If DeFi took the market by storm in 2020, NFT is becoming a prominent Crypto trend in 2021. So what is NFT?
What is NFT? Source: Cointelegraph.
What is NFT in Crypto Market?
NFT concept
NFT stands for Non-Fungible Token (Non-fungible Token). This is the latest application of Blockchain technology. Each NFT represents a unique file, and as such, they are unique and not interchangeable.
NFTs can exist in many digital files, such as artwork, audio, video, electronic toy, or any other creative work.
History of the NFT
The first ideas similar to NFT have been around since 2012. At that time, Yoni Assia first announced the Colored Coin on the Bitcoin Blockchain for only one Satoshi – the smallest unit of Bitcoin. Although it is still quite simple, at this point, the idea of a Colored Coin has many similarities with the current NFT. It is to use Blockchain as a certificate of ownership for assets such as stocks, digital collectibles, etc. But unfortunately, Colored Coin immediately failed for a very understandable reason Bitcoin was not created. Out to support this type.
The first ideas similar to NFT have been around since 2012.
In 2014, a similar main platform with open-source code called Counterparty was born. It is built on the foundation of the Bitcoin Blockchain but with more improvements. This can be considered the first Bitcoin 2.0 platform and an address for users to create their currency or tradable assets. Counterparty was very popular at the time for its Pepe Frog meme deals.
ERC-721 allows the issuance of assets on the Ethereum Blockchain.
In 2017, ERC-721 appeared. This is considered one of the major turning points of the token platform running on the Bitcoin Blockchain. ERC-721 allows the issuance and trading of assets on the Ethereum Blockchain. That means 3rd party platforms like Counterparty are no longer needed when trading assets. At this time, people also began to call this form NFT. Ethereum perfects NFT and becomes the market leader for assets stored on Blockchain. NFT is gradually becoming more and more popular through the virtual cat game Crypto Kitties, allowing players to raise and trade virtual cats with Ether.
Highlights of NFT
Recognized by analysts as well as many investors as a potential development trend in 2022, NFT includes outstanding features such as:
- Scarcity: Each NFT represents a unique file. Although there are many NFT issuers in the market, each issuer collection will usually limit the number of non-fungible tokens to increase their scarcity. This is also one of the reasons why NFT is highly valued.
- Indivisible: This is the most prominent difference between NFT and cryptocurrencies. We all know that cryptocurrencies can be divided into very small pieces to make it easier to buy, sell, and trade, especially for coins of great value like BTC, ETH… However, NFT is an asset. Property is indivisible. You can only buy one, two, or more digital art pieces, not half the work.
- Uniqueness: This is the most important feature of NFT. With each non-fungible token, users can fully trace their source of information, so there’s no need to worry about forgery. These credentials serve as authentication certificates for each NFT.
Pros and cons of NFT
Pros
Has incredible upside potential. It is thanks to its unique nature that NFT can generate record profits. The most typical example is Hashmasks picture “Trump ” in 3 days, which has increased prices by 100,000%. No coin has ever done this before.
More transparent and convenient than traditional collectibles. Thanks to the help of Blockchain technology, you can trace the origin and owner of valuable items in just one click. The risk of counterfeit goods is almost eliminated thanks to all transaction history recorded on the chain.
Help store assets safely and securely through asset tokenization.
Reducing transaction costs and time, especially when you are in two different countries, trading with cryptocurrency is even more convenient.
Cons
Low liquidity. Because it has only recently emerged, NFT’s liquidity is not high, which is inevitable. Up to now, the total number of NFT transactions so far is about 300 million USD. This is only 0.1% of the crypto trading volume in a day.
The valuation of properties is still emotional, especially the works of art collectibles.
Compare NFT and Coin
Similar
NFT & coin are asset classes on the blockchain (Blockchain). One thing in common is decentralization and anonymity.
You can store NFT & coins in a certain wallet. NFT, you can move out of the wallet and sell it like a coin. Currently, there are many NFT marketplaces.
Different
A coin will have more liquidity, making it easier to buy and sell. The value of a coin is determined by the market price (based on supply and demand).
An NFT does not have a specific price. The price of the NFT is determined by the seller and is based on valuation as a collectible.
The coin is divisible, but NFT is not: For example, your one ETH is the same and can be divisible to transfer or sell. And NFT is unique, indivisible, and non-fungible – the characteristic that makes it unique.
How to generate NFT?
