NFTs Dapps & Tools

Frequently asked questions

What are NFTs?

Non-fungible tokens (NFTs) are a type of digital asset that represent ownership of unique items. The term "non-fungible" refers to items that are not interchangeable because they have unique properties. In contrast, "fungible" items like Ethereum (ETH) or dollars are interchangeable because their value defines them, not their unique properties.

NFTs are built on top of a blockchain (like Ethereum) using smart contracts, allowing them to represent anything unique as a blockchain-based asset. This has resulted in a significant shift in the digital art and collectibles world, with artists seeing considerable sales to a new audience of cryptocurrency users. Celebrities have also adopted NFTs, seeing them as a new way to connect with fans.

How do NFTs work?

NFTs, or non-fungible tokens, stand apart from ERC-20 tokens like UNI or LINK, as they are wholly unique and cannot be divided into smaller units. They enable the allocation or assertion of ownership over distinct pieces of digital data, with a blockchain serving as a public ledger for tracking purposes. An NFT is created, or "minted," from digital objects to symbolize digital or physical assets.

The minting of NFTs is carried out via smart contracts, which establish ownership and control the transfer of the NFTs. When an individual mints an NFT, they execute code held in smart contracts that adhere to various standards, such as ERC-721. This information is subsequently added to the blockchain where the NFT is managed.

What can NFTs represent?

An NFT could represent Digital Art such as GIFs, collectibles, music, videos.

However, digital art is just one application of NFTs. They can be used to represent ownership of any unique asset, whether digital or physical like Real World Items such as deeds to a car, tickets to a real world event, tokenized invoices, legal documents, signatures, etc. For instance, they can be used to tokenize real estate, collectibles, or even specific items like a pair of Nike Jordans. In the future, ownership of various assets, such as a car, might be represented by an NFT.

NFTs address some of the problems present in the digital world today. As society becomes increasingly digitized, there's a need to replicate physical properties like scarcity, uniqueness, and proof of ownership in the digital realm. Current digital assets often only work within their product context and cannot be resold or exchanged, even if there's a market for it. NFTs provide a solution to these issues, creating a new "internet of assets" where ownership of unique digital and physical assets can be secured and verified on a blockchain blockchain.

NFTs as digital content?

Non-fungible tokens (NFTs) are currently revolutionizing the digital content industry, especially for content creators who have traditionally seen their earnings eroded by digital platforms. Artists, for instance, gain exposure by publishing their work on social networks, but the profits largely go to the platforms that sell advertisements to the artist's followers. In this traditional model, the artists don't own their content; the platforms do.

NFTs, however, are enabling a new creator economy in which artists maintain ownership of their content. The ownership is inherently part of the content itself, which is represented as an NFT. When artists sell their content, the funds go directly to them. Additionally, if the new owner resells the NFT, the original creator can automatically receive royalties. This is ensured because the creator's address is part of the token's unmodifiable metadata.

Critics often argue that NFTs are pointless, citing the ability to screenshot or copy digital content freely. However, this perspective overlooks the value of verifiable ownership. Just as having an image of Picasso's Guernica doesn't make you the owner of the multi-million dollar artwork, owning a screenshot of an NFT doesn't provide the same value as owning the original token. The value of owning the verifiable original increases as the piece of content is shared and used more widely. Therefore, owning the verifiably real thing will always have more value.

NFTs as gaming items?

Non-fungible tokens (NFTs) have garnered substantial interest in the gaming industry, offering numerous benefits for both game developers and players. NFTs can provide verifiable records of ownership for in-game items and fuel in-game economies.

In many traditional games, players can purchase items for in-game use. However, these items typically have no real-world value and cannot be resold. If these items were NFTs, players could sell them when they no longer need or want them, potentially even making a profit if the items increase in desirability.

For game developers, issuing NFTs can generate continuous income since they can earn a royalty every time an NFT item is resold in the open marketplace. This results in a mutually beneficial business model, where both players and developers can profit from the secondary NFT market.

Moreover, NFTs ensure that in-game items remain the player's property even if the game is no longer supported by the developers. This means that in-game items can outlive the games themselves, becoming digital memorabilia with value outside of the game.

An example of this concept in action is Decentraland, a virtual reality game that allows players to buy NFTs representing virtual parcels of land, which they can use as they wish.

NFts as Physical items?

While the tokenization of physical items isn't as advanced as that of digital ones, many projects are exploring how to convert real estate and unique fashion items into non-fungible tokens (NFTs). Given that NFTs essentially serve as digital deeds, one can envision a future where purchasing a car or a house with e.g. ETH would also entail receiving the deed as an NFT in the same transaction.

As technology continues to evolve, it's conceivable that your wallet could serve as a key to your car or home, with doors unlocked by the cryptographic proof of ownership embedded in the NFT.

Moreover, NFTs representing high-value assets like cars and property could be used as collateral in decentralized loans. This could be a valuable tool for individuals who aren't rich in cash or cryptocurrency but own physical assets of value.

Tokengating content with NFTs?

Tokengating is a process that utilizes non-fungible tokens (NFTs) to control access to certain content or services. This could range from restricted content and private chat servers to exclusive products in the e-commerce realm.

In a platform utilizing tokengating, users are typically asked to link their wallets to prove they own the necessary NFT. If they possess the required NFT, they are granted access; otherwise, the content or service remains inaccessible. NFTs are particularly suitable for this purpose due to their unique properties, which make it impossible to falsify ownership.