NFTs are hugely popular and can be profitable investments, but they can also be difficult to understand. The technologies and systems that support NFTs are stunningly complex, and each piece of infrastructure is jammed with jargon.
Acronyms also abound, along with project roadmaps that often seem written for math professors. With the resulting information overload, It’s easy to become overwhelmed and disheartened.
Fear not!
We understand that entering the NFT realm can be intimidating. So we created an easy-to-scan guide to help you gain a better understanding of NFTs.
Let’s dive in!
Standards
A token standard is a method used for structuring and creating the technical underpinnings of an NFT. On the other hand, accepted token standards ensure that your NFTs are widely compatible and more easily trusted.
Within the Ethereum ecosystem, there are two main non-fungible token standards:
1. ERC-721
The Ethereum Improvement Proposal number 721 (ERC-721), created in 2018, allows for generating NFT assets on the Ethereum blockchain.
Additionally, the creation and success of early NFTs were part of the inspiration for developing the token standard. The early NFTs include CryptoPunks and CryptoKitties.
As a result, there was a way for the burgeoning ecosystem to begin building on a solid foundation. Today, the token standard is the most widely used and supported type of NFT. Additionally, it undergirds a multi-billion dollar market.
2. ERC-1155
The Ethereum Improvement Proposal number 1155 happened half a year after the ERC-721 standard. Based on its functionalities, ERC-1155 is a standard interface for contracts that manage multiple types of tokens.
When comparing ERC-1155 to ERC-721, ERC-1155 tokens are much more flexible and have a wider range of features.
NFT Types
An NFT may have various types based on a specific quality, feature or trait.
Purpose Types
On this type, an NFT can either be utility-focused or art-focused. Thus, they can be:
Utilitarian- They enable a practical use case.
Art, decorative or collectible- represents a work of art appreciated for having aesthetic or conceptual qualities.
Quantity and Supply Types
NFTs can be flexible, implementing quantities and supply sizes
One-of-one- Only one NFT of an art piece and no other version exists.
Multi-edition- In this type, multiples of the same object or piece of art exist.
Open-edition- In this type, someone creates an uncapped supply of a particular object or art.
Limited-Edition
Data Storage Types
On-Chain Types- The NFTs have many data encoded directly onto the blockchain.
Off-chain- They are the opposite of on-chain NFTs, as their data is stored outside the blockchain.
Use Cases of NFTs
NFTs have different applications, the list is not exhaustive, and new ones are regularly emerging. They can, however, be within the below user cases:
Fine Art
Music
Profile Picture (PFP)
Memes
Writing
Social Media
Domains
Events
Memberships
Gaming
Financial assets
Final Thoughts
2021 was the year of the NFT, and things don’t appear to be slowing down as more projects and more money are pouring into the space daily. NFTs are a developing phenomenon with new use cases and ever-expanding possibilities.
This quick guide should get you started on your successful journey into the world of NFTs.
There is so much more to explore and learn, and we encourage you to do so. NFTs can be fun and interesting, but exercise caution if and when deciding to invest.
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