Non-fungible Tokens Explained | Best NFT Products 2024
Non-fungible tokens (NFTs) exploded in popularity in early 2021. As a key driver of the booming ecosystem of decentralized applicatoins built around Ethereum, NFTs have been called everything from digital beanie babies to a complete revolution in how art can be monetized in an increasingly digital world.
With some NFTs selling for tens of millions of dollars, this budding industry has now attracted the attention of millions of people around the world. So, are NFTs the future of everything from baseball cards to in-game items?
Let’s take a closer look beyond the hype and see whether non-fungible tokens will turn out to be everything they’re touted to be.
What Are NFTs?
NFTs are similar to other sorts of crypto tokens that have been issued on top of blockchains with expressive smart contracting-capabilities like Ethereum and Binance Smart Chain. However, while the point of most cryptocurrencies is for every token to be the same as any other token in the same currency network (meaning they are fungible), the idea with NFTs is to create unique tokens that are unlike any other.
These tokens tend to be attached to some other item that is not found directly within the blockchain. In some cases, this could be a work of art. Other NFTs may be similar to the baseball cards kids collected in the 20th century. Basically anything can have an NFT associated with it, and the main point of the NFT is to establish some sort of social prestige in the form of a collectible.
For example, there may be thousands of copies of a particular Lebron James highlight available on the internet, but only one person can own the original version of the digital video that has been issued by the National Basketball Association (NBA). The NFT token associated with the Lebron James highlight is what signifies who has social “ownership” of the video.
This is the general premise behind NFTs, but it’s still mostly theoretical at this point. After all, many of the NFT tokens get their value from a source outside of the blockchain, so it’s unclear if any of this makes sense.
For example, what happens if someone loses the private key associated with the aforementioned Lebron James highlight NFT? What if Lebron James himself issues an NFT of the same highlight? What is the “official” NFT for the highlight in that scenario? It’s possible that the development of NFTs will lead to something else more valuable in the future, but perhaps the current market should be mostly viewed as a proof of concept.
Our Favorite Marketplace for NFTs: OpenSea
OpenSea is one of the largest online markets for NFTs. Notably, there is a wide range of different types of NFTs available on this platform. Instead of focusing on a single niche, OpenSea allows users to trade NFTs that represent everything from domain names to art.
In addition to issuing their own NFTs, OpenSea users are able to trade NFTs with each other on the secondary market as well. These features combined with relatively low fees have made OpenSea one of the leading brands in the NFT market up to this point. That said, a key downside of OpenSea for those who are not that familiar with the cryptocurrency space is that users are only able to make payments via cryptocurrencies.
While there is no mobile app available for OpenSea at this time, the web version of the platform works quite well on Android and iPhone.
An Alternative Marketplace for NFTs: Rarible
In the grand scheme of things, Rarible was early to the NFT game, as the platform launched roughly a year before the peak of the NFT type in early 2021.
There are no restrictions on the use of the Rarible platform, and it can be used by anyone to create or trade NFTs. If you are an artist who wants to get started with issuing your first batch of NFTs, then this would be a solid option because it removes all of the complexities of blockchains and smart contracts away from the user.
Another often overlooked aspect of the Rarible platform is that it is completely non-custodial. This means that users retain control over the private keys associated with the NFTs that are created or traded on the platform in their own crypto wallets.
While the NFT phenomenon has started to move to a variety of different blockchains, a downside of Rarible is that it currently only works with tokens associated with the Ethereum network.
It should be noted that Rarible also has its own native governance token in the form of RARI. Those who have RARI tokens are able to help guide the future of this NFT platform, which takes the idea of community ownership to the next level.
A Third Marketplace: SuperRare
SuperRare is an NFT platform that has been active since all the way back in 2018. It’s built on top of Ethereum, which means the NFTs on the platform are in the form of ERC-721 tokens.
For SuperRare, the focus is on NFTs that have been issued in the digital art niche. Much like an art gallery would take a fee for helping a traditional artist sell their works of art, SuperRare charges a fee on NFTs that are sold via their platform. This fee amounts to 15% of the transaction, which is on the high end when compared to other NFT markets out there. Although this is lower than the sometimes 50% fee that is found with traditional art galleries, 15% is still a bit high when you consider the ethos of decentralization that provides the fundamental value proposition of blockchain technologies like Ethereum.
Anyone who wants to buy or sell NFTs on the SuperRare platform will need to do so with ETH, as credit cards, debit cards, and other forms of traditional online payment are not available. Of course, there are still ways to move between ETH and the traditional banking system once you are done using SuperRare.
Our Favorite NFT Collectible: CryptoPunks
CryptoPunks is the most popular NFT collectible collection on the market today.
Although the pixelated artwork may not seem like much to look at upon first glance, some of these CryptoPunks have already sold for more than $1 million. Although CryptoPunks are sometimes referred to as the first-ever NFT collection, the reality is they were predated by some collectible collections on other, non-Ethereum networks.
