Non-fungible tokens (NFTs)

Non-fungible tokens (NFTs) on the Ethereum blockchain are tokenised versions of assets that can be traded. NFTs map ownership of a digital asset to the holding of a unique token on chain.

10 most expensive nfts sold so far

Collecting and Storing Art with NFTs

In the digital era the way people purchase, collect, and store art has changed. However, collecting art is not new, traceable back to the ancient civilizations of Egypt, China, India, and Babylonia.

Decentralisation Matters

Blockchain decentralisation transfers control and decision-making from a centralized entity to a distributed network.

What exactly is Blockchain?

Blockchains are a new way to record transactions using distributed digital ledgers. Blockchain technology is undeniably, faster, cheaper, and more secure than traditional systems.

What exactly is Blockchain?

Blockchains are a new way to record transactions using distributed digital ledgers. A distributed ledger has no central administrator but is instead a consensus of replicated, shared, and synchronized digital data geographically spread across multiple sites, countries, or institutions.

Blockchains differ from typical databases in how they store information. Blockchains store data in blocks that are then chained together in chronological order. Every cryptocurrency transaction is stored on a digital ledger that records the cryptocurrency transaction. 

Blockchains use a large network of computers to verify each transaction on that distributed ledger. 

What is Ethereum blockchain?

Ethereum is a decentralized, open-source blockchain with smart contract functionality. Ethereums open-source, blockchain-based, decentralized software platform enabling SmartContracts and Distributed Applications (ĐApps).

Ethereums Smart contracts and Dapps can be built and run without downtime, fraud, control, or interference from a third party.

Blockchain transactions are faster, cheaper, and more secure

Blockchains are undeniably, faster, cheaper, and more secure than traditional systems, which explains why now why banks and governments are adopting the technology.

Blockchain Storage Structure

The key difference between a typical database and a blockchain databse is the way information is stored. Blockchains store information together known as blocks, A blockchain collects information together in groups known as blocks which that hold sets of information

A blockchain is a decentralised, distributed, public, digital ledger

A blockchain is a decentralised, distributed, public, digital ledger consisting of records called blocks. The blockchain chain of blocks contains information, where each block contains some data, the hash of the block and the hash of the previous block. A blocks hash can be compared a to a fingerprint, it's always unique, identifies a block and all of its contents. 

What is an NFT?

An NFT is a digitally unique digital asset that can be traded on a blockchain. NFT assets are unique in some way, and can’t be exchanged like for like.

What is an NFT (non-fungible tokens)?

An NFT is a digitally unique digital asset, with an immutable record of transactions that are updated each time the asset is transferred. Each NFT has an owner stored on its verifiable public record.

An NFT is a unique token living on a blockchain. The NFT token represents (or points to) some other data, like an image or video.

An NFT turns digital artworks into real-world assets.

What does Non-Fungible mean?

NFT tokens are non-fungible, meaning each token is unique and irreplaceable. Fungibility means completely interchangeable, non-fungible means items that are not interchangeable.

How do NFTs work?

An NFT is a blockchain-based record signifying the ownership of the token. Most NFTs are built using a consistent standard known as [ERC-721]

The majority of NFT's consist of just a smart contract, as NFT's content and metadata are stored separately from the NFT smart contract.

What is minting an NFT?

Minting an NFT is the process where artists issue authenticated single edition digital artworks, certified on the Ethereum blockchain. NFT's prevent forgery and provide historical provenance.

An NFT is essentially a smart contract. The smart contract asserts a digital piece is the original, and all the others are just copies/digital prints.

How do NFT's Prove Ownership?

An NFT is a blockchain-based record (Smart Contract) signifying the ownership of the token. NFT's prove ownership the same way as with Crypto Coins. The NFT buyer must take steps to protect and store the NFT.

What is a smart contract?

A smart contract is a computer program or a transaction protocol, essentially an agreement between two people in the form of computer code. Smart contracts automatically ensure that money and assets change hands and both parties honour their agreements.

