What Are NFTs?

NFTs are non-fungible tokens, or unique digital file records on a blockchain, a type of distributed ledger. 

NFTs can represent any digital or real world asset from collectibles like art or music, domain names, and in-game items such as avatars to real estate, parts of crypto mining operations, and business ownership.

Digital art like Bibi #3604, the NFT on the right, is an example of generative NFT art, where each NFT mint creates a random array of traits with different rarity scores such as laser eyes (3% have this trait) and chocolate bar (4% have this trait). Artwork by @darapixel.

everything published to the blockchain is public

NFTs are digital records of assets

NFTs validate authenticity and chain of ownership. They create digital records on decentralized immutable ledgers known as blockchains.
Ethereum and Bitcoin are two examples of decentralized immutable blockchains.
NFTs Bitcoin Rocket Art by Choong Deng Xiang
NFTs or non-fungible tokens are unique digital records of assets on a blockchain that cannot be duplicated, divided, or replaced by another identical item.

Traditional assets such as real estate titles or stock certificates have issues requiring an intermediary for secure transfer, speed, verifiability, and transparency, adding costs to every transaction. NFTs don’t. 

 Fungibility is the ability of an asset to be interchanged or exchanged with other goods or assets of the same kind. 

Most crypto coins, fiat currencies, and even commodities like oil and gold are fungible assets. A 100 dollar bill can be exchanged for five 20s or a different 100 bill and have the same value. 

 

Traditional non-fungible assets includes things like houses and used cars. Non-fungible tokens or assets are unique digital records of assets on a blockchain. 

NFTs are created or minted by executing code stored in decentralized smart contracts that assign ownership and manage the transferability of the NFT

Smart contracts are self-executing agreements or sets of instructions that are written in code and deployed on the blockchain in decentralizes manner.

Unlike regular contracts, which can be broken or are controlled by a centralized party, smart contracts are unbreakable promises that cannot be altered once their code is deployed on the blockchain.

  • decentralized
  • censorship resistant
  • trust-minimized
  • immutable
  • transparent
  • remove counter party risk

blockchain immutability is the ability of a blockchain ledger to remain permanently unalterable

What Is A Blockchain?

A blockchain is a distributed digital ledger. A record of transactions.

Ethereum and Bitcoin are distributed digital ledgers a.k.a. blockchains.

A distributed ledger is a decentralized database that is consensually shared and synchronized across multiple sites or geographical locations.

Decentralization refers to the transfer of control from a centralized entity to a distributed network. Unlike a centralized database, a decentralized blockchain has no central administrator.

Decentralized blockchains are immutable, which means that the data entered is irreversible. Once a transfer or transaction happens its recorded forever on the blockchain

Ethereum and Bitcoin are decentralized, immutable blockchains, meaning that transactions are permanently recorded and viewable to anyone.

While most do operate in an immutable manner, only blockchains that are truly decentralized and robust enough to prevent hostile takeover of 51% of the network are fully immutable.

something that is immutable has an inability to change or be changed

NFT smart contracts and ownership are immutable.

NFT data is stored on the blockchain through smart contracts, which are immutable provided the blockchain on which they are deployed is immutable.

All NFT transactions create a permanent unalterable record on the blockchain. Thus, ownership of an NFT is also immutable.

NFTs are incorruptible, and while there are look-alike copycats, these are easily distinguishable from authentic collections. 

Creators share contract identifying information, and collectors are able to verify authenticity by checking the on chain data for any token to see who created it, when, and the chain of ownership.

Ownership of NFTs is immutable and recorded on the blockchain.

Immutable ownership is one reason NFTs can replace old school methods of keeping ownership records such as car and real estate titles. There is no need to pay a title company $600 to transfer a title when you buy a home.

 

NFTs are easy to transfer. Unlike records of stocks or physical baseball cards, NFTs are simple, fast and cheap to move around securely and verifiably.

Moving shares of Apple stock from Robinhood to Bank of America, for example, can take more than a week.

If my Apple stock shares were NFTs, however, they could be securely and verifiably transferred between wallets on the blockchain in moments at a very low cost.

Everything that is published to the blockchain is public.

In order for the code of an NFT smart contract to run it must be published to the blockchain. That means NFT smart contracts are transparent or able to be viewed by anyone.

Similarly, in order for an NFT transaction to take place, it too must be published on the blockchain, making all NFT transfers trackable.

Authenticity and community. 

Many popular NFT collections fall under this category. 

Successful ART NFT creators find ways to build loyal collector communities through a range of collector benefits that vary from collection to collection.  

Art NFT benefits could include more NFTs, access to IRL events, contests, token generation, etc.

Tokenizing real estate assets and fractional ownership. 

Axie Infinity is maybe the most successful example here.

However, there are many new projects and more in the pipe line with various iterations of in-game items or upgrades you can take with you, trade, sell, or use to earn in game crypto currency.

OpenSea is the first and largest NFT marketplace.  As such it has the widest selection of user-owned digital goods and the most trading volume.

Due to this, users often complain that OpenSea is too big for its own britches as OpenSea’s massive size leads to platform growing pains and slow page speeds.

OpenSea is powered by smart contracts designed for buying and selling unique digital assets a.k.a. NFTs.

Smart contracts let users protect the custody of their NFTs on the platform. 

Although OpenSea facilitates NFT transfers, users make transactions directly with others users on the blockchain by linking OpenSea to a supported Web3 wallet.

OpenSea is secured and generally considered ‘safe,’ but does not protect individuals from user-errors such as accidentally sharing your keys, getting coaxed into a phishing hoax, or purchasing a scam collection.

OpenSea’s core currencies are Ethereum (ETH/WETH), SOL, USDC, and DAI. Some fiat / credit card options

No, OpenSea does not run a decentralized governance system.

OpenSea supports multiple blockchains including Ethereum and Solana

MetaMask – Web3’s most popular wallet and one of the industry’s oldest players MetaMask can be used as a browser extension and a mobile app.

Coinbase Wallet – A self-custody wallet that gives you control of your crypto, keys, and data, the Coinbase Wallet can be used as a mobile app or a browser extension.

TrustWallet – A non-custodial mobile wallet with support for over 1 million cryptocurrencies.

Portis – Connect to dApps with an email address and password, from almost any web browser, on any device – including mobile phones.

Fortmatic/Magic – A user-friendly wallet from that allows users to sign up from any device with a phone number.

Venly – a multi-blockchain digital wallet that builds an open network between individuals, ecosystems, and dApps. Allows users to store assets with a native solution that also works on mobile devices.

Authereum – An Ethereum-based, usability-focused wallet and dApp solution with no transaction fees and a fiat on-ramp.

Bitski – A simple-to-use wallet allowing users to sign up with an email and password.

Dapper – A browser extension that pays gas fees for you.

Kaikas – A Chrome browser extension that interacts with the Klaytn network from websites.

OperaTouch – Opera Crypto Wallet works with both your Opera computer browser and your Opera Touch for iOS browser (or Opera for Android) on your mobile device.

Torus – A low friction wallet that allows you to login with Facebook, Google, and other OAuth providers.

WalletConnect – a protocol supported by many different dApps and wallets.

WalletLink – WalletLink is an open protocol that lets you connect your mobile wallet to DApps running on any browser like Coinbase Wallet.

Phantom – Phantom is a non-custodial Solana wallet that lets you do more than just deposit and send cryptocurrency.

Glow – a fast, easy-to-use Solana wallet.

Nifty Gateway is a Gemini owned company and the perfect NFT marketplace for newcomers because unlike other marketplaces it is a custodial platform.

This means NFTs on Nifty Gateway are stored in a secured wallet, powered by Gemini’s state-of-the-art custody technology, which enable collectors to move work on platform (buy, sell, gift) without the cost and hassle of gas fees.

It also means that unlike other marketplaces, Nifty Gateway can help you restore access to your collection if you lost your account information.

LooksRare is a decentralized NFT marketplace.

Rarible is a smaller peer-to-peer marketplace with easy to use minting and trading features.