That said, Larva Labs was still quite early to the game when they decided to test the excitement around NFTs all the way back in June 2017. While some CryptoPunks are worth a lot of money today, the first CryptoPunks that were issued were actually given away for free to anyone who decided they wanted to add some of them to their personal Ethereum wallet.
Notably, each CryptoPunk is generated by an algorithm rather than a human with a paintbrush or smart pen. Larva Labs has said they will never create more than the 10,000 different CryptoPunks that have already been generated.
Those who purchase CryptoPunks usually look for specific variations of the collectible that have rare traits. For example, only 5% of CryptoPunks come with Big Shades, while less than 1% have a tiara. As of April 2021, the most expensive CryptoPunk sale was a little over $7.5 million for a CryptoPunk #3100.
An Alternative NFT Collectible: NBA Top Shot
The NFT collectible set that has likely done the most when it comes to entering the mainstream consciousness is NBA Top Shot.
Sports trading cards have already existed as collectibles for many decades, and the main idea behind NBA Top Shot is to bring this concept into the digital age. NBA Top Shot was created through a partnership with Dapperlabs, and the NFTs for this platform are issued and traded via the Flow blockchain.
NBA Top Shot is already responsible for hundreds of millions of dollars worth of NFT sales, so it’s obvious that this experiment has turned into a massive success story in the realm of NFT adoption. Notably, NBA Top Shot has focused on user experience over the concentration on decentralization found with other types of NFT collectibles.
In addition to operating on a somewhat centralized blockchain in the form of the Flow blockchain, NBA Top Shot users are also recommended to purchase new packs of NBA Top Shot collectibles through the use of their credit card or debit card rather than a cryptocurrency. That said, it is possible to deposit cryptocurrency onto the NBA Top Shot platform.
Dallas Mavericks owner Mark Cuban, who has become a major advocate for the NFT space, has brought up NBA Top Shot in a number of mainstream media interviews in 2021. While many of the most valuable NBA Top Shot collectibles involve Lebron James, the most expensive item sold on the market up to this point has been a dunk by Ja Morant.
A Third NFT collectible: Sorare
Another NFT collectible platform that focuses on the sports world is sorare.
This platform combines the worlds of NFTs with fantasy sports gaming, and it’s focused on the world of football (soccer for Americans). Sorare runs on the Ethereum blockchain, and it has piqued the interest of well-known companies in the blockchain and gaming spaces such as Consensys and Ubisoft.
Additionally, many of the world’s largest football clubs have agreed to let their trademarked properties be included in the game. In fact, Barcelona’s Gerard Pique is one of the investors behind Sorare.
Sorare works similarly to many other fantasy football platforms out there, except that the players that can be used in tournaments and games are issued in the form of NFTs and can have real-world value. There are three levels of players found in the game: unique, super rare, and rare. Unique players are the rarest items in the game, as there are only one copy of them. In other words, it’s not going to be easy to add Messi or Neymar to your fantasy team on this platform.
Since Sorare is built on Ethereum, transactions made in the Sorare system are denominated in ETH.
A Fun NFT-Based Video Game: Axie Infinity
To say NFT-based video game Axie Infinity has been a success would be a massive understatement.
The game, which could be compared to Pokemon, has become arguably the biggest breakout hit in the history of NFT-based video games with a market cap in the tens of billions of dollars.
Users can make real money playing the game and it’s created an entire industry of people doing just that in the Philippines and other regions. The only downside is that you have to buy “Axies” to get started and that means the barrier to entry is rather high.
Still, it’s not often that a game has enabled users to make real money while playing. Most of the time video game manufacturers take all profits from whatever occurs in their games and Axie Infinity represents a dramatic shift to that paradigm.
What's the Point of NFTs?
To be clear, it’s not exactly a sure bet that NFTs are the future of art and other collectibles.
This is still very much an experimental use case of blockchain technology, and there are plenty of detractors of the NFT concept in the blockchain and cryptocurrency space. The main point of an NFT is to signal to other people that you are the owner of some sort of digital or real-world item. In other words, you’re usually not getting any sort of copyright or trademark license when you purchase one of these tokens.
There will still be thousands of copies of whatever the NFT you purchase represents on the internet, and the idea is that you’re getting the original copy. You can use an analogy to the traditional art world to better understand the point here. The NFT is the original piece of art, and all of the other copies of the digital work of art on the internet are just prints.
At the end of the day, some people want to feel special and own the original work of art rather than a print. It’s sort of like a tokenized version of a certificate of authenticity for a collectible.
History of NFTs
Some people have referred to CryptoPunks as the first major NFT collectible to ever exist, but the history of this concept goes back a bit further than that.
In the early days of Bitcoin, there was a concept known as Colored Coins. The basic idea was to represent other tokens with small amounts of bitcoin on the Bitcoin network. However, the Bitcoin community did not want their blockchain to be used for non-monetary use cases, so the Colored Coins concept moved to secondary layers on top of Bitcoin, such as Counterparty, before moving to other blockchains like Ethereum and Binance Smart Chain.
