrencies, which are the same as each other, so they can be used as a medium for commercial transactions.”

Key term

standardization

Most of the digital assets created so far exist in their own asset classes and are usually controlled by the company that created them; domain names purchased on GoDaddy cannot be used as Twitter handles, Fortnite skins cannot be brought into Madden, and so on.

interoperability

One benefit of digital asset standardization is that NFTs can be easily transferred from one developer’s sandbox ecosystem to another. 

Build assets and use NFTs on public chains (such as Ethereum) to standardize the digital asset economy and open up new ways to create and obtain value. For example, a car with a New York State license can still be driven in Florida because the country’s road rules are standardized.

Tradability

The interoperability of an NFT allows the existence and prosperity of a free market. Similar to how you can go to the flea market or Wal-Mart and sell the product on eBay, you will have the freedom to exchange or trade your NFT in the way you want.

fluidity

Your assets are more liquid than ever before. Web 3.0 is the “third-generation Internet service for websites and applications that will focus on using machine-based data understanding to provide data-driven and semantic networks” for creators And companies provide the most frictionless market access opportunities in history.

With a simple signature of your digital wallet (such as MetaMask), you can send a unique asset from your local mall to the Taj Mahal in a few seconds, a process that used to take days and hundreds of dollars. The Ethereum network will allow your creative masterpieces to be seen and purchased by anyone around the world through a cryptocurrency wallet. Remember, you are not just sending emails with JPEG, each Token has a unique identification code and metadata to distinguish them from each other.

Immutability and provable scarcity

Given the unique metadata of your NFT, people can review the token and the smart contract that created it to determine how many tokens were generated in the same set and whether it is indeed 1 in 1. OpenSea pointed out, “Developers can also enforce specific attributes not to change over time by coding on the chain. This is particularly interesting for art, because art relies heavily on the provable scarcity of the original work.”

Programmability

Web 3.0 assets are similar to the digital assets that exist in Web 2.0, or “the second stage of the development of the World Wide Web, especially characterized by the growth from static web pages to dynamic or user-generated content and social media.” NFTs are fully programmable and can use complex mechanisms, including but not limited to: future NFTs’ generative coding, exchange of existing ERC-20 tokens, and even changing the name of NFTs over time.

Gaming is the space where programmability may be the brightest. From one of the earliest blockchain-based games “CryptoKitties” to the current Ethereum-based games, people in some countries in “Axie Infinity” make money by playing it. Obviously, the utility of NFT games comes from its programmable Sex, the resulting assets have value beyond emotion or scarcity.

Why putting all this together makes NFT a disruptive opportunity?

In a word: decentralization . NFTs have and will continue to disrupt the digital economy because people are beginning to realize how similar the Ethereum-based NFT market is to the traditional physical market. If Best Buy sells MacBooks for $2,000 and Wal-Mart sells them for $1850, the free market is likely to play its role in pushing business to Wal-Mart because they charge lower fees for the same products. The previous situation assumes that Best Buy and Wal-Mart are equal in other respects, but this is not always the case. Suppose you live in a rural area. The nearest Best Buy is 10 minutes away, but the nearest Wal-Mart is 10 hours away. This will cost you time and gasoline, and may prevent you from pursuing a lower-priced computer. In this free market system, there are many frictions.

Therefore, the emergence of the Internet and e-commerce. Click a few buttons and you don’t even need to go to the store, how great! But there is still a problem, that is, centralized companies like Amazon are slowly weeding out small creators because they don’t have enough manpower to produce products quickly. Of course, there is also the issue of transporting and tracking physical goods. If there is a way to transfer assets from one person to another, prove that it was created by you and allow consumers to use it, without the need for giant companies to fake monopoly on your products. Welcome to Web 3.0, blockchain and NFT technology!

Please see the chart below to understand the timeline of Web development.

The most comprehensive analysis of NFT: the potential of the new digital golden age

A brief history of NFT, from Crypto Kitties to Axie Infinity

CryptoKitties, CryptoPunks, and Ethereum Name Service are some of the earliest NFT projects that started as early as 2017. CryptoKitties has attracted much attention as one of the first blockchain contracts deployed in the entertainment field. CryptoPunks is widely accepted as the first ERC-721 NFT series, and in 2021 has promoted the demand for NFT historical artifacts and avatars to represent your digital identity. Then we have The Ethereum Name Service, which predates the invention of the ERC-721 token, but is still technically an NFT. The ENS domain name can be purchased on the ENS website and is intended to be a human-readable wallet address that can be linked to your Ethereum wallet. Instead of sending the NFT or token to an address that looks like this, “0xd8dA6BF26964aF9D7eEd9e03E53415D37aA96045”, it can be read like this, vitalik.eth. This address belongs to Vitalik-Buterin, the current representative and co-founder of Ethereum.

