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What is a Non-Fungible Token (NFT)?

Contributor, Benzinga

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A non-fungible token (NFT) is a digital asset that is unique and indivisible. NFTs are one-of-a-kind digital assets used for collectibles and rare items.

How do NFTs Work?

NFTs are typically built using Ethereum. The use of Ethereum for some NFTs proved so popular that it hurt the cryptocurrency

But not all NFTs use the popular crypto Ethereum. Other blockchains like TRON and NEO can be used for NFTs.

NFT company Dapper Labs created its own blockchain called Flow that is now being used by the company’s own NBA Top Shot NFT line.

NFTs allow users to own digital assets like retail estate, art, digital sneakers and video moments. The concept of digital assets is similar to in-app purchases of items in video games. The big difference for NFTs is their uniqueness and ability to be easily transferred to another owner thanks to blockchain technology. 

NFTs also give artists more control over their assets and allow them to set sale prices. Some NFTs are also set up to where the original creator gets a portion of each sale of the digital asset, creating a never ending stream of revenue.

The industry has quickly exploded and turned what is a non-fungible token into a popular topic question and internet search.

How to Buy Non-Fungible Tokens

Some NFTs can be purchased and exchanged on their own trading platforms. Lots of NFTs are offered up for sale as drops or limited time sales for those who are lucky enough to be at the right place at the right time to take advantage of the sale.

Crypto exchange sites like OpenSea offer a way for investors and fans of NFTs to buy the digital assets from individuals. OpenSea has hosted works from musician Shawn Mendes, Twitch co-founder Justin Kan and artist Beeple.

With crypto taking over the digital art world, NFTs are even making their way to popular auction houses like Christie’s.

For example, digital artist Beeple posted a new digital picture online every day for more than 13 years. The result is now Everydays: The First 5,000 days, a digital art unique work.

Christie’s will be the first major auction house to offer a NFT digital work. Christie’s will also be the first major auction house to accept cryptocurrency, in this case Ether, as a payment option for the work.

Nifty Gateway is one of the top marketplaces for digital assets and has partnered with some top names in the music, art and celebrity worlds. The company was purchased by cryptocurrency company Gemini in 2019.

Sorare offers a platform to collect and trade limited edition soccer NFT cards. More than 125 clubs are featured and more are added weekly. Connect and trade with other fans via Sorare’s open marketplace or take part in its Global Fantasy Football Game where you can create your line-up and earn points based on real-life performances.

Brief History of NFTs

NFTs can be traced back to colored coins on the Bitcoin network. NFTs that recreated Pepe the Frog also popped up around this time with rare ones selling on eBay and at live auctions.

CryptoPunks became the first Ethereum based NFT with 10,000 unique offerings. Each CryptoPunk has a different set of characteristics. The NFTs from CryptoPunks, a Larva Labs company, are considered digital assets that are truly unique and collectible with their limited supply.

In 2017, CryptoKitties from Dapper Labs became the first NFT to truly hit the mainstream digital asset market. The digital assets were part of a blockchain based game as well.

NFT Use Case

NFTs can be digital assets that store art or videos and don’t have as much usability. Other NFTs like CryptoKitties are part of a blockchain game that have more usability to the owner of the digital asset.

CryptoKitties is a blockchain game that lets users collect and breed creatures. The CryptoKitties are all unique NFTs that can not be replicated, taken away or destroyed. Each CryptoKitty has different appearance and traits that make it a unique digital asset.

CryptoKitties were popular in 2017 and helped launch NFTs into the mainstream. The NFTs for the game are seeing strong sales once again with the rise in popularity of digital assets.

How to Transfer a Non-Fungible Token

Non-fungible tokens can be transferred similar to cryptocurrencies. Some vary in the degree by which they can be transferred and traded.

Most NFTs are traded within their existing game or created platform. Blockchains make ownership and trading of NFTs easy on open marketplaces. The open marketplace style of the blockchain allows non-fungible tokens to be transferred in marketplaces such as auctions or placed for sale for cryptocurrency on digital asset transaction platforms.

The blockchain technology provides a digital record of each transaction for the non-fungible asset.

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NFT Popularity Rising

The rise of popularity and acceptance of Bitcoin and other cryptocurrencies was a top story in 2020. NFTs look to be the hot story in the cryptocurrency and digital asset world in 2021.

NBA Top Shot has been one of the dominant crypto collectible NFTs with sales of $225 million in the month of February 2021, according to CryptoSlam. NBA Top Shot, owned by Dapper Labs, sold over 200,000 packs of highlights at a price point of $9 in a recent digital asset pack drop sale. A LeBron James dunk highlight from NBA Top Shot was sold for $208,000 recently.

A decade old rainbow cat meme was sold for $580,000 recently. An animated artwork created by Beeple featuring Donald Trump laying face down in the grass covered in graffiti was sold for $6.6 million.

The rise of NFTs is attracting some big names to the market. Logan Paul offered NFT highlights of a Pokemon box break that sold out in less than an hour. Musician Steve Aoki is launching a NFT drop with Nifty Gateway. Even William Shatner has NFTs using his likeness.

NFTs were a $41 million market in 2018 and started to see strong growth with $338 million in sales in 2020. That figure is set to rise exponentially in 2021 with the popularity of NBA Top Shot alone looking to surpass last year’s figure. Predictions call for the NFT market to be worth $1.3 billion in 2021 thanks to the growth of digital art, games and collectibles.

Frequently Asked Questions

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Q: What is a famous example of a non-fungible token?

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Q: What is a famous example of a non-fungible token?
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A
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A: NBA Top Shot has become the most popular and highest grossing non-fungible token digital asset class. NBA Top Shots are sold in packs and can be bought and sold through the company’s own marketplace for users.

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