NFT definition – NFT to unlock the metaverse (NFT 101)

NFT technology has arisen as the continuation of blockchain technology. In today’s article, DarePlay would give a deep dive into the NFT definition, the NFT market with all the good, the bad and even the ugly in the current market.

What does NFT stand for?

NFT is an abbreviation for Non-Fungible Token. As the name suggests, NFT is a token that cannot be traded, sold or bought in fraction. For this fungibility, NFT are completely different from common fungible tokens like Bitcoin or any other cryptocurrency.

As Investopedia defined, non-fungible tokens (NFTs) are cryptographic assets on a blockchain with unique identification codes and metadata that differentiate them from each other.

A non-fungible token (NFT) is an unchangeable digital identity that is stored in a blockchain and used to verify ownership and authenticity. It cannot be duplicated, replaced, or divided.

An NFT’s ownership is documented in the blockchain and is transferable by the owner, enabling the sale and exchange of NFTs.

Moreover, anyone can make NFTs, and they don’t necessarily need to know how to code.

NFTs, over its evolution, has blended itself with fungible token to create a new type of token called “Semi-Fungible Token”. This term might sound a bit strange but it has many implications in our real life. Semi-fungible tokens, basically, are used as consumer products. A typical example for Semi-Fungible Token implications are NFT cinema and concert tickets. In these form of a ticket, the token contains critical information relating to time, date and type of events. So the value of this token is associated with the series it represents.

NFT timeline and milestone

Fig. 2 is just a brief history of NFTs. In fact, there is more on the whole picture of NFT development. Also check the dedicated site called “NFTtimeline” to trace back the history of NFT and how it has evolved from the start.

A report on NFT market in quarter 2. 2022 has shown that the majority of NFT market share are being dominated by The Other Side and Bored Ape Yacht Club – 2 projects developed by Yuga Labs. These two projects saw $2 billion traded in quarter 2, 2022 only.

Behind The OtherSide and Bored Ape Yacht Club’s all-time high trading volume

The cryptocurrency that powers the NFT Ethereum ecosystem, Ether, witnessed one of the best months of its trading history in May 2021. As the foundation currency for transactions, ETH reached an all-time high of $4,362 during the month, according to CoinMarketCap statistics.

The tremendous amount of liquidity that was pushed into the market had also benefited Bored Ape NFT sales. Bored Ape Yacht Club’s sale volume increased by 45,463.5% in just 31 days to almost $17 million. Total transactions increased by 5,158.52% and 2,417.73%, respectively, from April.

Another fact that influenced the trading volume of BAYC is the official announcement of Yuga Labs, releasing The Otherside metaverse in April. Notably, Otherside spared 200,000 plots of land to tribute the BAYC community.

Half of the land (100,000) have been rewarded to those who actively contribute to the development of the metaverse.

Out of the remaining half, 55,000 plots were put on sale on April 30, and the rest of land plots, 45,000 plots, were airdropped to holders of Bored Ape Yacht Club and Mutant Ape Yacht Club for free.

All of these impacted the average sale value of BAYC positively. By the end of April 2022, BAYC’s average sale value rose to $308,497.23, a record breaking number of its all-time high, equivalent to around 101 ETH.

Interestingly, Crypto Punk, one of the blue chip NFT collections, the used-to-be 1st rank, has recently felt behind Bored Ape Yacht Club in sale rankings. After reaching $2.4 billion in total sales, Bored Ape Yacht Club has officially surpassed CryptoPunks, which had revenues of $2.36 billion.

The state of NFT industry

According to DappRadar, NFT sales in the third quarter of 2022 were $3.4 billion, down from $8.4 billion in the second quarter and $12.5 billion at the market’s peak in the first quarter.

The nascent NFT market profited from rising cryptocurrency prices and investors’ high risk appetite in 2021, but these conditions have drastically changed in 2022 as rising central bank rates cause investors to shun risky assets. The price of bitcoin is currently about $19,000, down from its peak of $69,000 in November.

Zooming in on the big picture of the NFT industry, let’s check out its supply and liquidity in Q2. 2022, analyzed by the NFT academy below.

