NFT is a non-fungible token, non-fungible, or unique token. NFTs work on the blockchain, they first appeared back in 2017 on the Ethereum system. 

The blockchain itself is actually a ledger of records. For example, bitcoin or ether are recorded in the blockchain. NFTs too. Such tokens, like any cryptocurrency, can be stored in your crypto wallet and used for making transactions with them. 

But there is an important difference. Bitcoins, ethers, other digital currencies, and even real money easily replace each other and are divided into parts. NFTs cannot be split or replaced with a similar token. From this point of view, the NFT has all the properties of a unique item in the physical world. 

What Does NFT Sell? 

With the help of NFT, you can sell almost any virtual object, images, music, texts, or 3D models. But most often we are talking about objects of digital (or digitized) art. 

For example, on March 11, 2021, a JPG file with 5,000 paintings by the artist Beeple glued together was auctioned off for $69.3 million in ether, that is, in the Ethereum cryptocurrency. The collage is called Everydays: The First 5000 Days. It includes all Beeple paintings over the past 13 years. 

Auction house Christie's sold the artist's work in the form of NFT. In the 255-year history of the house, this is the first such case and at the same time the largest transaction in the history of the NFT market. 

The participation of Christie's and the final amount of the transaction fueled the hype around the new tool.  

How do digital objects turn into NFTs? 

This happens on special platforms that work with NFTs. There are several popular sites - for example, Rarible, Mintable, OpenSea. The last one is the largest. All of them are both NFT marketplaces and NFT workshops. 

To create a token, you will need a wallet in the Ethereum system, as well as a file with digital content. Usually, the algorithm of actions is similar to working with a virtual photo album. Simply create a collection and add a media file (or files) to it in any of the available formats, from PNG to MP4. Each file needs to come up with a name and, preferably, a description. 

The platform creates a token and sends it for verification. Some platforms do this with a delay: the token is created after a buyer has been found for the media content. 

The monetization scheme of the platforms is different: some take a commission from NFT buyers, others take a commission from the author (seller). The size of the commission is also different - from tenths of a percent to 10% or more percent of the transaction amount. 

In addition, a certain set of owner rights is sewn into the NFT. Usually this is permission to freely display images or play music and videos. But sometimes sellers include the entire set of copyrights in the token. 

For example, musician Clarian put up for auction his 12-track album "Whale Shark" with an initial bid of almost $190,000. The buyer will become the full owner of the album. “The owner will be able to do whatever they want with the music: stream it online, license the soundtracks, change it and remix it, destroy it or keep it for long trips to the beach,” the listing says. 

Thus, NFT is digital property (JPG pictures, audio tracks, videos, photos, and much more) plus a set of certain rights to it. And from a technical point of view, it does not matter whether it is a real art or a randomly created file. 

But the use of unique tokens is not limited to collecting. 

In 2019, Nike patented the CryptoKicks sneaker authentication system. When buying a pair of shoes, an NFT is generated. As in the case of crypto cats, such a token contains the entire “pedigree” of sneakers: data about the manufacturer, appearance and special parameters, and information about resales. 

Further, virtual shoes begin to live their own lives. Owners of unique tokens with digital sneakers will be able to cross pairs (yes, again, like in CryptoKitties), but in the form of real shoes.  

Another example of linking the real and virtual worlds through NFT is the Crypto Stamp project of the Austrian postal service. These are postage stamps tied to tokens. They are used to mark real mail. At the same time, each stamp is stored on the blockchain and can be part of a digital philatelic collection. 

Summary

Potentially NFT can be used as an investment object. According to NonFungible, in 2020 the NFT market size was $250 million. At Edsson we have had clients for whom we created custom NFT objects. Our team of experts is always aligned with the latest trends in the tech world.