NFTs: A Closer Look

Published on
May 25, 2022
Written by
Ryan Kamykowski
Read time
5 minutes
Category
Resources

WHAT DOES “NFT” MEAN

So, you are ready to plant your flag in the metaverse.  

“Siri, What Does NFT Mean?”

Siri: “Non-Fungible Token”

Okay. Now what?

Well, Let’s break it down.

The term “fungible” means “interchangeable” or tradeable, alike, or replaceable by an identical item. A great example would be the dollar which is produced to be widely circulated.

If you and I are standing in a bubble and I have a dollar in my hand and you have a dollar in yours, no one can argue that the value of mine is any different than yours. In fact, the value is precisely the same. Precisely fungible.

A “token” is an asset that, for this purpose, resides on a blockchain managed by a smart contract. Tokens can only be accessed by their owner which is defined as the holder of the jumbled, very-long private alphanumeric key. These types of tokens can be represented several ways, but in this situation we are going to explore two: ERC-20 and ERC-721.

Now if we look at two cryptocurrency wallets, each holding one Ethereum (ETH) and all other factors being the same, those two coins are equally fungible, right?

Right. Those are ERC-20 tokens and, by design, they are fungible.

Perhaps you’ve seen a picture of this ape around:

A picture can be worth a thousand worlds in the metaverse. Specifically, a provably unique picture whose ownership can be verified without the need of a third party.

A great example of this would be the NFT Mutant Ape Yacht Club #2209 (above) that sold on January 2nd 2022 for 26.69 ETH or roughly $102K.

MAYC #2209 is an ERC-721 token and what makes it different from ETH is that it is totally unique and irreplaceable and therefore “non-fungible” by design.

So, when someone asks you what an NFT really is, you can be one of the rare and unique folks out there that has an answer besides “non-fungible token.”

WHAT IS AN NFT FILE

NFTs are currently used mostly for art, music, and forms of digital expression but there are way more ways to utilize them that haven’t even been thought up yet.

NFT files sit on a blockchain and store extra information, like an image, which makes it work differently than say a cryptocurrency coin for example. It is still a token, but it is completely unique as an asset, it can be traded and will never have more than one owner at a time.

An NFT is generated, or “minted” using a smart contract which sits on a blockchain. The NFT file consists of different unique identifiers (token IDs), the identifier of where the digital work of art associated with the NFT can be found and the current owner’s wallet address. Since blockchain transactions are fully traceable, anyone can look at an NFT’s core data, including the blockchain address of the current owner and the blockchain address of every owner since its creation.

WHAT IS AN NFT COLLECTION

You’ve probably read about them or have seen them on OpenSea. CryptoPunks, CyberKitties and the Bored Ape Yacht Club are some examples to name a few.

A group of NFTs together presented by an artist or creator for a specific theme or purpose is technically a collection.

In terms of art, some collections are as small as two NFTs and some are in the tens of thousands. While some collections’ NFTs are individually made one-by-one, many are generated using complex coded generators that layer many different traits on top of one and other, paying specific attention to the creator’s desired rarity preferences. These can be very hard to build which is why we built a No-Code Generator here at Ambition.

Once a creator has generated their artwork, the next step will be to deploy their smart contract. This step binds the collection of files and metadata created during the generation process and deposits it onto a server where it can be accessed by potential buyers. In many cases, this is the very popular “minting” stage.

CONCLUSION

We now know that NFTs are different from other tokens because they are totally unique and that the possibilities for them are still yet to be completely determined.  We also know that right now, NFTs are booming and the art is incredible! We see it in the awesome collections coming out daily and it inspires us to do great things.



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