The most comprehensive analysis of NFT: the potential of the new digital golden age

From Kevin McCoy’s “Quantum” to colored coins, Counterparty, Rare Pepes, Cryptopunks and CryptoKitties, get an insight into some of the decisive moments in the history of NFT.

What can an NFT represent?

It is important to understand that although NFTs can be art, not all are.

Other use cases of NFT include but are not limited to: intellectual property documents, records of historical relics, proof of ownership of physical and digital assets, games, programmable digital art, music, video, partial ownership of real estate, social tokens, VR wearable devices , Virtual real estate, event tickets, subscription badges, blockchain domain names, etc.

Some of the most noteworthy and highly anticipated use cases of the NFTs mentioned above are virtual real estate and games. This excitement stems from an idea called “meta universe”, or a virtual world with scarce assets and real value. Cathy Hackl of Forbes took a bullish stance in her recent article “Metaverse is coming, this is a very big problem”.

Some of the most compelling Metaverses currently being established and proposed include: Decentreland, The SandBox Game, Crypto Voxels, etc.

For artists, developers and content creators, the demand for your skill set and creativity has never been higher! There is now a huge emerging community. A huge emerging community is developing every day, accepting the participation of all artists and creators, and look at the historical sales and statistics of the top virtual world as of July 2021.

The most comprehensive analysis of NFT: the potential of the new digital golden age

Although this may sound like just a video game, it is so much because these platforms are built on the Ethereum blockchain. Maybe now is a good time to delve into the little diamond symbol you see in the graphic above. That is one of the symbols used to mark the sale of ETH, which is a native token on the Ethereum blockchain.

Homogeneous and non-homogeneous

The second piece of information from Investopedia’s definition is that NFTs cannot be exchanged for the same thing. To give an example of the traditional art industry, Leonardo’s “Mona Lisa” and Diego Velazquez’s “Las Meninas” are both famous and valuable works of art, but no one Will walk into a cafe, hand over the “Mona Lisa”, and then ask for “Las Meninas” in exchange…NFT is unique, so you guessed it, it is irreplaceable of.

In the market, you will often see a 1/1 next to an unforgeable token; however, you will also experience changes from 2/2 to 10,000/10,000 (or more). Although many people call a Token with multiple minted copies as NFT, technically speaking, this is incorrect. Any Token, if there is a symbol behind it, it means that more than one such Token has been minted on the blockchain, it is a “semi-homogeneous token”.

The often overlooked semi-homogeneous tokens function differently from non-homogeneous tokens. As an artist, you may want to consider why you have to make multiple copies of your work before minting your favorite blockchain.

The most comprehensive analysis of NFT: the potential of the new digital golden age

The most comprehensive analysis of NFT: the potential of the new digital golden age

The most comprehensive analysis of NFT: the potential of the new digital golden age

Decompose various ERC Token standards

Smart contract standards make possible the continuous innovation of Ethereum. They continue to bring more and more people, hoping to orchestrate values ​​and agreements in new ways on the Internet.

Although one person can create thousands of art types, a new crypto artist needs to understand the different types of tokens (smart contract standards) they may encounter. For this comparison, we will use the Token type on the Ethereum blockchain, although we will cover other blockchains later.

What is ERC-721 Token?

ERC-721 Token is an unforgeable Token with ERC-721 smart contract. These Tokens are unique, unique, and rare.

What is ERC-1155 Token?

ERC-1155 Token is a semi-homogeneous Token minted according to the ERC-1155 smart contract. These tokens may be quite abundant and may have different utility from ERC-721Token.

Think of ERC-721 Token as a concert ticket with designated seats, while ERC-1155 tken is an ordinary ticket. Although ordinary tickets can be exchanged with other people at the concert, tickets for designated seats cannot be exchanged. Although both types of tickets have value, they are not U.S. dollars. You cannot go to the franchise booth to pay for hot dogs with the ticket, because although it is valuable, this value comes from the specific utility the owner obtains from owning the ticket. In this case, it is to enter the concert.

What is ERC-20 Token?

An ERC-20 Token is neither an unforgeable nor semi-forgeable Token. ERC-20 Token is a completely replaceable Token whose function is similar to BTC or USD.

