NFTs

Non-Fungible Tokens #

Non-Fungible Token #

NFT stands for Non-Fungible Token, essentially a unique token within a blockchain. They are unique digital objects that cannot be modified and can verify their originality against a replica. NFTs can be collectibles, images, videos, sounds, access passes to an event or community, documents, web domains, video game items, clothing, text files, etc. NFTs are an important step in discussions about the digital art economy, ownership of digital art, fundamental issues of digital files, and cultural transactions.

Generally, cryptocurrencies are fungible, meaning all tokens of a currency represent the same thing. If I have 1 ETH and you have 1 ETH, they are worth the same. With NFTs, it is different; each token is identified separately from the others and constitutes a unique object with its own characteristics. There can be copies, such as an edition of X amount of reproductions of a particular artwork, but each copy is independently minted (created) with its own imprint on the blockchain.

History #

The idea of non-fungible digital objects began with experimental Bitcoin projects like “Colored Coins” in 2012. The first proper NFT, known as Quantum, was minted in 2014 by Kevin McCoy and Anil Dash, creating the first non-fungible token that could demonstrate ownership via the blockchain. This not only created the first NFT but also opened a revolutionary way to conceive art and entertainment today.

It wasn’t until Ethereum – and specifically the ERC-721 protocol – that NFTs began to be properly discussed, with projects like Etheria and Spell of Genesis in 2015. However, the sector’s boom emerged with the first iconic PFP (profile picture) collection: the well-known CryptoPunks, a collection of 10,000 pixelated avatars launched by Larva Labs, which after months of being minted, were being sold for millions of dollars. Close to CryptoPunks were CryptoKitties in December 2017, offering breeding methods and games, which later evolved into the Play To Earn craze of 2020 and 2021 with games like Axie Infinity.

After these first PFP collections, the bubble got out of control, and the Internet was flooded with projects, receiving other famous collections, from the esoteric Ether Rocks to the Bored Ape Yacht Club of 2021, reaching celebrities like Justin Bieber, NBA star players, and brands like Adidas or Gucci, which later declined as a collection and community. In the world of art and 1/1 artwork collectors, there were also countless million-dollar auctions and acquisitions, such as Beeple’s work that included his first 5000 days as an artist, auctioned at Christie’s for $69.3M, or the iconic Nyan Cat meme, whose NFT version was sold for nearly $600K.

After the 2021 bubble, NFTs saw a decline in subsequent months, parallel to the bear market of those years. However, many communities have remained active, and many developers and artists continue to create, to the point that today, NFTs are a model followed by multiple blockchains in their programming protocols. Additionally, marketplaces remain active, and NFT trading has not ceased. More and more creative platforms are integrating this format, in addition to the uses shown in DAOs, DeFi processes, or communities on networks like Discord. In 2024, NFTs have increasingly been associated with memecoins to encompass the cultural objects landscape on the blockchain.

Types of NFTs #

  • Meme: Any object, event, photo, idea, word that integrates culture can be an NFT.
  • Art: From traditional art to crypto art, painting, sculpture, photography, video art, digital art, generative, classic.
  • PFPs: Profile Pictures, or avatars for social media profiles, mainly for sector-specific networks like X and Farcaster.
  • Video games: Items, characters, places, in-game currencies, or any object from a game can be an NFT and interacted with.
  • Collectibles: Cards, collectible series, iconic items, NFT versions of IRL collectibles, etc.
  • Music: Although not as large as visual arts platforms, NFTs can be sound, music, albums, etc.
  • Apparel: From original clothing for virtual dolls to NFTs linked to clothing brands.
  • Tickets: Event tickets, attendance cards, keys to enter Discord groups, access to private clubs.
  • Web domains: NFTs like ENS (Ethereum Name Service) are decentralized domains, in this case, .eth.

Birth and Life of an NFT #

Minting and burning #

When an NFT is created, it is referred to as “minting,” denoting coining, inscribing, in this case, leaving an imprint on the blockchain. Minting an NFT uses code that generates a smart contract. This can be done directly on the blockchain or through platforms, usually within the same marketplaces – like Open Sea, Foundation, Zora, etc. – where NFTs can be minted and traded. Other NFTs are minted from their own websites, others use launchpads, while some emerge within platforms like video games or art networks.

When creating an NFT, you interact with the blockchain, spending cryptocurrencies on fees to execute the necessary processes for the non-fungible token’s smart contract. Once the transaction is completed, the NFT appears in the wallet of the person who minted or acquired it, allowing them to sell it or simply keep it as a collectible or for the utilities or benefits it may bring within a specific community or platform.

Burning an NFT is killing it: refers to the process of permanently removing the NFT from circulation. This is typically done by sending the NFT to an irretrievable or unowned address, effectively destroying it and making it impossible to trade, sell, or transfer in the future.

Chains #

Like cryptocurrencies, NFTs gradually appeared on other networks like Ethereum, Aptos, Near, Wax, Base, Solana, BNB Chain, Polygon, each with its own programming parameters, uses, minting, and/or transfer costs, etc.

