As the adoption of cryptocurrency continues to accelerate globally, millions of people worldwide are being exposed to new ways to transfer and store money and other digital assets for the first time.
While the likes of Bitcoin, Ethereum, and even Dogecoin, lead the charge in putting blockchain technology on the map, non-fungible tokens or NFTs are also quickly becoming a household name.
In this article, we’ll share what an NFT is, why they matter, and how they will continue to play a significant role in the future adoption of crypto and blockchain technology.
What is an NFT?
While the term ‘non-fungible token may seem intimidating, NFTs are nothing more than a specific unit of data stored on a digital ledger such as a blockchain. This data can represent a piece of digital art or any other form of media such as video, audio, or even text.
Unlike cryptocurrencies such as Bitcoin and Ethereum, a non-fungible token is one of a kind based on its specific data.
For example, if you were to exchange one USD at the bank, you would ultimately still have a dollar. NFTs on the other hand, are designed to be unique, and therefore naturally collectible. Just like there is only one true Mona Lisa painting, there is only one of any specific NFT.
As Nofungible.com notes:
“Non-fungible tokens (or “NFT”s) are a special class of assets on the blockchain characterized by being unique and non-interchangeable with one another for equal value.
An NFT is different from a cryptocurrency in that it is defined by metadata that builds-in a role, function, and value that are unique to it. Specifically, a non-fungible token can be a video game asset, a work of art, a collectible card or image, or any other “unique” object stored and managed on a Blockchain.”
NFTs can be sold, traded, or even used as a virtual currency in a variety of online games. As our founder and CEO of MoonPay, Ivan Soto-Wright recently shared with The National News:
“The singularity of each token makes them easy to verify and can drive certain tokens to be highly sought after…they offer a unique guarantee of authenticity as they cannot be copied, stolen or replicated. You bought it, you own it. You can sell it, too.”
For most use cases, it can be helpful to think of NFTs as a digital version of Beanie Babies or Pokemon cards, with the bonus of being able to transfer them across the world in seconds—no postage required.
What was the first NFT?
While there is some debate as to who rightfully claims the title of being the world's first NFT, the “Colored Coin” created in 2013, is considered by many to be the earliest concept of a non-fungible token.
As investor Andrew Steinwold shared in his excellent Medium article on the history of NFTs:
“One could argue that Colored Coins are 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.”
That said, it wasn’t until several years later in 2017 that NFT projects began picking up steam with the launch of both CryptoKitties and CryptoPunks.
CryptoKitties, created by DapperLabs, continues to have a thriving community worldwide even today, with thousands of CryptoKitties being sold, traded, and bred daily.
CryptoPunks, created by LarvaLabs, is a series of 10,000 pixelated ‘punk’ avatars that are some of the most sought after NFTs today. At the time of this writing the minimum price in which you can purchase a CryptoPunk is 19.4 ETH or $46,082.56 USD.
More recently, additional NFT projects and artwork have gained mainstream attention. Most notably, artist Beeple selling his digital art for a record $69 million. Over the course of the last year, hundreds of celebrities, artists, musicians, and brands have also launched their own NFTs allowing fans and collectors to own a piece of history.
NFTs and the Blockchain
While there are hundreds if not thousands of blockchains in operation, the Ethereum blockchain is currently the blockchain of choice for most NFT projects. Because popular cryptocurrency wallets such as Metamask and Trust Wallet support the ERC-721 standard, it’s relatively easy to purchase, send, and receive NFTs for anyone comfortable with using those cryptocurrency wallets.
The accessibility of blockchains such as Ethereum for both technical and non technical folks the opportunity to monetize their work, defeat piracy and plagiarism, build communities, and manage royalties in a way that has never been possible before.
“As everything becomes more digital, there's a need to replicate the properties of physical items like scarcity, uniqueness, and proof of ownership,” says the Ethereum organization.
The bright future of NFTs
As the demand for NFTs continues to grow, marketplaces such as OpenSea, Rarible, and Nifty Gateway are hard at work, making NFT ownership and creation more accessible to everyone.
And at MoonPay, we’re committed to doing our part to help organizations on the forefront of crypto and NFT innovation to make that a reality. We’re honored to play a small role in providing the payment infrastructure needed for current and future marketplaces.
Though NFTs are still in their infancy, the rapid development continues to positively impact the future direction of some of the biggest societal and technological shifts of our time.
NFTs aren’t just ‘digital art.’ They offer an entirely new way to consume, create, share, and connect.
Exciting times indeed.