A smart contract is a mechanism involving digital assets and two or more parties, where some or all of the parties put assets in, and assets are automatically redistributed among those parties according to a formula based on certain data that is not known at the time the contract is initiated. — Vitalik Buterin

What is the point of NFTs?

NFT's allow us to directly support digital artists monetizing directly with their fans. You become a collector and patron of the artist by actually owning some of their work. 

NFTs also enable artists an ability to profit from the secondary market, by setting a resale fee (usually between 5 and 10 percent) specified at the time of minting.

Can anything be a NFT?

NFT-represented assets don’t need to be digital, although NFTs suit digital assets more naturally than physical assets. An non-fungible token can be a work of art, a collectible card or image, a video game asset, or any other unique object stored and managed on a Blockchain.

When a NFT is minted, a Smart Contract is created on the the Ethereum blockchain. The smart contract essentially becomes the deed to whatever the token represents, which is is how NFTs can be digital artworks, virtual collectibles or physical property. NFTs can also tokenise physical documents (diplomas, house deeds, etc).

NFT secondary market sales

NFTs enable creators an ability to profit from the secondary market. This is accomplished at the time of the NFT minting, we can establish a fee (usually between 5 and 10 percent) we receive each time someone resells the NFT.

How do I access, store and swap Ethereum tokens?

Bitcoin and Ethereum operate anonymously through the use of private and public keys. Investors or NFT Collectors create a unique digital wallet identified by a string of characters, not their name. It is in this way every transaction on the blockchain markets is kept secure and private.

How do I buy NFTs?

NFTs can be purchased with the cryptocurrency Ethereum (Ether) from NFT exchanges like Open Sea, Super Rare and Foundation.

How do I mint a NFT?

With a NFT exchange account and a connected wallet with ETH in it, you can mint NFTs. You will need some ETH (the cryptocurrency used for all transactions on Ethereum) in your wallet to pay for the transaction costs on Ethereum.

What information can be stored on a blockchain?

An NFT is a digitally unique digital asset, with an immutable record of transactions that are updated each time the asset is transferred. Each NFT has an owner stored on its verifiable public record.

An NFT is a unique token living on a blockchain. The NFT token represents (or points to) some other data, like an image or video.

An NFT turns digital artworks into real-world assets.

Nyan Cat

Nyan Cat is a viral internet sensation. Nyan Cats' design was inspired by the artist cat Marty who crossed the Rainbow Bridge but lives on in spirit.

How Do I Sell my NFT Digital Art?

You get a wallet, join an exchanfge and mint your artwork as an NFT. There are numerous digital marketplaces where you can do this, including Open Sea, SuperRare, Nifty Gateway and Foundation.

Prepare the NFT Assets

Prepare the NFT Assets (artwork) as TIFF, AI/EPS, JPEG/PNG, or MPEG-4. The cost to mint large files on Ethereum is prohibitive, so large files are stored off-chain using decentralised storage systems and referencedin the NFT metadata.

Setup an ERC-721 enabled crypto wallet

To mint an NFT on any exchange, you will require a NFT (ERC-721) enabled crypto wallet loaded with some ETH. ETH can be purchased using a credit card on exchanges like Coinbase, Kraken or Binance then sent to your Metamasks unique address.

A ERC-721 enabled crypto wallet enables you to interact with NFT platforms when buying or selling artworks on the blockchain. ERC-721 is a free open standard describing how to build non-fungible or unique tokens on the Ethereum blockchain. The reason you need ETH in your wallet is to pay the Ethereum network transaction fees (called gas) to power the NFT minting process.

The Metamask virtual wallet is currently is the most widely supported digital wallet by NFT exchanges. Metamask is free and works as Chrome extension and functions as crypto wallet & gateway to blockchain apps.

Choose an NFT exchange and authenticate

Minting an NFT is the process where artists issue authenticated single edition digital artworks, certified on the Ethereum blockchain. NFT's prevent forgery and provide historical provenance.