The process of creating NFT is quite simple and does not specifically require users to have a deep understanding of how the market works and blockchain technology. If you can create valuable works of art, you can completely convert them into NFT assets through NFT trading and trading marketplaces such as OpenSea, Mintable, VIV3…
In addition, creating and publishing NFTs on OpenSea is virtually free. But on some other platforms, you will have to pay a small fee as transaction fee, and this fee will vary depending on the health of the network. An important note before creating an NFT is choosing the right blockchain network. Currently, Ethereum is a popular network used by many NFT issuers, but new networks such as Tron, Polkadot, and Tezos… are also gradually gaining the trust of many NFT issuers.
Applications of NFT
After owning the NFT, users can use these non-fungible tokens in various scenarios:
- Use in games: Currently, in many games, especially Play-to-Earn titles, NFT is used to help boost the in-game economy. In particular, NFT can also be converted into many different items or equipment to attract users and create value for the game.
- Digital assets: NFT is used to support users in buying and selling virtual assets such as virtual land, clothes, equipment, etc. In 2021, someone spent more than 450 thousand USD buying virtual land close to the market. The land of famous rapper Snoop Dogg….
- Identity verification: With its unique and irreplaceable characteristics, NFT is said to be the optimal solution for verifying and certifying the copyright of works.
- Collectibles: Many investors store NFTs for collection purposes because many of the artworks converted to NFT are the works of famous and high-value artists.
NFT Trading Guide
NFT Buying Guide
NFTs can be purchased online through various marketplaces. OpenSea is one of the great tools. You can think of it as an online gallery where you can browse digital assets, trading cards, or other collections.
OpenSea works like an auction house, where you bid on items and expect to be the winner. And other listings allow you to “Buy it now” for a set price.
OpenSea is one of the great tools for buying NFTs.
Guide to trading with NFT
Step 1: Create a crypto wallet to buy and store NFTs.
Step 2: Connect the wallet to the NFT selling platform you want to buy. Note the transaction fee. Each project and each wallet you choose will have different transaction fees.
Step 3: The token will be transferred to the wallet. If the Token integrates with the NFT Dapp, you can trade it immediately. Place buy and sell orders at the time you think is appropriate to achieve the highest profit.
Potential NFT selection criteria for investment
Many different factors can directly or indirectly affect the value of the NFTs in a collection. Therefore, to evaluate and choose NFT investment, users need to pay attention to some of the following factors:
- Usability: You need to learn the details of the applications of that NFT in both the virtual world and the real world. If it is used a lot in games or for identity verification for new platforms, NFT will likely grow strongly in the future.
- Scarcity: If the NFT is created by popular artists in limited quantities, then there is a high chance that the NFT will grow rapidly.
- Community Size: Like other crypto assets, the larger the community size, the better the growth of NFT. Community size affects the number of users and potential buyers, i.e., affects the supply and demand in the market. You can check this scale based on the project’s official social network or NFT holding wallet addresses.
- Origin: NFTs created by famous people with a certain level of prestige in the market will attract more than other NFTs.
Risks and risks from NFT
NFT is a new investment trend that will develop and explodes in 2021. With its distinctive features and high applicability, NFT has become the “prey” of many investors in the cryptocurrency market. However, after all, NFT is also a digital asset, and there are many risks, especially for new and inexperienced investors.
Nowadays, anyone can create and issue NFTs on trading platforms. Therefore, if investors cannot distinguish and select potential NFTs, they run the risk of buying valueless NFTs. In addition, no individual or organization has provided a basis for NFT valuation, so many NFTs are on the market with different prices. In particular, with the impact of shark investors, many NFTs have skyrocketed to hundreds of thousands of times in a short time.
How to check the authenticity of any NFT
You can check the authenticity of the NFT in the following ways:
- Search various NFT marketplaces to see if the NFT you want to own is being sold in many places. You should double-check if you see an identical NFT traded on many different exchanges before deciding to buy them.
- If the NFT is an image, do a reverse Google image search to verify if the image has been posted before.
- If the NFT’s current selling price is too low and you know its actual value may be higher than that, the NFT could be a scam NFT.
- Tracking and verifying your NFT transactions is a way to check the authenticity of an NFT. Through this action, you can know the ID, contract address, encryption standard, NFT creator, and whether the transaction has occurred successfully?…. From there, evaluate and verify the accuracy and uniqueness of the NFT that you are trading. You can access the blockchain explorer of the blockchain platform you are trading to see the above information. Examples are https://etherscan.io (Ethererum), https://explorer.solana.com (Solana), https://www.bscscan.com (BNB Chain), https://polygonscan.com (Polygon) )…
Some outstanding NFT projects today
Rarible
Rarible allows users to easily create a digital collection and sell it on their marketplace. With a focus on user-authored artwork, Rarible allows intellectual property rights to be claimed through proof of origin provided by NFT.