In your journey as a cryptocurrency artist, you will often encounter ERC-20 Token. They are a key role in decentralized finance (DeFi), and many organizations in the DeFi and Ethereum fields use their own ERC-20 Tokens.

NFT markets like Portion and Rarible each have their own ERC-20 Tokens, namely $PRT and $RARI.

The most comprehensive analysis of NFT: the potential of the new digital golden age

How to create (“cast”) NFT artwork

As an artist entering the world of crypto art, they may be eager to sell, but first take time to educate yourself, understand the basics of cryptocurrency and the process of creating a cryptocurrency wallet, use the Ethereum network, and cast your first NFT. There are stories about artists and creators outside. They didn’t take the time to understand the ins and outs of cryptocurrency and eventually lost a lot of money. (The author of this article is one of them…)

After understanding the risks, volatility, and mechanisms of cryptocurrency and DeFi, you need to purchase cryptocurrency related to the blockchain you plan to mint artwork. The most compelling blockchains that have been developed or are developing for NFT compatibility include: Ethereum, Tezos, Wax, Binance, Cardano, Polygon (MATIC) and Flow.

For simplicity, we will continue to use NFT on the Ethereum blockchain as an example, as it is the most widely used.

Step 1: Purchase ETH and set up a wallet

Register an account on a centralized exchange such as Coinbase, Gemini, Binance or Kraken.

Buy ETH. Please note that Ethereum is the blockchain that processes transactions, and ETH is the cryptocurrency you want to buy.

Download the MetaMask browser extension and create a cryptocurrency wallet. MetaMask will act as a wallet that you will carry with you, and your Coinbase account will behave like a bank.

Write down your mnemonic phrase and keep it in a safe place. Never use numbers! “The disadvantage of Web 3.0 and blockchain-based decentralized applications is that there is no password recovery. If you forget your password, your mnemonic phrase will be the only way to access your wallet again. On a piece of paper Write down your mnemonic phrase (recovery phrase) and keep it in an absolutely safe place.

Step 2: Choose which NFT market to sell on

For those who wish to cast a digital artwork, consider curated markets such as Portion, SuperRare, MakersPlace and Foundation.

For those who want more flexibility or control over their projects, consider websites such as OpenSea or Rarible.

Step 3: Decide how to price your artwork

When deciding the price of your NFT, consider your experience and the price you paid to create the work you want to sell.

Measure the market and similar artists.

Consider whether you are casting 1 work or more work. The general rule of thumb is that the price of your version should be equal to the price of your NFT.

Make your Genesis (first piece) work unique, and consider sticking to it until the need is proven. A lot is often more suitable for mature artists with high demand or practical tokens, such as the ordinary concert tickets mentioned above.

Consider the price of ETH. Although there is a catch phrase in the Ethereum world: “1ETH=1ETH”, it is undeniable that the NFT market as a whole follows the footsteps of ETH. As the price of ETH increases or the market is particularly unstable, the market tends to slow down. This may result in many transactions on the blockchain, making block space more difficult to obtain, and leading to higher “gas fees”, which we will introduce later.

Step 4: Auction or on sale?

Although some markets strictly provide the option of creating and selling NFTs through auctions, other markets allow more choices. When choosing these two methods, you should consider your potential buyers and your own sanity.

Overview of the top NFT markets

There are many NFT markets, and given the rapid development space, it seems that more NFT markets will appear every week. As an artist, before blindly casting your work, you have to consider which market is best for you. The top NFT market for creators to sell non-forgeable tokens may differ in how they run their sales, who is allowed to sell, and even operate on different blockchains, so when you pay for gas to mint you Be sure to observe carefully before the works.

NFT royalty

From the artist’s point of view, one of the most important benefits of NFT is the ability to obtain royalties from the resale of their works.

NFT not only allows creators to monetize their works on the primary market, but some blockchains, such as Ethereum, integrate royalties to make NFT one step further, that is, every time a creator’s work is purchased on the secondary market At that time, royalties will be paid to them. This means that as long as the NFT changes hands on the secondary market, the artist will get a certain percentage of each transaction, and it is permanent.

This is a huge revolutionary method that can help creative industries with a broken royalty system. Many artists, especially musicians, do not collect all royalties due to lack of transparency, either because the songs are not properly registered or because they are still unclaimed and are attributed to the publishing company.