Minting an NFT on an exchange creates a smart contract that asserts a digital piece is the original, and all the others are just copies/digital prints.

Mint Your NFT!

With a NFT exchange account and a connected wallet with ETH in it, you can mint NFTs. You will need some ETH (the cryptocurrency used for all transactions on Ethereum) in your wallet to pay for the transaction costs on Ethereum.

You also need to understand the NFTs you mint on exchanges are tied directly to your wallet.

How much does it cost to mint an NFT?

Minting a NFT is not free. You have to pay the Ethererum transaction costs. It costs between $15.00 and $50.00 to mint a single NFT artwork on Ethereum. It also costs around $3.00 or more to send it to another account.

How long does it take to mint an NFT?

Minting an NFT is the process where artists issue authenticated single edition digital artworks, certified on the Ethereum blockchain. NFT's prevent forgery and provide historical provenance.

What are the technical specifications for a NFT?

A NFT can contain a JPG or PNG, or a video file in MP4 format.

NFT Minting Platforms

NFT minting platforms have made it easy for anyone to mint an NFT. In 2021 we are seeing NFT platforms enable bulk creation, unlockable content, and rich media. Digital artists wanting to mint NFTs can do so without having to program a smart contract. 

How Do NFT Marketplaces Work?

  • 1

    Sign up for a platform

    Sign up on to a NFT marketplace, install a digital wallet, create a collection, which will contain your NFTs. Configure the auction parameters.

    Opensea platform
  • 2

    Setup a Crypto Wallet

    Setup a crytpo wallet to store NFTs and Crypto. When an item is listed, a transaction is created which create a smart contract for the NFT and store it in the user’s wallet.

    Metamask wallet review logo big
  • 3

    Mint the NFT

    With a NFT exchange account and a connected wallet with ETH in it, you can mint NFTs. You will need some ETH (the cryptocurrency used for all transactions on Ethereum) in your wallet to pay for the transaction costs on Ethereum.

    Blockchain Minting
  • 4

    List the collection for sale

    The platform will moderate then list the NFT item for sale. 

    10 most expensive nfts sold so far
  • 5

    NFT buyer places bid

    When the auction closes, the seller will receive notification of the top bids. 

    1*fo2ffjqfq24jm966t kfmw
  • 6

    Transfer of goods

    The NFT platform will now handle the transfer of goods and funds. NFT marketplaces do charge some fees on the selling amount for transferring funds and NFTs. 

    Nfts Transfer of goods

ERC-721 Non-fungible Token Standard

Most NFTs are built using a consistent standard known as ERC-721. The ERC-721 introduces a standard for NFT type of token that is unique and can have a different value than another Token from the same Smart Contract. 

Crypto Wallets

A crypto wallet is where you securely keep your crypto. There are many types of crypto wallets, the most popular being hosted wallets, non-custodial wallets, and hardware wallets. 

Hosted Crypto Wallets

Hosted wallets are third party wallets that keep your crypto similar to how a bank checking or savings account keeps your money. Crypto exchanges like Coinbase incorporate a hosted wallet that automatically holds your Crypto purchased on these exchanges. 

The primary benefit of hosted wallets is protection in case you forget your password. The downside is you can't access advanced crypto activities like yield farming, staking, lending, borrowing, etc.

Non-custodial Crypto Wallets

Non-custodial wallets don’t rely on third-party custodians to store and protect your crypto. Non-custodial wallets give you complete control of your crypto and all the features of the technology. 

Non-custodial Wallets do however require you to remember and safeguard your Wallet password referred to as a “private key” or “seed phrase”. If you lose your password with a hardware wallet there’s no way to access your crypto. If someone accesses your private key they can take all of your Crypto assets.

Hardware Crypto Wallets

Hardware wallets are thumb drive size physical wallet devices. These wallets store the private keys to your crypto offline so you can keep your crypto secure even if your computer is hacked. 

Hardware wallets are not free and are more complex to manage but are no doubt the safest way to manage and secure your crypto assets (including NFTs). 

