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What are NFTs? Are they really useful?

Unless you are living under a rock, you probably have heard about NFTs by now. If not, now is your chance!

It is a buzzword for sure, everyone is talking about them. So the question is: are NFTs really something worth knowing about or it is just another trend that will fade away in a few months?

The simple answer is NO!

NFTs AREN’T just a trend, they are here to stay, and they are going to change the life of many people in addition to shaking many industries.

This article is for people from various backgrounds, who know nothing or little about NFTs.

So what are NFTs, Really? Why are some worth that much? And what NFTs have to do with blockchain?

What are NFTs — NFTs for beginners by Afrypto

Stick around and complete this article. Once you finish you’ll know more about NFTs than 80% of people on this planet.

As you must have read somewhere, NFTs mean Non-Fungible Tokens.

Yes! I know, but what are they?!

Definition of Non-Fungible Tokens

First things first, let’s start by defining these words:

(if you are familiar with NFTs you can skip this part)

Fungible = exchangeable or replaceable items.
For example, if I ask you to give me 1$ bill, you won’t ask me which one I want. You’ll open up your wallet and give me any 1$ bill you got. They are all the same.

Whereas Non-Fungible means that each item is unique and not equally interchangeable with another.

A Token is a set of information that is registered on the blockchain and enables us to verify the authenticity of the NFT associated with it. In NFTs, each token has a unique ID (number).

To better illustrate this, let’s say my friend Ahmed and I are buying two similar iPhone 7 Rose Gold 128GB.

The first thing we’ll do is go to the store and ask the agent to sell us the 2 iPhones. As long as it is an iPhone with the specifics mentioned before, we don’t really care which if he gives us, n°1, 2, 3 or 4 (see the picture below).

In this case, all these iPhone are fungible, they have the same value. If the buyer gave me the n°1 and Ahmed got the n°2, we can exchange them if we want to (although there is no reason to).

Now let’s pass forward to 6 months, my iPhone will still be very clean with almost no scratches and a clean screen. In contrast, my friend Ahmed who isn’t that protective will have a smashed screen and a broken camera. Remember, we both bought similar phones, with the same price at the exact time.

But would it be fair now to exchange these iPhones? Of course not !
My iPhone would be worth almost double the price of Ahmed’s, it would be a lost deal to me if we exchange them. In this case, these phones are Non-Fungible.

Taking the same examples of iPhones, the best comparison of a token would be the Serial Number of the iPhone. Each one has a unique Serial Number that makes it possible for the Apple employees and stores to verify when it was purchased to verify the guarantee status and other information.

Recap:

Fungible: when they are produced and sent to Apple stores to be sold (fungible)

Non-fungible: when they are used since each one is in a different state, some with broken screens and others are still almost new.

Token: a piece of information stored on the blockchain, same as a Serial Number of an iPhone stored on Apple’s Database.

Still feeling confused? Don’t worry, I felt the same when I first started learning about NFTs.
We barely explained the definition of the words Non-Fungible Tokens, just keep reading through this article to know a few examples of NFTs and their use-cases.

Wrap-up:

An NFT, or non-fungible token, is a unique identifiable digital asset stored on the blockchain. An NFT could be a digital artwork (JPG, GIF, MP3, MP4…), a skin of a video game, a virtual land, a ticket to an event, or even a digital representation of a real-life physical asset.

The ownership of an NFT is easily and uniquely verifiable due to its public listing on the blockchain.

We will get into blockchain later in this article. But make sure to follow us, we will write a specific article on Blockchain, what it is and how it is changing the world (literally).

Enough theory for now. Let’s break down some of the well-known NFTs projects from the different categories we mentioned and why some are valued or sold for thousands/millions of dollars.

Before we continue, you will most likely have the urge to search these names below, we advise you to not get tempted, just keep reading. Once you finish the article, you will be acknowledged enough to understand them when you are doing your research.

Current NFT use-cases:

  • Beeple (artist)

An artist who created a design every single day for 5000 DAYS! Can you imagine? Even before NFTs were a thing. He sold the entire collection as an NFT for around 69 Million Dollars (why 69 tho?😂) during an auction by Christie’s (one of the major Auction Houses).

Someone literally paid $450,000 to be the virtual neighbor of Snoop Dogg.

The Metaverse as you must have heard somewhere is a virtual world where people get to meet in 3D Avatars, chat, play, collaborate, and even “dance”.