Rarible.
Decentraland
This is a virtual reality world similar to the fantasy worlds in the game. Here, players can own and trade virtual lands and other items.
Decentraland.
Gods Unchained
This is a collectible card game in which tokens are issued as NFTs on the Blockchain.
Gods Unchained.
My Crypto Heroes
My Crypto Heroes is a role-playing game with many participants. Through quests, players can upgrade their characters. The characters and items in the game are issued as Tokens on the Ethereum Blockchain.
My Crypto Heroes.
Binance Cellectibles
This is a type of NFT Token jointly issued by Binance and Enjin on special occasions to give to users via the social network Twitter.
Binance Collectibles.
Crypto Stamps
As the name suggests, Crypto Stamps is a virtual post office that issues and connects the digital world with the real world. The stamps here are circulated as digital images on the Ethereum Blockchain, turning them into a tradable digital collection.
Crypto Stamps
3 most popular NFT markets today
There are many NFT buying and selling websites for you to choose from. Here are the 3 most popular NFT markets today that you can refer to:
- OpenSea.io: This peer-to-peer platform is known for offering rare digital collectibles and items. To use OpenSea.io, you only need to create an account to start collecting NFT collections.
- Rarible: Similar to OpenSea, Rarible is an open marketplace that allows artists and creators to publish and sell their NFT products. RARI tokens issued on the platform allow holders to consider features such as fees and community rules. OpenSea and Rarible NFT marketplaces do not require ownership verification for NFT listings.
- Foundation: On this platform, artists must receive an invitation from a friend or colleague to post their work.
Due to the wide range of platforms, plus the participation of thousands of NFT creators and collectors, be sure to do your research before you buy. This will help you avoid imposters and scammers.
Should I buy Non-Fungible Token or not?
I advise investing a small amount of money in experimenting because the NFT market is still quite new.
Remember, the value of the NFT is entirely based on what others are willing to pay for it. Therefore, demand will drive the price of NFT up rather than fundamental, technical, or economic indicators.
That is to say, and an NFT may sell for less than you bought it for, or worse, you may not be able to sell it because no one needs it.
You should approach the NFT like any other investment you’ve ever entered. Do your due diligence, and understand the risks – including the possibility that you could lose your entire investment. If you decide to join the NFT community, proceed with caution.
3 most potential NFT tokens at the moment
Along with the explosion of the NFT market, NFT tokens promised to grow strongly in 2022. If you should pay attention to the 3 most potential forms of NFT tokens at the moment:
- NFT Infrastructure: Theta Network, Enjin Coin, Flow, WAX.
- NFT Issue & Marketplace: Chiliz, Decentraland, ECOMI.
NFT Game: Axie Infinity, Alien Worlds, Sandbox.
The top 3 potential NFT tokens in 2022 can include:
THETA
Theta Network is built on blockchain technology, specializing in video distribution. Theta allows users to both watch video content and earn token rewards. Users will receive rewards for forwarding videos to other users who view the same content.
Chiliz – CHZ
This is the first platform to apply blockchain technology to the sports industry. The Chiliz development team has developed a platform called Socios.com, allowing users to both own Cryptocurrency and have the right to vote for their favorite clubs or sports.
ChiliZ Token (CHZ) is a coin used to pay the costs of eSports clubs and teams participating in Chiliz’s system and fans.
Decentraland – MANA
The project provides a virtual reality platform powered by Ethereum. In this virtual world, you can buy plots of land that you can later traverse, build, and earn money. It is the first fully user-owned digital platform. Similar to games like Skyrim and Fallout, Decentraland is a purely virtual universe. However, instead of playing on a two-dimensional screen, you enter a three-dimensional world.
Summary
The biggest appeal of this technology, when anyone can create NFT, is one of its main weaknesses. Anyone on the Internet can make an NFT out of anything. That means there are a lot of worthless tokens on the network. The scarcity of an item does not guarantee its value will increase, so players can suffer heavy losses when the NFT fever cools down. In 2020, the value of some popular NFTs will increase by about 2,000%. However, in a market where many participants can use fake names, fraud is also a risk.
By now, readers must have understood what NFT is and why it has become one of the most interesting trends in 2021, right? Besides some risks, with all those advantages, I believe that NFT has great potential for development in the future.