Total Supply Per Segment

	01/01/2022	01/04/2022	01/07/2022
Art	1,751,218	1,889,387	2,002,389
Collectibles	6,909,533	8,195,275	8,583,806
Gaming	21,602,192	22,635,899	22,742,730
Metaverse	503 ,730	538,644	658,101
Utilities	1,440,044	1,700,636	2,410,804

Percentage of Increase Over the Quarter:

Q1 2022	Q2 2022
7.89%	5.98%
18.61%	4.74%
4.79%	0.47%
6.93%	22.18%
18.10%	41.78%

OpenSea, the largest NFT marketplace, reported declining sales for the fifth month running in September.

Devin Finzer, CEO of OpenSea, which is backed by investors including a16z, said,

“I think what’s unique about this environment is it’s the intersection of both the macro economic downturn and the crypto winter. The previous crypto winters were a little more isolated to just crypto prices so for that reason, I think it’s wise to be conservative about how long this could last.”

However, he said that the company is in a “good spot financially” and he expressed excitement about the long-term potential of NFTs, referring to the current downturn as a “building phase.”

NFT classification

Over time, NFTs have been developed and evolved into various forms. To give you a comprehensive view on NFTs, we would like to classify NFTs into different categories as follows:

PFPs and Avatars

Definition:

Profile pictures and avatars are mostly common with those who just dabble into the world of NFT. This type of NFT, to mention, a starting point of the emerging NFT technology and its applications.

This type of NFT is basically used to make profile pictures or avatars. Those who do not share an approval for NFTs may criticize this type of NFTs as merely useless and worthless JPEG being overpriced.

Its proponents, in contrast, believe PFP NFTs are cool and proud themself over being first explorers in the next world – the extension of the internet, with web3 and the metaverse.

Examples

PFP NFT owners are free to use them on their own social media sites, most frequently as a form of digital flex. The larger NFT community gains significantly from all that online flexing since they effectively serve as free advertisements for NFTs. Numerous celebrities have added PFP NFTs to their social media profiles since the 2021 NFT boom.

One-of-One NFT art

Definition:

Normally, creators can divide their work into various editions during the NFT minting phase. Several editions of the same work may visually be similar to one another yet have unique edition numbers or token IDs.

While minting many editions of one artwork is fantastic for broadening the audience for an artist’s work, other creators choose to go completely the other way and mint their work as a one-of-one NFT.

By choosing this course, the object can only ever belong to one individual at a time, thus increasing its market worth.

Example:

This One-of-One NFT approach makes the most sense for producers wishing to benefit from the scarcity imposed by NFTs on digital commodities, as proven by artists like Beeple, XCopy, and Pak earning millions from their 1/1 NFTs.

Generative NFT art

Definition

Generative art is exactly what it sounds like: artwork produced in some way by a computer. Some works produced by actual robots also fit this criterion, even though they are frequently produced using generative algorithms or artificial intelligence (AI).

Several projects are leveraging generative art to generate NFT products.

Examples

Generative art has seen a resurgence and market boom, with initiatives like Art Blocks, Autoglyphs, and Braindrops pushing the boundaries of the genre.

NFT Collectibles

Definition

The market for sports trading cards and memorabilia has recently experienced a rise, not only physically, but digitally as well.

Blockchain and NFT Projects like NBA Top Shot serve as evidence that it is also occurring online. Collectibles continue to be a viable format for NFT projects despite that project’s well-documented rise and fall, particularly when they are associated with already-popular IP.

The rarity and value of NFT collectibles might fluctuate, just like those of their real-world equivalents. Because of this, they appeal to both collectors and enthusiasts who are willing to spend a lot of money to complete their collections.

Example

To name a few popular collections in this category, NBA Top Shot probably rank number 1. Other examples could be Gronkowski’s championship series, and NFT basketball collection

Photography NFTs

Definition

As more and more well-known photographers join the platform, the popularity of photography NFTs is rising and is expected to continue in 2022.

Example

Photographers like Julie Pacino, Justin Aversano, and J.N. Silva have so far found success working in the NFT industry. We anticipate seeing more producers combine photography with other creative disciplines as this NFTs market continues to expand in order to explore the hitherto unexplored creative potential of the sector.

Music NFTs

Definition

Most people are now aware of the music industry’s failure in giving musicians viable means of supporting themselves via their work. The musicians struggle since streaming firms grab the lion’s share of their earnings. Emerging from this situation, NFT music certainly have a role in turning the table.