Keep Your Coins Secure

Since an NFT can't be easily changed after it's been created, it's a good idea to think about how the data for your NFTs is stored, addressed, and made persistent over time. Just as there are many ways to store money there are many ways to store crypto and NFTs.

Storing NFT Data Off-Chain

How to store your NFT content and metadata
seamlessly and securelly.

Immutable NFT content storage

Because a NFT can't be easily changed after it's been created, it's a good idea to consider how the NFT data is stored, addressed, and made persistent over time. On blockhain, immutability mean the NFT is secure as it's replicated it across thousands of computers/nodes across the world.

The blockchain will handle the minting and bookkeeping of the NFT, and ensure the metadata of the NFT is immutable. But during the NFT creation process we need to use an URL link that references the actual asset. We add this URL in the metadata of the NFT, which points to the NFT asset that is stored off-chain.

Off-chain NFT storage

Blockchains aren't designed for storing large amounts of data. With Blockhains it is extremely expensive to replicate large amounts of data across the thousands of nodes on Blockchain. The solution is storing the NFT data off-chain, and securing the data so it's perpetually available. We are linking the NFT metadata to the place where the asset or artwork is stored.

IPFS

The InterPlanetary File System (IPFS) is a protocol and peer-to-peer network for storing and sharing data in a distributed file system. IPFS allows users to host and receive content in a manner similar to BitTorrent, rather than deploying files from a centrally located server.

The InterPlanetary File System is a peer-to-peer protocol to share and store files. IPFS uses content-addressing to uniquely identify each file. IPFS's peer-to-peer hypermedia protocol was designed to make the web faster, safer, and more open. 

IPFS's represents data of any size and format in a secure, verifiable, and distributed way that can stand the test of time. IPFS uses content identifiers called CID, where ther content is referenced as hashes. The CID becomes part of the URL, and the URL won’t change if the content doesn’t change.

Be aware however that with IPFS if you change the content, the content identifiers (CID) will also change.

NFT.Storage

nft.storage is a brand new service in BETA, built specifically for storing off-chain NFT data. Data stored off-chain with NFT.Storage will be available in IPFS indefinitely.

From nft.storage: NFT.Storage fills the gap for NFT developers today who are looking for easy APIs and best practices for storing their NFT data securely and resiliently. In the long-term, NFT.Storage will hopefully decentralize itself out of existence, upgrading today's implementation into the provably permanent storage solutions of tomorrow.

Arweave

Arweave is a decentralized storage network. They are a platform for the indefinite storage of data. One of Arweaves tagline is "collectively owned hard drive that never forgets". Arweave also backs data with sustainable and perpetual endowment. 

The Arweave blockchain can store and pin files onto IPFS and keep them available permanently. They take an IPFS Hash, store the data onto Arweave and pin it to IPFS.  

The Arweave network native cryptocurrency AR is used to pay "miners" to indefinitely store the network's information.  

Textile

Textile open source tools provide a decentralized IPFS-based storage and content hosting.

Filecoin

Filecoin is a decentraliused storage network powered by built-in incentives.

Blockchain Native Virtual Worlds

NFTs can be used for virtual land ownership and in-world assets. Decentraland is the first fully decentralized virtual world for creating, exploring and trading virtual world assets owned by its users.

Selected NFT Art Marketplaces

The NFT industry has become a multi-billion dollar industry.

SuperRare

SuperRare is a digital art market on Ethereum, trading unique, single-edition digital artworks. Each artwork is authentically created by an artist in the network, and tokenized as a crypto-collectible digital item that you can own and trade.

Open Sea

Open Sea uses what they call Lazy Minting. This means the NFT isn’t transferred on-chain until the first purchase or transfer is made. Open Sea describes this as 'unbundling the on-chain issuance of the NFTs from the metadata'. You can easily mint NFT's with an Open Sea account.

Nifty Gateway

Nifty Gateway is another marketplace for what they call 'Nifties', which are just NFTs!

