Unless you’ve been living under a rock for the past year, you’ll most likely have heard someone mention NFT’s – but what are they? NFT stands for “non-fungible token”, which probably doesn’t help you understand it any better, so let’s break it down:

Fungible is a legal term that defines the mutually replaceable characteristics of items like gold or money. Whereas a one-dollar note is equally as valuable as any other one-dollar note, a unique item like an antique or a painting is non-fungible.

Tokens, in this instance, refer to digital items created and stored on a blockchain network. Cryptocurrencies like Bitcoin could be referred to as digital tokens, but they can also represent unique items, which is where NFTs come in. An NFT is a type of digital contract that is secured by encryption and can’t be copied, stolen, or replicated. Technically, anything can be represented by an NFT if the owner of the item chooses to define it that way, but currently, the space is largely made up of digital art.

Quick NFT Stats

• NFT Market Value: $2.5 billion
• Most expensive NFT ever sold: Beeple – ‘Everydays‘ for $69.3 million
• Daily NFT trading volume: $62.5 million
• Most NFTs sold in one day: 56,736 on August 10, 2021

Top 10 NFT Projects (as of August 13, 2021)

• CryptoPunks
• Art Blocks
• Bored Ape Yacht Club
• Meebits
• CryptoArte
• VeeFriends
• SuperRare
• MoonCatRescu
• Bastard Gan Punks
• The Sandbox

So, what exactly do NFTs do?

There is currently much debate regarding the true value of NFT technology. Some critics believe the craze will die out while others see them as the future of property rights. While there are still several technological and legal issues to overcome, there is no doubt that NFTs have caught the attention of some high-profile investors. At the very least, the ability to instantly and legally transfer ownership of an item without the need for a third-party intermediary should have some real-world uses.

With the NFT market now worth an estimated $2.5 billion and individual works selling for upwards of $10 million each, it’s no wonder there is hype surrounding it all. But what defines the true value of one NFT over another? If you buy an NFT of a song, do you own the rights to that song? To answer these questions, we need to go back to where it all began.

An NFT Timeline

NFTs may seem like a new fad but they actually go back way further than most people know – by almost ten years!

2012

Back in 2012 just after Bitcoin started gaining traction, a project called Colored Coins popped up, representing the earliest example of NFTs. However, since the Bitcoin blockchain was not designed to support unique tokens the coins failed to maintain value.

2014 – 2016

Soon after, a digital asset trading company called Counterparty built a platform upon which users could create tradable NFT-based collectibles. This led to the launch of several digital card games like Spells of Genesis, Force of Will, and even a collection of Rare Pepe memes. Still, NFTs remained largely underground until the Ethereum network burst onto the scene in 2017.

2017

With Ethereum came far greater functionality in respect to blockchain development and, in particular, smart contracts. Ethereum made it possible for coders to quickly and easily build decentralized applications that users could interact with using ETH tokens to fuel the network.

One of the earliest and still to this day most popular applications ever built on Ethereum is CryptoKitties, an NFT-collectibles game featuring digital cats. This game brought NFTs to the mainstream and at one point was so popular it almost crashed the entire Ethereum blockchain.

2018 – present

Nonetheless, soon after the release of CryptoKitties, the industry collapsed into a two-year-long bear market and NFTs went into hibernation. However, developers kept working behind the scenes and by the time the market recovered in late 2019, hundreds of NFT marketplaces existed. Platforms like OpenSea and Rare Bits are now leading the charge, while new technologies like decentralized finance (DeFi) make trading NFTs easier than ever before.

Currently, one of the most popular NFT projects is CryptoPunks, a selection of low-quality images of ‘punks’ dressed in different ways. Despite being around for almost four years, CryptoPunks recently found a new fanbase, with some works selling for upwards of $7 million.

What does an NFT actually represent?

Each NFT is simply a small data entry on the blockchain defining what it is, who owns it, and license details. Some NFTs are only licensed for personal, non-commercial use while others have commercial licenses. However, it’s important to note that an NFT doesn’t qualify as proof of copyright over the underlying object unless this is explicitly noted.

For this reason, the fluctuating value of an NFT is largely based on what people believe its worth. Despite this lack of intrinsic value, some NFTs have become incredibly valuable due to their cultural significance or rarity as a collectible. For example, in May 2021 the University of Berkeley in California sold two NFTs of Nobel Prize-winning inventions for $55,000. However, the university maintains ownership of the patents while the buyer just gets a licensed, digital version of the patent disclosure form.

The technology behind NFTs

In order for NFT projects to exist, they must be built upon a blockchain and use a type of cryptocurrency to facilitate sales and purchases. Several standards have been created to support the NFT industry, the first and most popular of which is Ethereum’s ERC-721 on which CryptoKitties was built.

