What are NFTs? — Part 1. what exactly are NFT’s? What type of…
By: The Gallery
Tags: Nft Marketplace, Nft, Cryptoart, Gallery, Jigstack

In this first article, we will speak about NFTs, its emergence from the crypto realm, and its significance to the investors. But what exactly are NFT’s? What type of tokens are they? What is the history of NFT’s?

Let’s start!

What is a Non-Fungible Token (NFT)?

In the blockchain world, there are two types of digital assets: fungible and non-fungible.

Fungible means that one unit is interchangeable with any other of the same type. For example, one kilogram of gold is interchangeable with another kilogram of gold.

Non-fungible means that one unit is unique and not interchangeable with any other. In the non-fungible token space, each token is unique and not interchangeable with any other. This means that each token represents something unique. This can be an asset, a share of a company, an in-game item, a digital certificate, and more.

There are many ways to represent a non-fungible token, but the most common are:

ERC-721 Tokens;

ERC-1155 Tokens.

ERC-721 Tokens

ERC-721 is a standard created for Non-Fungible Tokens. It specifies a set of functions and events that a Non-Fungible token contract has to implement. The standard is heavily inspired by the ERC-20 standard and shares a lot of common characteristics. As such, ERC-721 tokens are also easy to mint and transfer. However, they are unique. Each ERC-721 token is a different instance of the same contract. They can be transferred to different addresses, but each token instance can only be transferred to one address.

ERC-1155 Tokens

ERC-1155 tokens are often described as a “next-generation multi-token standard”, and the focus here is truly a “multi-token” approach. A collection of ERC-721 tokens can prove slow and inefficient, for instance, when transferring multiple armor pieces in a game for a particular character. This is where ERC-1155 comes in, and can offer unique digital NFTs, that allow batch transfers of multiple tokens at once, and at a much faster speed than an ERC-721. ERC-1155 is developed by Enjin and supports both non-fungible tokens as well as fungible tokens.

NFT History

Maybe not everyone knows but the history of non-fungible tokens has been a long and interesting one, with many crypto projects trying to solve the issue of unique digital assets, even starting with Bitcoin. Let’s look deeper.

2013, Colored Coins, the very first NFTs to exist. Colored Coins are made of small denominations of a bitcoin and can be as small as a single satoshi, the smallest unit of a bitcoin. Colored Coins can be used to represent a multitude of assets and have multiple use cases, including property, coupons, ability to issue your own cryptocurrency, issue shares of a company, subscriptions, access tokens, digital collectibles

2014, Counterparty, a peer-to-peer financial platform, was founded and built on top of the Bitcoin blockchain and attracted various projects including trading card games and meme trading in the following years

2017, Ethereum started to gain prominence and American studio Larva Labs released CryptoPunks, a project to trade unique cartoon characters, on the Ethereum blockchain. In late 2017, another project called CryptoKitties where players adopt and trade virtual cats was released and quickly went viral, raising a $12.5 million investment and some kitties were selling for over $100,000.

2018, Decentraland, a blockchain-based virtual world, raised $26 million in an initial coin offering and had a $20 million internal economy as of September 2018.

2019, Nike patented a system called CryptoKicks that would use NFTs to verify the authenticity of physical sneakers and give a virtual version of the shoe to the customer.

In early 2020, the developer of CryptoKitties, Dapper Labs, released the beta version of NBA TopShot, a project to sell tokenized collectibles of NBA highlights. The project was built on top of Flow, a newer and more efficient blockchain compared to Ethereum. Later that year, the project was released to the public and reported over $230 million in gross sales as of February 28, 2021.

In 2021 interest in NFT continued to spike, and a number of high-profile sales were made just in the first few months. In February 2021, the musician Grimes sold around $6 million worth of tokens representing digital art on Nifty Gateway. Later that month, an NFT representing the meme animation Nyan Cat was sold in an Internet marketplace for just under $600,000. In March 2021, Jack Dorsey, founder of Twitter and Square, sold an NFT representing his first tweet for over $2.5 million.

The Inter Planetary Filesystem

However, we know tokenizing files on the blockchain is very expensive, the most widely used decentralized solution at the moment is IPFS.

Permanence and immutability are part of the core value proposition of an NFT. Unfortunately, many NFTs being targeted at consumers today offer neither of these properties due to fundamental design flaws. It is common to hear claims that NFTs “live on a blockchain forever”, but frequently, due to the cost and space limitations of storing data on a blockchain, only the ownership record is actually stored, with metadata linking to the actual content of the NFT.

All too often, these links are fragile and direct the user to a specific location using the HTTP protocol, rather than a specific asset. This means that the content pointed to by the link could change or go offline at any point in the future, leaving the original asset lost forever (and the record of ownership worthless).

The InterPlanetary Filesystem (IPFS) can help address these concerns and NFTs that leverage IPFS gain several advantages. However, adhering to established conventions is critical to ensure the permanence and accessibility of data stored on the network. With non-fungible tokens (NFTs) surging in popularity, it’s a good time to revisit best practices for linking and storing NFT data on IPFS. In this post, we’ll address two areas of recent concern in particular: content addressing and content integrity. You can find more details on the IPFS documentation site, in this article called Best Practices for Storing NFT Data using IPFS.

Read more about how IPFS can help bring permanence and immutability to NFTs.

Jigstack NFT solution: GALLERY

The NFT industry is booming and it wouldn’t be right for Jigstack to just sit out and watch. We have big plans for Jigstack and we will be tapping into this industry in the near future. We can’t say too much about what’s to come but we can say that we’re going to make NFT’s even better than they are now and provide even more value for the Jigstack ecosystem. The integration of NFT’s to Jigstacks DAO will push it that much closer to becoming the industry known DAO of DeFi.

Stay Tuned Gallery:

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👉 Discord: https://discord.gg/RaQdphYfyh

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