Foundation

Foundation is a 'creative playground for artists, curators and collectors to experience the new creative economy.'

Mint Base

Mintbase provides users (minters) with various creative allocation and redemption mechanisms for their customers.

Know Orgin

Known Origin is another digital art marketplace powered by Ethereum.

Vitalik Buterin

Bitcoin and Ethereum are doing different things. Bitcoin is a digital currency, and the protocol is written to sustain this cryptocurrency. Clearly, Ethereum platform has ETH, it is also a digital currency, but it exists to sustain the protocol.— Vitalik Buterin

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NFTs FAQ

  • What are NFTs in Crypto?

    An NFT is basically a digital collectable item. NFTs are unique digital assets with their ownership recorded and certified on the blockchain. The NFT token represents (or points to) some other data, like an image or video.

    NFTs (non-fungible tokens) are tokenised versions of assets. NFT's are traded on a blockchain. With NFTs the underlying assets are unique in some way and can’t be exchanged like for like.

  • What is Crypto artwork?

    Crypto artwork is generally sold through “non-fungible tokens,” or NFTs. NFT's are unique digital tokens that live on a blockchain and verify ownership of a piece. 

  • What exactly is Blockchain?

    A blockchain is a distributed ledger of transactions. The Blockchain is simply system for recording information in a way that's difficult to change or hack. The **blockchain** digital ledger of transactions is duplicated and distributed across the entire network of computer systems on the blockchain.

  • What is the InterPlanetary File System (IPFS)

    IPFS is a distributed system for storing and accessing files, websites, applications, and data. IPFS is used in mintiung NFTs. 

    Instead of being location-based, IPFS addresses a file by it's content, meaning what's in it, instead of being location-based. 

  • What is a non-custodial platform?

    A non-custodial platform/wallet means the exchange/wallet provider has no means of accessing or freezing the wallets funds.

    A non-custodial wallet means you have sole control of your private keys and your coins.

  • How do I buy NFTs?

    NFTs can be purchased with the cryptocurrency Ethereum (Ether) from NFT exchanges like Open Sea, Super Rare and Foundation. OpenSea, Mintable, Rarible are the three largest and most popular platforms. 

  • What is distributed storage?

    Distributed data storage is where information is stored on more than one node, often in a replicated fashion.

  • Why are NFTs so popular?

    NFTs are unique, or non-fungible, digital tokens that run on smart contracts on Ethereum. NFTs have enabled a way for purchasing exclusive items, such as collectibles, online. NFTs originated in 2015 with the first NFT projects launched in 2017.

    As each NFT token is unique and can't be replicated, NFTs create scarcity which makes them valuable.

  • What are Blockchain Domain Names?

    The Blockchain .crypto & .eth domain name extensions can now be used in place of digital wallet addresses.

  • Fungible vs. Non-Fungible Tokens

    Fungible assets like like Bitcoin, Etherum, Litecoin are all fungible assets, or assets that have the same value. 

    Non-fungible tokens (assets) are tokenised versions of assets, where the underlying assets are unique in some way and can’t be exchanged like for like.

  • What does it mean to be "ERC-721 compliant"?

    A proper NFT smart contracts on Ethereum should be ERC-721 compliant. ERC-721 is the standard for how NFT unique tokens are be managed, owned and traded.

  • Why do NFTs have value?

    NFTs uniqueness and ownership can be verified, and can be traded easily through secondary markets.

  • Where are NFTs Hosted?

    NFTs are predominantly “hosted” on a Web3 protocol called the InterPlanetary File System (IPFS) which enables referencing the location of a piece of data rather than storing it. Also the IPFS address of a file in IPFS is created from the content itself. 

  • What is a Smart Contract?

    Smart contracts are a blockchain technology to allow us to exchange anything of value in a transparent, conflict-free way without the requirement of a middleman. Money, property, shares, or art can all be exchanged using smart contracts.

  • How do you make NFT art?

    To make a NFT you mint the artwork using an NFT art exchange like Open Sea.

  • Can I create an NFT for free?

