Today, let’s talk about what NFT is all about. After all, it’s definitely one of the top trends of 2021-22. Top NFTs have been selling for millions of dollars, and the Collins English Dictionary has recognized “NFT” as the word of the year 2021.
What Is NFT
NFT stands for Non-Fungible Token. And to understand what “non-fungible” means, let’s start with “interchangeable” assets from your everyday life. For example, money. After all, you essentially don’t care what $100 you have, $100 is always $100.
All money in the world is interchangeable unless, of course, you are a numismatist. If you compare it with cryptocurrencies, then Bitcoin is also fungible, because all Bitcoins are equal to each other and cost the same. 1 Bitcoin always equals 1 Bitcoin.
To imagine what a non-exchangeable asset is, let’s take a work of art: Leonardo Da Vinci’s Mona Lisa, whose original exists in a single copy, is on display in the Louvre in Paris and its authenticity has been confirmed by experts.
NFT is something similar but has some peculiarities of its own because it is a “token” that is on a blockchain.
So, NFT is a unique token, one of a kind, and cannot be replaced by another similar token. It is essentially a certificate of the uniqueness of a digital object, which confirms the right to own that very object. NFT does not prevent the copying of a digital object, it only confirms the ownership of the original copy. The Mona Lisa has millions of reproductions worldwide: in magazines, catalogs, calendars, and postcards. But the right of ownership of the original belongs to the Louvre. And there is no need for experts as in the case of the Mona Lisa, because it is a token, which means that all transactions, ownership history, and movements can be traced on a blockchain, and without being tied to a real person, which is no less important.
How NFT Works
But let’s break down exactly how NFT works from a technical standpoint. Essentially, NFT is just a piece of code that a certain address owns. Whoever has access to that address owns that piece of code. That piece of code can be bought or sold between different addresses. And this is all validated on the blockchain. The authenticity of ownership, and the history of transactions, all of that can be tracked on the blockchain.
But it’s not so clear-cut with the image. Let’s say you bought an NFT with an image of the Mona Lisa. The blockchain confirmed the originality of the NFT, we were able to trace the creation and transaction history. But the thing is, our NFT doesn’t contain the picture itself. As we said before, it’s just a piece of code. And here in this code, there is a link to the server where our image is located.
You don’t have access to the server where the image is stored. Other people have access to it. So if the server gets hacked, or it burns down, or the owners decide to change your image, your NFT will display what they want. Or it won’t display anything if the connection to the server is broken.
A little more on the technical side of NFT. There are several standards for NFT tokens and they were developed mainly for the gaming industry, but they are already used everywhere. It should be said that we will look at standards for NFT in the Ethereum network, as the most popular at the moment. But gradually other blockchains like Solana, Cosmos, Binance Smart Chain, and Near are starting to adopt NFT as well.
- ERC-721 is the best known and most popular standard for NFT. It is the standard that implies a unique token that exists in a single instance.
- ERC-1155 is no longer one, but a series of unique tokens. That is, they are the same within the series, but the series itself is unique. If you take the gaming industry, it could be a unique series of swords, of which there are only 10. If you compare it to ERC-721, there’s a unique sword in one instance, but in ERC-1155 it’s a unique sword series of 10 swords that are identical to each other.
- ERC-998 – allows you to combine different NFTs into one composite NFT.
- ERC-875 – transfers multiple tokens to a new owner in a single transaction.
What’s The Value
But why do people buy NFTs? Right now, people are buying NFTs because they see them as collectible things to invest money in with the goal of making money from them in the future. Let’s look at 4 factors that can affect the value of NFTs.
- Primary. Bitcoin is so popular because it is the first cryptocurrency in the world. Accordingly, the first NFTs from some authors, businesses, or projects will have value.
- Utility. There is utility and application in real life. If you take our Mona Lisa and imagine that NFT would give you the right to visit the original painting once a month in the Louvre without any visitors, plus an exquisite dinner with expensive champagne, then the value of such an NFT would increase significantly.
- Uniqueness or rarity. Take the all-too-familiar Mona Lisa and here the uniqueness and rarity are clear. The original is available in only one copy and most collectors of the world want to own it. And if the Louvre were to release an NFT with the Mona Lisa in a single copy, it too would likely be in high demand. And if you add visiting without visitors and with dinner to it, there’s not much to say.
- History of Ownership. Once again, the Mona Lisa comes to our rescue. If we look at the history of this painting’s possession, King François bought it from the Salailleys and had it in his castle at Fontainebleau, where it remained until the time of Louis XIV. The latter moved it to the Palace of Versailles, and after the French Revolution, it ended up in the Louvre in 1793. Napoleon hung the portrait in his bedroom at the Tuileries Palace, then it went back to the museum. Agree on a glorious ownership history that gives the painting even more value. The same with NFT, if the only NFT with the Mona Lisa from the Louvre was bought first by Elon Musk, then resold to Vitalik Buterin, who would put it on OpenSea, its value would obviously skyrocket.
The Most Famous and Expensive NFTs
In conclusion, we want to show you the most successful, in terms of money, NFT, which was sold for record sums:
- The leader so far remains the painting “The First Five Thousand Days” by the already famous artist Beeple, which was sold for $69.3 million at Christie’s auction.
- In second place again is Beeple and his work HUMAN ONE – $28.9 million, all at Christie’s auction. This is already a physical thing with the NFT attached to it.
- The next item on the list is a pack of NFTs from the Bored Ape Yacht Club series for $24.4 million at Sotheby’s Auction. Written by Yuga Labs.
- CryptoPunk #7523 – $11.8 million, Sotheby’s auction. The author – Larva Labs. There are other CryptoPunks in the top 10, which were sold for seven-figure sums, but we want to show you other works.
- For example, a work called Ringer #109, sold for 2,100 ETH ($6.9 million). The author of the work, Dmitry Chernyak, created it on the platform Art Blocks Curated. It allows you to create generative art, that is, you conventionally write some commands and code, and the platform turns it into art.
- Interesting lot – NFT with Internet source code – $5.4 million, Sotheby’s auction. The author is Tim Berners-Lee.
Conclusions – NFT & Crypto Casinos
Non-fungible tokens, or NFTs, have gained popularity in the blockchain and cryptocurrency industries. Beyond the realm of the arts, these distinctive digital assets have the power to transform markets like those of online gambling and cryptocurrency casinos.
One potential influence of NFTs on crypto casinos is the ability to create provably fair games. By integrating NFTs into the gaming process, players can be assured that the games they are playing are not rigged and that the outcome is determined by a transparent algorithm. This can increase trust in the casino and attract more players.
Another potential influence of NFTs on crypto casinos is the ability to offer rare and unique virtual items as rewards for gameplay. Players could potentially earn NFTs as prizes for winning games, which could then be traded or sold on a secondary market. This could create a new type of online gambling experience where players can not only win money but also unique digital assets.
Finally, NFTs could also offer a new way to gamble with cryptocurrencies themselves. Players could potentially use NFTs as collateral in games or betting, offering a new level of security and transparency in the gambling process.
Overall, NFTs have the potential to transform the online gambling industry, offering new opportunities for players and casinos alike. It is yet to be seen how NFTs will be incorporated into the realm of crypto casinos and what the long-term effects will be, as with any new technology.