Suppose the upcoming artist “X” sells their creation works to the buyer “X” at a price of 0.1 ETH. The artist “X” then became a well-known name and continued to sell their works for 1 ETH. The demand for the creation works of artist “X” has risen sharply, and buyer “X” plans to sell the works to buyer “Y” at a price of 10 ETH. In the traditional form, the artist didn’t take anything, just happy that someone valued their art so much. Although some laws have been thrown out, such as the “Art Act”, as Hyperallergic pointed out, “If passed, the Act will require a 5% royalty (maximum The royalty payment ceiling is $35,000). The bill only applies to auction houses with annual sales of more than one million U.S. dollars. “But such a law has not yet been passed. Fortunately, you can write royalties into smart contracts!

Platforms like Portion inspire artists to create high-quality works and are recognized by the market and collectors. Therefore, all original artists will continue to receive 11% of royalties as Portion Token rewards (similar to the traditional art market’s royalties system). This is the remaining reward each time the work is resold on the secondary market.

The most comprehensive analysis of NFT: the potential of the new digital golden age

The most comprehensive analysis of NFT: the potential of the new digital golden age

The most comprehensive analysis of NFT: the potential of the new digital golden age

Ethereum Ga s fees explained

Once you confirm your first transaction on the Ethereum mainnet, your MetaMask will prompt you to “sign” your wallet to confirm that you want to pay Gas fees to edit the blockchain.

According to the documentation of the Ethereum network, “Gas” refers to a unit that measures the amount of calculation required to perform a specific operation on the Ethereum network. Since each Ethereum transaction requires computing resources to execute, each transaction requires a fee. Gas refers to the cost of successful transactions on Ethereum.”

Here are several useful tools to understand and visualize gas and block transactions

→ Etherscan : Ethereum ‘s block explorer and analysis platform, is a decentralized smart contract platform.

→ Gas tracker : an all-in-one tool for optimizing your gas costs.

→ TxStreet : A visualization tool for real-time transactions on the blockchain of cryptocurrencies (Bitcoin, Ethereum , etc.).

How to promote my NFT art

A day in the NFT market is a year in the non-NFT world. You will not be able to keep up, you will feel FOMO. keep going.

Unlike physical artworks and collectibles, NFT exists in a basically frictionless market. The cost and risk of moving a fragile piece of art across the Atlantic from MET to the Louvre is astronomical, but for crypto art, you only need a bit of ETH and a few clicks of a button.

Once you have completed the process of creating your NFT artwork, you should promote it to the NFT community and reach out to potential collectors. There is a very strong community around NFTs, and artists are becoming more and more collaborative and creative in supporting each other’s artwork in the online (and Metaverse) community. Social media is the preferred marketing tool. Twitter, Discord, Telegram, Instagram, Reddit, and Clubhouse are much bigger than Facebook, Linkedin or other social media platforms. Don’t forget to also check out virtual platforms like Decentraland and Cryptovoxels! Spend your time building communities and supporting people around you, and making real connections!

Cryptocurrency relies heavily on the impulse of humans to copy and belong, and NFTs take this to a new level. There is a shareable memo to show that your community is on the same page, which is exactly what this space needs. The 72nd episode of the podcast Bankless did a good in-depth study of the power of mimicry and memos. Here are a few of my favorites:

The most comprehensive analysis of NFT: the potential of the new digital golden age

The most comprehensive analysis of NFT: the potential of the new digital golden age

Take a look at the chart below for some quick tips on how to effectively market yourself in the increasingly competitive NFT market.

The most comprehensive analysis of NFT: the potential of the new digital golden age

common problem

Do I have to pay taxes for NFT?

Quick answer: yes

Are NFTs a fashion?

Quick answer: no

Are NFTs harmful to the environment?

Quick answer: Yes, but…

Who are some famous NFT creators?

Answer: Beeple, Fvckrender, Fewocious, Lirona, BT

What are the notable NFT collections?

Cryptopunks

The most comprehensive analysis of NFT: the potential of the new digital golden age

Bored Ape Yacht Club

The most comprehensive analysis of NFT: the potential of the new digital golden age

Cool Cats

The most comprehensive analysis of NFT: the potential of the new digital golden age

Gutter Cats

The most comprehensive analysis of NFT: the potential of the new digital golden age

Crypto Hodlers

The most comprehensive analysis of NFT: the potential of the new digital golden age

Summarize

congratulations! You are becoming Frida Khalo of Metaverse! For a quick summary of what is explained in the above article, check out the infographic below.

The most comprehensive analysis of NFT: the potential of the new digital golden age

 

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