Ethereum is the most popular in NFTs, with the highest fees and not as fast as other alternatives, not very suitable for larger-scale uses. The second largest is Solana, whose low fees and speed have allowed it to gain ground. Tezos is another popular network in the NFT world, with very low fees and focused on fast P2P exchange. BNB Smart Chain and its dApps and games have also been popular, similar to L2 like Polygon or more recently Base. There are even networks specifically created around NFTs, such as the WAX network, where collectibles are exchanged or interacted with within video games.

Here is a comparative list of NFTs across different blockchains:

BlockchainProgramming LanguageNative TokenAverage Minting CostAverage Transaction Speed
EthereumSolidity, VyperETHHighSlow
PolygonSolidityMATICLowFast
SolanaRust, CSOLVery LowVery Fast
FlowCadenceFLOWModerateFast
CardanoHaskell, PlutusADALowModerate
EOSC++, WebAssemblyEOSLowFast
TezosMichelsonXTZLowModerate
Worldwide Asset ExchangeEOSIOWAXVery LowFast
Binance Chain (BNB)Binance Smart Chain (BSC)BNBModerateFast
BitcoinN/A (Not primarily for NFT)BTCHighSlow
AvalancheSolidity, Avalanche NativeAVAXLowFast
CronosSolidity, EVM CompatibleCROLowFast
AlgorandTEAL, ClarityALGOVery LowVery Fast
TronSolidity, JavaTRXLowVery Fast
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Life of an NFT #

Once minted, NFTs reside on the blockchain and can be traded, offered, staked, etc.

Free Minting #

The basic state of an NFT is when it resides on the blockchain. Once minted, it can be transferred between wallets, listed on a marketplace, or burned.

Open or Limited Edition #

This is the usual method: a limited edition of a series of NFTs is released, which can be the same image or with variations. Those who want the NFT mint it, paying the cost of minting + network fee. Sometimes they are launched with a minting time limit or even under indefinite minting: the number of NFTs that are minted at the established price within a certain time range.

Generative PFP Collections #

This method of limited/open editions is also common in so-called drops, or mass launches, as seen in PFP collections where thousands of NFTs are generated at a base price. Usually, this is done using a generative algorithm that combines different features/variables of a PFP avatar to generate X thousands of them. Once minting is closed, collections are usually marketed on popular NFT marketplaces.

1/1 Auction #

This is mainly used for digital art objects. The NFT is minted by the artist who puts it up for auction at a reserve price. Once the reserve price is met, the auction begins, lasting for a time determined by the creator, who is also responsible for closing it. At that point, the NFT is transferred to the highest bidder.

Staking #

NFT staking allows the token to be frozen within a system that provides benefits to the holder, usually passive income or some type of redeemable rewards within a platform or community.

Galleries, IRL, and Experiences #

Some marketplaces and development platforms offer experiences similar to a physical world gallery, both curated and sometimes presented in virtual 3D spaces and more. There are also several companies focused on making wall frames and devices to display NFTs, such as Muse Frame and Token Frame.

NFT Trading #

Once minted, NFTs are usually integrated into marketplaces where they are traded. Over time, the number of NFT stores on the web has grown, but in general, the most important things to consider are:

  • Chains supported and integration/agility with them
  • Number of users and type of audience, what that community is interested in
  • Liquidity, buyers and sellers of the NFTs traded
  • Payment method, prices, fees, staking methods, or integration with other marketplaces and platforms
  • Utilities like native currency or reward system

Main Marketplaces #

There are many exchange stores for NFT collections as well as independent minting sites or galleries and art or limited edition pieces. Among the main ones:

  • Blur – NFT platform on Ethereum focused on trading
  • Magic Eden – Multichain, fresh, curated
  • Open Sea – Multichain, veteran, immense, has lost strength in recent years
  • Tensor – Popular marketplace on the Solana network
  • Foundation – Multichain, mainly for creators
  • SuperRare – More curated, focused on crypto art
  • Exchange Art – Similar to Foundation/SuperRare but based on Solana
  • Gamma – Similar to Foundation/SuperRare but based on Bitcoin
  • Objkt – Leading marketplace on the Tezos network
  • Zora – Broad platform with strong community support
  • Manifold – Platform for web3 and NFT development
  • Deca – Focused on generative art and metaverse art experiences
  • Rarible – General aggregator with reward system
  • Nifty Gateway – Focused on collections, galleries, and experiences
  • Looks Rare – General NFT market, has its own currency LOOKS
  • Wild – NFT platform focused on artists, communities, and interaction
  • fx(hash) – Platform focused on generative art

Ordinals #

In recent years, a new protocol within the Bitcoin network called Ordinals has gained traction. It allows the use of the Bitcoin network to inscribe all types of multimedia files, similar to how it happens with NFTs, except that in the case of Ordinals, they are inscriptions on satoshis (fragments of BTC) rather than smart contracts as with NFTs. They are technically different protocols, methods, and processes, but on the surface, they are the same: NFTs are digital objects on networks like Ethereum, while Ordinals are on the Bitcoin network.