by Viktor A 

June 13, 2021

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After the year 2017, when the ICO market had its all time high, the blockchain tech in the NFT market has been under the spotlight for a long time. The NFT industry has a strong potential to change the current financial market because it can provide a faster, cheaper and more efficient way of linking the buyer with the seller, which is usually very time-consuming.

In early 2016, the crypto-verse was rocked with the news that a digital currency, NFT, would be issued on the Ethereum blockchain. For years, research had been showing that blockchain tech was being applied to real world problems, and the NFT market was no different. In fact, since Bitcoin’s inception, the blockchain had been applied to everything from voting to buying a cup of coffee.

In the past few years, there has been a surge in the number of virtual currency and blockchain-based projects that are being created. However, most of these startups are still struggling to be successful in the market. What is causing this? The answer lies at the core of what is fueling this revolutionary technology: blockchain.

The conversation about non-playable tokens, or NFTs, is interesting because they are a great example of how blockchain technology’s impact on people’s lives goes far beyond the financial market. As we’ve seen in hundreds of headlines in recent months, they’ve captured the world’s attention as a new way to engage with culture, music, sports and media. In this article, we explain what NFTs are, how they work, how the NFT boom started and why blockchain technology has enabled NFTs to create a new economy.

Why is there so much hype about the NFT?

NFT is an interesting and engaging topic of conversation because almost everyone loves music, art, games and the internet. All social media feeds are full of people who show no interest in crypto assets or decentralized finance but talk excitedly about unplayable tokens. In the first half of 2021, we saw a lot of celebrities and memes supporting NFT. Twitter CEO Jack Dorsey sold his first tweet as an NFT in March of this year for a staggering $2.9+ million. Edward Snowden’s NFT, a portrait of Snowden himself, sold for about $5.4 million, or 2,224 Ether (ETH). The NFT meme Zoë Roth, better known as Disaster Girl because of a meme from 2005 (and later) in which she stares at the camera with a devilish grin while a house burns down in the background, was sold as an NFT for 180 ETH, the equivalent of nearly $500,000.

Related: When Dollars Meet Fame: NFT market’s most famous hits(NY Times article)

Moreover, some companies in the traditional market have decided to follow the NFT wave. In Brazil, for example, the first Havaianas collection was auctioned at NFT last month. Since December 2020, NFT transactions have increased more than 25-fold, making NFTs a part of people’s daily lives. It could be one of your favourite songs, a cartoon about your favourite superhero, or a game instrument your kids want to buy. The chart below provides a clear picture of NFT’s growth over the past six months and the volume of business from the end of the third quarter to the recent peak.

What is the NFT? How do they work?

One can think of NFT as software code that verifies the properties of an irredeemable digital good or a digital representation of an irredeemable physical good on a digital medium.

For those who prefer a more technical view: The NFT is a smart contract model that provides a standardized way to verify who owns the NFT and a standardized way to move non-functional digital assets. In the NFT Market case, the target of the NFT could be any non-privileged asset, from domain names to event tickets, digital coins in games, and even identifiers on social networks like Twitter or Facebook. All of these non-functional digital assets can be NFTs.

NFT has a data structure (token) that links metadata files that can be associated with an image or file. This token is transferable and customized to meet the requirements of blockchain networks like Ethereum, Kusama and Flow, among others. The art file is uploaded to the blockchain network, which creates a metadata file in the token data structure.

As a creator of content, for example, the digital artist Beeple or the rock band Kings of Leon, you upload your art file to a platform that takes over the metadata of your file and goes through the entire back-end product process, also known as NMT. Your NFT then receives a cryptographic hash (key) – a tamper-proof record with a timestamp that is sent to the blockchain network. It is very important for any artist to keep track of their valuable data and make sure that it is not changed later on. When you upload your artworks to the channel, you better know when the art file metadata has been tokenized. Since the artwork data is uploaded, no one can retrieve or delete it, and there is virtually no chance of your artwork disappearing once your NFT is registered on the blockchain.

How has blockchain technology strengthened NFT?

Prior to 2008, traditional NMTs did not have a unified view in the digital world. As a result, they were not standardized and the NFT markets were closed and limited to platforms that produced and built deterministic NFTs. The first NFTs on the blockchain appeared with the arrival of colored coins on the Bitcoin blockchain. Although originally designed for bitcoin (BTC) transactions, their scripting language stores small amounts of metadata on the blockchain that can be used to represent asset management instructions.

On the other hand, the first NFT experiment based on the Ethereum blockchain was CryptoPunks, created by Larva Labs, which consisted of 10,000 unique punks to collect. The fact that punks live on the Ethereum network has made them compatible with digital markets and wallets.