In recent years the cryptocurrency industry has received criticism for its high energy usage and resulting environmental impact. Blockchains such as Ethereum use a Proof-of-Work (PoW) consensus method that requires millions of computers and a lot of electricity to operate. Subsequently, developers have created Proof-of-Stake (PoS) networks that use token holders to verify transactions rather than complex computer algorithms.

Although Ethereum is in the process of migrating to PoS, other PoS networks like FLOW and Tezos are already starting to attract NFT developers. CryptoKitties’ developer Dapper Labs recently announced plans to move the game onto FLOW, joining the popular digital sports card trading game “NFT Top Shots”.

Due to high-profile partnerships with famous celebrities like Katy Perry, video streaming blockchain THETA recently became one of the most widely used NFT networks. Other NFT blockchains like Chiliz have also garnered attention through sports partnerships and fan engagement apps like Socios.com

How NFTs are Created and Programmed

Anybody can get involved in the world of NFTs, whether you just want to invest or you want to create your own NFT art. Simply download an NFT-enabled digital wallet like MetaMask, buy one of the coins below, and go shopping on one of the many NFT marketplaces. Below are the top ten crypto coins used by NFT enthusiasts:

Top 10 NFT Coins

• Theta Network (THETA)
• Axie Infinity (AXS)
• Chiliz (CHZ)
• Enjin Coin (ENJ)
• Flow (FLOW)
• Decentraland (MANA)
• ECOMI (OMI)
• Audius (AUDIO)
• Ultra (UOS)
• The Sandbox (SAND)

If you also want to create and program your own NFTs, there are many fun and easy platforms to do that. If you’re an artist, musician, or any type of creative you can monetize your work and earn royalties through the sale of NFTs. First, select the platform you want to build it on – the most popular ones are OpenSea, Rarible, and Mintable.

For this example, we’ll use OpenSea:

1. Go to Opensea.io

It will give you the option to connect your MetaMask crypto wallet to the platform using just the wallet address. This will now be your login address for OpenSea.

2. Click Create

Select My Collections and make a new list, which will act like a store for your NFTs. This is where you can create, share, and sell all your NFTs.

3. Upload your Art

You can upload anything from images or text to video and audio, with supported files including JPG, PNG, GIF, SVG, MP4, WEBM, MP3, WAV, OGG and many more. You can also give it a name and a link to more info if you want.

4. Add Details

A lot of NFTs act like old-school trading cards, so you can provide details and stats like a symbol, hair color, height, strength, or mana level. You can also add secret content that is only revealed after purchase.

5. Set the Supply

This is the number of NFTs that can be minted/sold. Traditionally, people usually only mint one of each NFT to maintain scarcity but you can make more.

6. List the NFT for sale

Set the price that you want to sell the NFT for and create a listing schedule – either immediate or at some future date. You can also make the listing public or private

Programming Complex NFTs

Behind platforms like OpenSea is a more complex programming language that creates the NFT for you. If you want to physically code your own NFTs, this can be done using a blockchain programming language like Solidity.

Solidity is used to create Smart Contracts on the Ethereum Virtual Machine (EVM), a decentralized computer on the Ethereum blockchain. A smart contract is essentially just a piece of code running on a blockchain, and all NFTs are smart contracts.

However, unlike a normal computer, coding on a blockchain requires gas fees – tiny amount of Ethereum that must be paid in order to create and deploy the smart contract. Using Solidity, you can connect your Ethereum wallet and create smart contracts using the ERC-721 standard.

With this standard, you can define specific conditions for an NFT like TokenID, CREATE operations, and transfer functions. There is a host of other programmable functions that are too complex to discuss here but can be found in the Solidity documentation at https://soliditylang.org/

Conclusion

However, you feel about NFTs, one thing is for sure – they have certainly become a big part of modern culture, finance, and technology. While some people believe they are a lucrative long-term investment, others see them as just fun collectibles and a passing fad. Technologists envisage a future where all intellectual property is stored as NFTs, while traditional financiers believe the bubble will pop and millions will lose money. That’s the beauty of new technology – nobody quite knows where it’s going to go, so jump on and enjoy the ride!

Disclaimer:  The author of this text, Jean Chalopin, is a global business leader with a background encompassing banking, biotech, and entertainment.  Mr. Chalopin is Chairman of Deltec International Group, deltecbankstag.wpengine.com.

The co-author of this text, Robin Trehan, has a Bachelor’s degree in Economics, a Master’s in International Business and Finance, and an MBA in Electronic Business.  Mr. Trehan is a Senior VP at Deltec International Group, deltecbankstag.wpengine.com.

The views, thoughts, and opinions expressed in this text are solely the views of the authors, and do not necessarily reflect those of Deltec International Group, its subsidiaries, and/or its employees.