Example

An NFT music piece is a tokenized representation of a musical work, such as a song, an entire album, or even a music video. With the help of platforms like Sound.xyz, Royal, and OneOf’s CO/SIGN initiative, musicians may now make money while maintaining creative freedom thanks to NFTs and blockchain technology. Owners can participate in the value of the release in some music NFTs. For instance, 3LAU’s Royal business lets supporters finance an artist’s creations.

Gamified NFTs

Definition

Gamified NFTs are basically in-game NFT items which exist and have value in NFT or blockchain games.

Players can possess in-game assets like skins, weapons, digital accessories, characters, and virtual land in the metaverse via NFT-driven play-to-earn (P2E) games, commonly referred to as “crypto games,” and trade these digital assets for money benefits.

Examples

Axie Infinity, Gods Unchained, and Decentraland are a few of the most well-liked games.

NFT event tickets

Definition

NFT use cases are expanding beyond digital art and avatar NFTs as the Web3 environment develops. Even event tickets are now being used to create blockchain-based presence tallies for music and other events.

For both live and virtual events, NFT ticketing enables users to utilize tokens as access passes. This is distinct from regular digital tickets since it gives issuers access to more detailed attendance data while also enabling them to send out announcements, hold unexpected contests, and create fan-only websites and services.

Examples

Even well-known events like Coachella have entered the NFT ticketing market, opening the door for others to start their own ventures like Las Vegas’ Afterparty and the Swedish music festival Way Out West.

NFT Membership passes

Definition

Although NFT-based memberships are a distinct subset of the NFT market, for the most part, they have evolved in tandem with PFPs to offer holders incentives.

NFTs are used as access keys by these exclusive programs to open a variety of services and incentives, including both virtual and actual experiences. Sometimes “token-gating,” which employs blockchain technology to confirm ownership of the NFT and provide holders access to any member-exclusive incentives on offer, is used to enforce NFT memberships.

Example

The Bored Ape Yacht Club is one of the earliest examples of NFT memberships.

Early on, Yuga Labs embraced their yacht-club image by restricting access to specific areas of their website and Discord server to anyone who owned a BAYC NFT. Members of BAYC get access to a variety of benefits, such as merch, special performances by A-list performers, and more. OneOf, Gary Vee’s Flyfish Club, and LinksDAO have all successfully emulated this model.

NFT Domain names

Definition

Before the word “NFT” was ever invented, domain name NFTs were a significant component of the NFT ecosystem. The acquisition and management of domain names for websites, wallets, NFTs, and other digital assets has become incredibly straightforward for consumers thanks to popular platforms like Ethereum Name Service and Unstoppable Domains.

Example

These domain names function as tradeable NFTs on the blockchain, and some, like “beer.eth,” which Budweiser purchased, command high prices on the secondary market. It’s not surprising that domain names have continued to gain popularity alongside the development of the NFT ecosystem given that the concept for Ethereum domain names dates back to 2015, when Linagee Name Registrar opened just a week after the Ethereum blockchain went online.

How does NFT work?

NFTs are essentially digital versions of actual collectibles. So the purchaser receives a digital file rather than an actual oil painting to display on the wall.

Additionally, buyers receive sole ownership rights, and NFTs can only have one owner at a time. Due to the distinctive data of NFTs, it is simple to confirm ownership and transfer tokens between owners. Additionally, the author or owner may choose to keep particular data inside them. As an illustration, artists can sign their work by putting their signature in the metadata of an NFT.
How to define the rarity of NFTs?

A NFT’s relative rarity to the rest of the collection is determined by its NFT rarity. Rarity and market worth typically go hand in hand, driven by the principles of supply and demand.

The exclusivity of characteristics, or the many components and features that make up the final token, determines rarity in the majority of PFP initiatives. The most effective methods for producing objective rarity use trait groups, sub-traits, and 1/1 traits.

How to create an NFT art

If you wish to create an NFT for yourself, follow our step-by-step instruction below:

Step 1: choose a marketplace

The creation of your NFT artwork begins with choosing an appropriate marketplace. There are two categories from which to select. You can either choose curated platforms or self-service platforms.

Curated marketplace platforms

The NFT marketplace category known as “Curated Platforms” permits only approved artists to mint or produce digital art tokens. Instead of merely basic and poor-quality collectibles, they are primarily focused on high-quality digital art tokens.

Markets for NFT are carefully managed on websites like SuperRare. They charge greater transaction costs and provide you less freedom to specify the royalties rates in your artwork.