During the peak of the Counterparty days in 2016, the first major NFT collectible set was created in the form of Rare Pepes. In early 2021, one of the rarest Rare Pepes sold for more than $300,000.
The history of NFTs can also not be told without mentioning Cryptokitties, which was the first major NFT collectible to gain serious traction on Ethereum. In fact, Cryptokitties became so popular that the transactions associated with this NFT app led to the Ethereum blockchain getting clogged up for the first time in 2017.
What Do You Get When You Buy an NFT?
When you buy an NFT on any marketplace, you should do some research into what you are actually buying before finalizing the purchase.
Different NFT markets will have varying setups in terms of what can be traded on the platforms, and individual sales of NFTs sometimes come with additional perks outside of the individual NFT that has been issued on a blockchain.
To be clear, when you purchase an NFT, you are purchasing a crypto token that represents some other data that is usually stored outside of the blockchain where the token was issued. It’s basically a digital certificate of authenticity that you are the true owner of some sort of digital file. Importantly, ownership of an NFT does not mean that you also own the particular item or asset that the NFT is supposed to represent.
Learn how to avoid NFT scams.
Can I Make My Own NFT?
Yes, it is easy to make your own NFT these days.
If you are not someone who understands the technical complexities of blockchains and smart contracts, there are plenty of platforms out there that can simplify the process for you. That said, it should be noted that these platforms usually charge a fee for the convenience of making it much easier for you to make your own NFT.
What Are the Most Expensive NFTs Ever Sold?
The most expensive NFT sold up to this point was a piece of digital art created by Beeple. The piece, known as Everydays: The First 5,000 Days, was actually many different Beeple works combined into one image. It was sold for nearly $70 million to someone base in Singapore. This has since been pointed to as a peak in a short-term bubble around NFTs from the early part of 2021. The auction for the Beeple work was conducted by Christie’s, and the purchaser of the piece shared his belief that the artwork is actually worth $1 billion after the auction had concluded.
Two other works of digital art that have sold for millions of dollars come from the CryptoPunks collection. A CryptoPunk #3100 sold for $7.6 million and a CryptoPunk #7804 sold for $7.5 million. Although CryptoPunks were launched around the same time as Cryptokitties, it apears that CryptoPunks have more staying power when it comes to interest from art collectors. There are a few other CryptoPunks that have also sold for more than $1 million, but #3100 and #7804 have been the two most expensive versions so far.
A final NFT worth mentioning when it comes to the most expensive ones yet is Twitter CEO Jack Dorsey’s first ever tweet. Dorsey sold the NFT for $2.9 million on a platform known as Valuables. Although Dorsey was paid in ETH for the tweet NFT, the Twitter CEO immediately converted the proceeds from the sale to bitcoin. That bitcoin was then donated to the Give Directly Africa Fund.
Can You Put an NFT in Your Crypto Wallet?
Yes, you can put an NFT in your crypto wallet. However, it should be noted that NFTs are issued on a variety of different platforms, so you need to make sure that you are using a wallet that corresponds to the network upon which your NFTs have been issued.
You also need to make sure that your crypto wallet supports NFT tracking before withdrawing to it, otherwise the NFT may not be displayed in your wallet. Storing an NFT in your own non-custodial crypto wallet means you have full control over the token.
What's the Difference Between ICO and NFT?
Initial coin offerings (ICOs) and NFTs are two different kinds of tokens that can be launched on top of a blockchain.
We’ve already defined NFTs throughout the rest of this article, so let’s focus on how ICOs differ from NFTs. While NFTs are meant to be non-fungible, which means each token is unique, tokens sold in ICOs tend to be fungible, which means they are all meant to be interchangeable and equal.
ICOs are generally used as a method of raising money for a particular crypto project.
Is the NFT market just a trend?
At this time, it’s unclear if NFTs are going to change the world or if they’re just a fad.
Those who are old enough will remember when Beanie Babies took over the world as highly-desirable collectibles in the 1990s, but nobody really talks about them today.
Then again, NFTs are more of a concept than a specific collectible set, so it’s possible someone will come up with a way to use this technology that is able to stand the test of time. For now, many of the NFT projects of today should be viewed as highly experimental.
Do I Need Crypto to Buy NFTs?
No, you don’t necessarily need crypto in order to buy NFTs.
While some platforms force their users to make buy and sell orders denominated in cryptocurrency, there are also plenty of NFT platforms that are more user friendly and allow traditional forms of payment to be used such as a credit card or PayPal.
That said, if the NFT you want to buy is only available on a platform that requires cryptocurrency to be used, then you’ll have no other option than to convert to cryptocurrency before making your purchase.
Most NFT purchases take place on NFT marketplaces but it’s possible to sell an NFT directly to another person.
Learn More About NFTs
Here at CryptoVantage we’re watching the NFT craze closely and we’ve got a large collection of guides to better understand the phenomenon:
