Introduction to NFTs
Introduction to NFTs
Traditional encrypted assets, such as Bitcoin and Ethereum, retain features such as fungibility and interchangeability. In contrast, NFTs are non-fungible and non-fungible. These two features are illustrated below with examples.
Homogeneous tokens can be divided. For example, someone can own 0.5 BTC or 1.1 BTC. In contrast, NFTs are indivisible, which means that 1 NFT cannot be divided into smaller parts.
Fungibility allows tokens to be exchanged for each other. For example, one BTC has the same value as any other BTC. On the contrary, each NFT is not interchangeable, and each pass is unique in the entire blockchain, just like the art assets in the real world, the Mona Lisa is different from Monet.
For some time in the past, we have been unable to judge the authenticity and ownership of content shared online. In the process of pirated music from dissemination to local storage, the original work is no different from its reproduction. For example, a photo of the Mona Lisa may be shared by millions of users and stored on their electronic devices without a reasonable way of identifying the person who originally posted it. NFTs were created to meet the need to verify authenticity in the digital age.
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The origin of NFTs
The first experiments with NFTs began with demonstrations of physical collectibles posted on the web by a project called Counterparty. Notably, in 2017, a group of unique NFT products called Cryptopunks took off on the Ethereum network. These novel assets have been widely recognized in the crypto community and have achieved huge gains.
However, another project called Crypto Kitties brought NFTs to wider attention. Crypto Kitties are essentially breedable digital cats that can be traded in a similar way to Pokemon trading cards. The demand to trade these digital cat NFTs exceeded the capacity of the Ethereum blockchain, causing gas prices to skyrocket. Perhaps, the immaturity of blockchain infrastructure at that time prevented the mass adoption of NFT
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NFTs in 2020-2021
Starting in mid-2020, NFT has once again spread like a prairie fire. From famous musicians such as Kings of Leon to stars such as NBA players, they began to try to tokenize their works and sell them as NFTs. At the same time, a large number of new creators began to delve into this field, including artists turning their artwork into NFT works, or converting KOL emoticons into NFT, etc.
Example
Example
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digital assets——Artists have always been at the forefront of NFT applications, gaining value by putting assets such as paintings, online graphics, GIFs or videos on the chain to reflect their scarcity and authenticity. This presents a huge opportunity to distribute, trade and collect digital works of art digitally. In order to support creators and collectors, many platforms such as Burnt Finance are developing infrastructure to meet the challenges of NFT mass adoption.
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Advantages of NFTs
Non-homogeneous tokens bring a new dimension to digital interaction. The three significant advantages of NFT are:
Transferable: Unlike exchange-traded fungible tokens, NFTs are bought and sold on specific markets. However, their value depends on their uniqueness.
Authenticity: Non-fungible tokens are protected by blockchain technology. Therefore, users can be confident that their NFTs are authentic, and it is currently impossible to create counterfeit items on a decentralized distributed ledger.
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Where to Create, Collect and Trade NFTs
There are several ways to create and trade NFTs:
Rarible
Rarible is a dApp built on the Ethereum blockchain that allows digital artists to issue assets that represent ownership of their digital works. These assets can be auctioned on the Rarible marketplace, where people can bid and buy digital assets. Although Rarible is one of the main marketplaces for buying and selling NFTs, it is still limited by Ethereum's slow transaction speed and high Gas fees. Therefore, buyers with a lower transaction amount are less willing to participate, because the resulting gas fee usually exceeds the price of the asset itself.
Burnt Finance
Burnt Finance is a fully decentralized auction protocol built on Solana and incubated by Injective. The team purchased Banksy's original work for $95,000 and was famously burned and minted into NFT by team founder Burnt Banksy, setting a precedent for transferring physical ownership to digital ownership through NFT. Auction prices for Banksy NFTs reached the highest rankings on platforms such as OpenSea, where they sold for $380,000, beating the average sale price for Beeple.
The project was built to address the challenges the market has faced so far, mainly high gas fees and slow transaction times. Burnt Finance will break the limitations imposed by the Ethereum ecosystem, allowing users to mint NFT/synthetic assets in seconds while maintaining extremely low transaction fees.
Injective Protocol
Injective will be the first decentralized exchange protocol to launch NFT futures and enable users to participate in NFT prediction markets. Additionally, given its unique layer-2 architecture, Injective is exploring creating and trading NFTs on the Injective chain, enabling fast transactions and zero gas fees. NFTs and their vast use cases are still being explored, and Injective will continue to explore opportunities to launch a marketplace for NFT derivatives.