Self-Service Marketplace Platforms:

Anyone may construct their NFT using whatever they want using this kind of peer-to-peer marketplace. You may thus create yours using a picture, a video, or an audio clip. Additionally, you may choose the royalty rate that you want to apply to each token sale.
This group includes websites like Rarible and OpenSea. This sort of NFT marketplace has certain risks since there are frequently too many copycats and con artists.

Step 2: Set up a digital wallet

There are different kinds of digital wallets you can create. Just choose one which suits you most. It could be Trust Wallet, Meta Mask or many others.

OpenSea often advises utilizing the MetaMask cryptocurrency wallet’s Chrome extension, buying your ETH, and preparing to mint NFTs.

But let’s say you already have an ETH-filled cryptocurrency wallet. In such a situation, you can make a MetaMask wallet and move the ETH there by transferring it from your primary wallet.

Gas prices for the creation of an NFT range from £10 to £200 in ETH. Therefore, go on to the following phase if your money is prepared.

Step 3: Create your NFT collection

At this time, you are not producing your digital arts token. You will notice My Collections on the OpenSea account screen; click it. Your digital creations are shown here as a store or gallery.

You must now edit your collection by giving it a name, providing a description, and adding a display image. This lays the framework for you to exhibit your works of art when you have finished them.

Step 4: Create your digital art token

Once your collection is complete, it’s time to start the main process of making your NFT. You may submit information by selecting Add New Item, which gives you the choice of visual (JPG, PNG, GIF, etc.), audio (MP3, etc.), and 3D files (GLB, etc.) as well as giving your token a name.

Tokens may be minted indefinitely, but you must do it one at a time. The number of versions of the same token you wish to manufacture is another crucial consideration.

Tokens may be minted indefinitely, but you must do it one at a time. The number of versions of the same token you wish to manufacture is another crucial consideration.

Stand-Alone Token: This makes the digital art token even more valuable since it suggests that there can only be one copy of it.

The Edition Token: The edition number is the only thing you need to include to identify each duplicate. Create as many identical tokens as you can with the edition tokens.

Then, where appropriate, add qualities, levels, and analytics to help purchasers who are perusing your collection sort the artwork. Property examples include the token’s creation date.

Step 5. Announcing the sale of your art

The following step after creating your NFTs is to post them for sale. You have the option of setting your price in an auction or a fixed-price listing.

You must pay a gas cost before advertising your artwork if it is your first time making and selling an NFT.

Step 6. Use social media to market your work

You must amass a significant following if you want to increase your chances of selling your work. In order to spread the word about your artwork to admirers on social media and attract new customers, you must post your direct link with them.

Best platforms for NFTs

OpenSea

With its 2017 start, OpenSea is one of the oldest and most established NFT markets still in operation. Numerous well-liked NFTs are hosted there, including those related to art, music, photography, trading cards, and virtual worlds.

Ethereum, Solana, and USDC are the three main cryptocurrencies utilized on OpenSea, while additional cryptocurrencies are available as payment choices. Just keep in mind that fiat currency like dollars and euros cannot be used.

Additionally, OpenSea is incredibly beginner-friendly. You may construct NFTs on their platform and browse NFTs right away after creating a free account, which only takes a few minutes.

Rarible

Users may purchase and sell artwork, collectibles, video game assets, and NFTs on Rarible. With Ethereum, Flow, and Tezos you may trade and make purchases on Rarible.

Rarible adds any petrol costs to a fixed 2.5% fee for each transaction. The ability to purchase NFTs with a credit card and conduct transactions in fiat currencies is a convenient feature.

Rarible has an intriguing feature: Rarible built its own native coin called RARI rather than letting internal management make all decisions. Owners of RARI may vote on corporate decisions, such as alterations to corporate policy.

Rarible and Adobe established a cooperation in 2021 to simplify the verification and security of metadata for digital material, including NFTs.

NBA Topshot

If you’re a serious basketball enthusiast, you may purchase NFTs of memorable events in basketball history on the NBA Top Shot marketplace.

For both the NBA and WNBA, you may purchase video clips, watch highlights, and purchase artwork. However, some of these Moments are pricey. Around February 2021, a LeBron James slam dunk video brought in $208,000.

The NBA has exclusive rights to these videos and established and runs the NFT marketplace. Additionally, you are confident dealing with a big, respected company.