NFTs became popular on the Ethereum blockchain in 2017 thanks to CryptoKitties, a cryptocurrency that allows users to create and breed digital cats with different pedigrees. This was a pioneering project to establish an advanced reward system, which showed that the NFT could be used as a promotional tool. This has led to an increasing interest in auction contracts, which have recently become one of the main mechanisms for pricing and purchasing NFTs.

The most interesting thing about applying blockchain technology to NFTs is that it greatly expands their benefits and capabilities. It has standardised the numerical representation of non-permanent assets through the ERC-721 standard. Similar to ERC-115 and ERC-998, ERC-721 is a smart contract model on the Ethereum blockchain that provides a standardized way to verify who owns the NFT, as well as a standardized way to move non-functional digital assets.

It is worth noting that although Ethereum is where most of the action is currently taking place, several NFT models have appeared on other blockchains. For example, goods, created by Mythical Games, focuses on implementing a cross-chain standard using the EOS blockchain. In addition, the first NFT TRON standard, TRC-721, was officially announced in late December 2020.

The adoption of this standard is expected to help the China-focused blockchain to leverage various applications based on distributed ledger technology and keep pace with the growth of Ethereum’s NFT sector. Since then, the NFT registered on the blockchain has truly become a unique asset that cannot be changed, counterfeited or faked.

What are the key benefits of blockchain for NFT?

We will explain them one by one. NFT models enable interoperability, which facilitates the transfer of NFTs between different ecosystems. In the new project, non-playable tokens can be instantly visible in dozens of different wallet providers, circulate in multiple markets and be purchased in multiple virtual worlds. This interoperability is only possible thanks to the open models made possible by blockchain technology.

As explained above, the first benefit of blockchain-based NFTs is standardization. In addition to standardizing the basic features of an NFT – such as Ownership, Transfer and Access Control – blockchain technology allows for the inclusion of additional features such as. B. Specifications on how to acquire an NFT. Other advantages are compatibility, tradability, liquidity, immutability, proven scarcity and programmability.

These provide a clear, consistent and reliable interface for application programming and authorization to read and write data. Interchangeability, in turn, has increased market opportunities for NFTs by ensuring free trade in open markets. Blockchain-based NFTs allow users to move their non-functional assets outside their original environment. You also get advanced trading tools, such as auctions and bidding processes, as well as the ability to trade in any currency, whether it’s cryptocurrencies like bitcoin and ether, Stabelcoins, or specific digital currencies from a particular app.

The immediate marketability of blockchain-based NFTs brings more liquidity to markets that can serve a wider audience and allows for a much wider range of non-poor asset buyers. The fifth and sixth advantages of using blockchain technology in NMT are immutability and proven scarcity. Indeed, smart contracts allow developers to place strict limits on the delivery of NFTs and specify long-term features that cannot be changed once the token is released.

Thus, it is possible to guarantee that the specific characteristics of the NFT will not change over time, since they are encoded in the blockchain. This is particularly interesting for the physical art market, which depends on the proven rarity of the original work.

An interesting trajectory in this new blockchain-based NFT world comes from recent trends and new markets, such as programmable art – which allows collectors to intervene in the original design of artwork. In the art market that the NFT represents, durability and rarity are important. In the digital art market, the advantage of programmability can play a role.

Examples of programmability can be found in Async Art, an NFT trading and creation platform that allows owners to change their images whenever they want. Another example of a programming feature is the ability to change the composition. This means that the music may sound different every time you listen to it. Both examples are made possible by dividing them apart into separate layers called bars. Each rod has several options for the new owner to choose from. An Async music track can therefore contain many unique sound combinations.

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Many people are still unaware of the scale of the NFT boom and how blockchain is revolutionizing the way art is consumed. Perhaps this topic deserves a more detailed discussion.

However, the power of NFT is the programmability of blockchain-based smart contracts that guarantee the content creator a reward every time his work is negotiated. Suppose a particular piece of content (music, art, domain name, photo of Pele’s door, etc.) is sold hundreds of times. In this case, the content creator receives a commission. This could completely change the dynamics of copyright and intellectual property because if revenue sharing is programmed into the NTF smart contract code, content creators will no longer have to worry about the legal ownership of their works.

Indeed, non-gambling token markets and blockchain technology have a long way to go to address scalability, marketing infrastructure and applicable jurisdiction in NFTs with decentralized storage. Nevertheless, we will not neglect the possibility of codifying the rights of a digital asset defined behind an NMT transaction. In this way, new businesses and markets can emerge, driven not only by traditional institutions or trusts but also by those who create value content in social and production hubs.

However, through a combination of the blockchain revolution and savvy marketing, the digital asset market has seen some incredible growth. Read more about how to create an nft and let us know what you think.

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