Non-fungible tokens are digital records that vouch for the authenticity of an artifact that you own. They are recorded using blockchain technology, and therefore cannot be manipulated in any way. The only method of transferring NFTs is through selling them in the market.
NFTs are records of photographs, videos, paintings, etc created in the digital space. More than the monetary value, NFTS are known for their artistic value and are indispensable for their owners. This explains the importance of these digital records.
This article is meant to guide you about everything related to NFTs and their various use cases.
Non-fungible Tokens In Detail
The term non-fungible represents a one-of-a-kind and irreplaceable entity. It is in contrast to the notion of cryptocurrencies that are fungible tokens. You can replace a cryptocurrency with another cryptocurrency of equivalent value, but a non-fungible token cannot be replaced by another token. You can trade an NFT for another entirely different NFT or in return for any kind of currency.
NFTs are proof of ownership and cannot be interchanged for copyright records. NFTS are mostly built on Ethereum, Solana, and Cardano.
History Of NFTs
NFTs are a new invention and only have a history of a decade. The first NFT was a video clip owned by Kevin McCoy. The video was made by his wife. Kevin sold this NFT to Anil Dash, and the first NFT transaction was recorded. It was registered as an NFT on the Namecoin platform and was sold for $4.
The first NFT project on the Ethereum blockchain was Etheria, which was created in October 2015. Etheria had 457 tiles as tradeable artifacts, which were completely sold in 2021. This project garnered a total of $ 1.4 million.
Rare Pepes is another NFT based on the Pepe Frog meme token, created in 2016. 2017 saw the emergence of many NFTS based on the ERC-20 criteria; Curio Cards and Cryptopunks are examples of the same.
A new standard for measuring the value of NFTs, ERC-721, was developed in 2018. This new standard was first adopted by an NFT game called CryptoKitties. It was at this time that a dedicated marketplace for NFTs called OpenSea was formed. Soon it rose to a big contender in the NFT arena with a huge market capitalization of $1.4 million.
The NFT marketplace grew manifold and gained the attention of the virtual world towards the second half of 2021, but this boom was short-lived. By 2023, the boom in the NFT marketplace subsided, and as reported by experts, a majority of the NFTs in existence now have no significant monetary value.
The Different Forms And Use Cases Of NFTs
As you have already understood, NFTs come in various forms such as art pieces, video recordings, audio files, games, etc. In this section, we will look into the various use cases and forms of NFTs.
1️⃣ Piece Of Art
The most commonly available form of NFTs is digital arts. Works of art, whether digital or otherwise are pretty much expensive and valued by everyone, but several digital forms of art such as The Merge and Everydays: The First 5000 Days are the most expensive NFTs that have ever been sold; they were valued at $91.8 million and $69.3 million, respectively.
Most art pieces in the NFT space are created as generative art by combining various artworks. There are no standard ways to determine the authenticity of such pieces of work. Forged works or works that are copied from others cannot be detected and this often poses a huge violation of intellectual property rights.
2️⃣Games
Another form in which NFTs mostly exist is games. The distinguishing feature of NFT games is that the users are the stakeholders and have the final say in the game’s development, rather than its developers. Due to this reason, several online platforms such as Microsoft have banned crypto games.
CryptoKitties was a successful game NFT based on the ERC-721 standard. The game gathered over $12.5 million in terms of revenue over the years,
In 2021, the NFT gaming sector faced a huge setback with the Valve Corporation banning all games built on blockchain technology.
3️⃣Music And Films
NFTs also come in the form of music and films. Famous movie scenes and songs can be tokenized as NFTs and can be collected by people as valuable artifacts. It is an extension of the royalty scheme.
The first NTF used to promote a film was in 2018. The NFTS were digital posters of Deadpool 2 made by the 20 Century Fox and Atom tickets.
The first documentary film converted as an NFT was Claude Lanzmann: Spectres of the Shoah by Adam Benzine. The film released in 2015 was made an NFT in 2021.
Triumph by Gregg Leonard was the first song converted as an NFT in 2021.
The first music album to be made as an NFT was Will of the People created in August 2022.
4️⃣NFTs In Science And Medicine
Another major use case of NFT is in the field of science and medicine. Patents in the sector can be filed in the form of NFTs. NFTs have also been used by the following universities and research institutes for funding various research projects.
- The University of California sold two patents for CRISPR gene editing and cancer immunotherapy as NFTs.
- A US geneticist, George Church, sold his DNA as NFT to fund research in genomics.
- Molecule Protocol is a project that uses NFTs to represent copyrights in the field of scientific research digitally.
5️⃣Other Use Cases
Doge, an NFT created based on the meme token of Shiba Inu, is an example of an NFT created on an internet meme.
NFTs are also used in trading in the real estate space whereby investors can own land or other real estate entities in the form of NFTs.
A novel way of using an NFT was the video of a political protest in which Prof Stanislavos Tomas destroyed a plaque in honor of the Nazi war criminal Jonas Noreika at the Lithuanian Academy of Sciences.
In another instance, Donald Trump created NFTs using his image, which is said to have earned him around $1 million.
NFT Scams: How To Stay Safe?
NFTS are a major area where lots of scams are found. The decentralized nature of NFTs and their wide availability have made NFTs a favorite haven for scammers.
NFT scammers operate by selling low-value NFTs at high rates or selling fake NFTs that do not have any value. As this sector is unregulated there is no way to identify or control scammers if they pose as genuine NFT artists or celebrities who sell original works.
Some of the most common NFT scams are listed below.
- Fake Artworks and Fake NFTS based on original artworks: In these cases either an NFT is created on a fake/non-existent artwork or a fake NFT is created by a scammer based on an original piece of art.
- Rug-Pull Scams: In the case of rug-pull scams, the scammers abruptly withdraw from the advertised NFT schemes after creating a huge hype and earning a good amount of money from investors.
- Phishing: Phishing in NFT marketplaces is identical to phishing in other online sectors prevalent in the NFT marketplace. Scammers can lure people into revealing their details inadvertently or can gain access through false URLs.
- Pump and Dump Schemes: Pump and dump schemes are attempts at fraud where the scammers advertise highly inflated rates for tokens and then suddenly sell their holdings so that the price falls.
How To Safeguard Yourself From NFT Scams?
The fact that scams are rampant in the NFT marketplace should not deter investors from collecting them. There are a few steps that you should take to safeguard yourself from scam attempts.
- Always do thorough research before investing in NFTs. You should inquire about the authenticity of the piece of art, and the artist, and should invest in it only after you have enough data to establish the veracity of the NFT.
- You should make purchases only from authentic, established marketplaces and NFT creators of good repute.
- You should not fall prey to unrealistic promises or invest in NFTs that have had inexplicably high price rises in recent times.
- Before making payments, you should double-check the authenticity of the URLs and make sure that the payment is made to the right address and not to any scam attempts.
- Gather enough information about each NFT scheme and educate yourself about the general market trends before making investments.
Also, Read: How to Create and Sell NFTs for Free
The Bottom Line: What Is The Future Of NFTs?
NFTs are a great innovation in the decentralized marketplace where creative artists can capitalize on their works and earn digital tokens. They can also help preserve artworks in the form of digital records, which can easily accessed by future generations.
In 2024, the NFT marketplaces are set to bloom and become a huge driving force for the Web 3 marketplace. The market is shifting towards a mature period now. Many new use cases such as NFTs for financial loans will be created in the future. NFTs will also be sold through e-commerce websites or physical stores in the coming years.
While the future is bright for investors of NFTs, they should take good care not to fall prey to scams or other attempts at fraud.