One example of a large company embracing this technique is the NBA Top Shot market. The DraftKings Marketplace and the NFT Marketplace of the Associated Press are two more. This year, even GameStop intends to introduce an NFT marketplace.

Users have the option of paying for Moment NFTs using credit/debit cards or a number of different cryptocurrencies, including Bitcoin, Ethereum, Bitcoin Cash, DAI, and USDC. Expenses are applied to the purchase price regardless of whether you pay with a credit card or bitcoin.

Binance

In 2021, one of the biggest cryptocurrency exchanges, Binance, introduced an NFT market. Like Crypto.com NFT, a highly-curated NFP marketplace, the worldwide cryptocurrency exchange is only one of several business operators joining the NFT market.

The normal digital goods featured on other big platforms, including as artwork, games, and collectibles, are available on Binance NFT.

The fact that Binance NFT has extremely cheap costs is a significant benefit. Only 1% of each trade is deducted by the site. Additionally, it is a user-friendly platform created with the same technologies and designs as its exchange.

Binance has an advantage over other major players in the cryptocurrency market since it operates on its own blockchain.

NFTGateway

Digital artist Pak’s “The Merge,” which sold for $91.8 million, was one of the pricey and exclusive NFT transactions that Nifty Gateway is renowned for staging. The platform’s acquisition by Gemini, which is led by the Winklevoss twins Cameron and Tyler Winklevoss, in late 2019 garnered media attention.

This market specializes on art, particularly works by well-known painters and celebrities. Nifty Gateway employs a “open editions” concept to increase demand. You may only purchase editions of a new type of NFT for a certain period of time.

You may use your credit card to make purchases at this market. If you want to make a significant investment in NFTs and have access to more expensive choices, Nifty Gateway could be the best option.

SuperRare

A premium NFT art marketplace called SuperRare presents itself as an art gallery inside the NFT community. This market is quite picky about NFT submissions and does not accept “meme style” NFTs.

Investors can have greater confidence in the quality of the work since SuperRare spends so much time examining it before it is made available for purchase. When an NFT is initially sold on the primary market, SuperRate charges 15% as compensation for their services. The buyer additionally pays a fixed fee of 3% of each transaction.

If you’re searching for high-end NFT artwork, especially more traditional pieces, SuperRare can be an excellent option.

NFT future

NFTs that persist face falling prices and a varied backlash as a cryptocurrency winter sends many Web3 projects into meltdown. Those worried about sustainability may be alarmed by the consequences of the climate. The idea of incorporating NFT is met with opposition from many players. Elon Musk called the Twitter rollout of NFT profile images “annoying” in a tweet.

The consolidated nature of platforms like OpenSea, Coinbase, and Etherscan is questioned in a widely read essay by Moxie Marlinspike, the former CEO of Signal. According to Marlinspike, an NFT he made on OpenSea was removed from the service and vanished from his wallet. He draws attention to possible problems for cryptocurrency wallets that rely on OpenSea to show NFTs.

NFTs are immutable digital assets that depict works of art, musical compositions, or actual things. Recent assertions that NFT sales are stagnant have actually been thoroughly debunked: Due to ongoing improvements in their usefulness, on-chain data from Dune Analytics’ dashboard shows that the NFT market is still healthy. Additionally, it demonstrates that, in contrast to Nonfungible, the source used for the WSJ piece, NFT users and transactions are far greater.

Community, culture, and utility are the three pillars on which the value of NFT collections is based. When evaluating NFT collections, value may be found in a number of different aspects or in only one. The most well-known instances are also some of the greatest ones. The Bored Ape Yacht Club is the best example of a community that is active. Generative art (Artblocks) and CryptoPunks have advanced NFTs in the cultural arena, and the usefulness of gaming NFTs is a great illustration of how innovation may take place in the industry.

The NFT market may be unpredictable, but there is opportunity there. Because of volatility, investors might design buy-low, sell-high strategies that could result in enormous gains. A turbulent market also offers the ideal chance to separate the strongest projects and holders from the weakest.

Conclusion

To fully grasp the NFT technology and the potential it has to complement our real life, it’s necessary to spend time diving deep into the world of NFTs and stay tune with what’s changed in the market.

The Dareplay.io research team continues to dive into this topic. More articles will be released overtime, follow us to get yourself in tuned.