    You can mint NFT's for free, without paying gas use Open Sea's Lazy minting service. With Open Sea's Lazy Minting the NFT isn’t transferred on-chain until the first purchase or transfer is made. They are 'unbundling the on-chain issuance of the NFTs from the metadata in your Open Sea Account for the work. 

  • Are NFTs bad for the world?

    Ethereum powers most crypto art platforms and while more efficient than bitcoin, Ethereums creator Vitalik Buterin has called the system “a huge waste of resources.” NFTs are produced using inefficient data validation computer processes.

  • What can be minted as an NFT?

    A blockchain is a distributed ledger of transactions. The Blockchain is simply system for recording information in a way that's difficult to change or hack. The **blockchain** digital ledger of transactions is duplicated and distributed across the entire network of computer systems on the blockchain.

  • What's an Ecologically Friendly NFT?

    There is an environmental impact associated with mining crypto tokens, due to the computer intensive algorithmic mining required to mint an NFT.

    Like Bitcoin, Ethereum uses a consensus protocol called Proof-of-work (PoW) to allow nodes of the Ethereum network to agree on the information recorded on Ethereum's blockchain, and also to prevent certain forms of economic attacks.

    Ethereum has a solution on their development roadmap to switch from Proof of Work (PoW) to Proof of stake[PoS), which is estimated to eliminate up to 99% of the current power consumption requirements.

  • The Future of NFTs

    NFTs are transforming the digital art landscape, and it’s just the beginning. As virtual real estate platforms like video games are on the rise, the demand for NFT artworks, both for collection and investment purposes, will continue to grow. 

  • What is an NFT Creators Code of Conduct?

    Good ethics for creators foster a healthy long term relationship and trust with collectors. Below are some guidelines on the emerging NFT Creators Code of Conduct:

    • Don't mint anyone else’s work
    • Don't mint the same work on different chains or platforms
    • Don't re-mint work unless it is in a transformative way
    • Declare an NFT work series from the first minted work
    • Be transparent on issues with NFT preservation and longevity
  • What is IPFS?

    IPFS is a hypermedia distribution protocol that incorporates ideas from Kademlia, BitTorrent, Git, and more.

    IPFS is a peer-to-peer file transfer network with a completely decentralized architecture. There is no central point of failure, censorship, or control.

    IPFS is an on-ramp to tomorrow's web. Traditional browsers can access IPFS files through gateways like https://ipfs.io or directly using the IPFS Companion extension

    IPFS is a next-gen content delivery network (CDN). We simply add a file to your node to make it available to the world with cache-friendly content-hash addressing and BitTorrent-style bandwidth distribution.

    IPFS is also a developer toolset for building completely distributed apps and services, backed by a robust open-source community.

    The IPFS Desktop app bundles an IPFS node, file manager, peer manager, and content explorer into a single, easy-to-use application.

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NFT Creators Code of Conduct

Good ethics for creators foster a healthy long term relationship and trust with collectors. 

Emerging NFT Creators Code of Conduct

  • Don't mint anyone else’s work
  • Don't mint the same work on different chains or platforms
  • Don't re-mint work unless it is in a transformative way
  • NFT work series oughta be declared from the first minted work
  • Physical editions with the same NFT content oughta be tokenized
  • Be transparent on potential issues with NFT preservation and longevity

The Non-Fungible Token Market

The non-fungible token marketg is still small and more difficult to measure than the cryptocurrency market. 

Market growth

The NFT market is young, but steadily growing. Peer to peer sales of non-fungible tokens is estimated to be roughly $2 – $3 million USD volume per month. 

Sale Mechanisms

NFTs are traded primarily for ETH on decentralized exchanges. As NFTs are created and stored on the blockchain, they can be traded seamlessly from wallet to wallet. And artists can receive royalties every time the NFT is traded. You can set a fee of up to 10%

NFT Distribution

Number of users interacting with NFTs, as defined by transferring, bidding on, buying, or selling. 

What’s next for NFTs?