Now some companies and wealthy individuals are rushing to buy pieces of virtual lands to create the Next-Gen Shopping Malls, cities… A piece of land on the Metaverse, also known as Virtual Real Estate, is a plot in a 3D world that you can own as any other physical Real Estate asset. It’s up to you to “build” a house on it, a virtual club or make a game on it.
For now, there are 3 popular companies that are building their own Metaverse: The Sandbox, Decentraland and CryptoVoxels.

The craziness you watched on Black Mirror is certainly coming to life. We are pretty sure it will have some utility, but at what cost?

Numerous NFT Collections that stand out from the crowd for various reasons, notably the CryptoKitties, CryptoPunks and BAYC. We will only choose the last one in this article since the founding team of the projects took more initiatives in comparison with the others.

  • BAYC:

Created on the Ethereum blockchain, the Bored Ape Yacht Club is a collection of 10,000 NFTs drawn as Apes (monkeys) with each one having a unique look and different rarity traits according to what’s his color, clothes, accessories, and background.

What makes this collection stand out and sell for hundreds of thousands, is that the founders have gone beyond the “Profile Picture” kind of NFTs that you see everywhere. The team experimented with different utilities, from holding exclusive Yacht Parties, to creating exclusive games and ethical charity towards different NGOs…

The strong community also played a role in making it one of the best NFT collections to date. Some famous artists like Post Malone, DJ Khaled, Marshmello, Jimmy Fellon, Stephen Curry… have also “Aped” into the project, in other words, they bought their own BAYC NFTs.

The minting (launch) price was 3 ETH ≈ 8,370$ in a Dutch Auction style. The project didn’t sold-out in a few hours like many others did. It needed few days before it skyrocketed to astonishing levels. The current floor price (the cheapest item) is 56 ETH ≈ 226,000$

  • VeeFriends by GaryVee

VeeFriends is a Collection of 10,255 NFTs created by one of the most successful entrepreneurs alive Gary Vaynerchuk (GaryVee). Each token is a basic sketch done by Gary himself.
Although these sketches look like a kid learning how to draw (sorry Gary), their real value comes from their utility. Some of these NFTs grant access to 1-to-1 sessions or video conference with him, another category gives you access to his coming annual conference VeeCon and another category let you play with him Tennis, Ping Pong or even go on a 4hours Garage Sells with the man.
VeeFriends value is also tied to the brand of GaryVee, many owners of this collection took part because they believe in him and what he can achieve.

Personal opinion: although Gary might seem at first as an “Inspirational speaker”, he has a lot more than that up his sleeves. He built a worldwide communication agency from the ground up, without raising a single dollar from investors and knowing this is one of the toughest businesses to scale.

  • The VeeFriends 1 released from the collection during may 2021 were minted between 0.5 and 2.5 ETH in a Dutch auction-style. Fast forward to now, the floor price is around 9 ETH, equivalent to 37,000$ at the time of writing.

The good news is, there will be a VeeFriends 2 during the first quarter of 2022 for a mint price of less than 1,000$, and we are saving to take a part in this launch. DO YOUR OWN RESEARCH, don’t take our words for granted as everything in this space is risky.

Blockchain and NFTs are revolutionizing the gaming industry, literally. Web3 as a whole offers more power to the users, in this case, users are the gamers.
NFTs can enable players to sell the items they own in the game, whether the skins, emotes or even the currency of the game.
If PUBG or Fornite for example have been crypto games, you could’ve had the ability to sell your skins quickly, without relying on any 3rd party websites. The game would’ve had its own marketplace on which players can sell their skins in exchange for virtual currency, that can be turned into “real” money.

Many games are have already started the P2E (Play to Earn). Where people are making enough money to live. We are not talking about the streamers who are well known, no, just average non-famous players!
If you are interested in knowing more about crypto gaming, leave a comment below. In case there’s enough demand, we will take an in-depth look at the Crypto & NFTs Gaming sector.

As much as the idea of a virtual world called “Metaverse” seems crazy, It will become a part of our daily life in a few years. It’s not for nothing Facebook re-branded to “Meta”, considering that the company own the data of 2+ Billion people on this earth and knows more about us that any other person/company.

After Facebook’s move, many companies started following its footsteps to take a part in the Metaverse transition, including Fashion Brands.

Nike, Burberry, Adidas, and many other well-established brands started experimenting with digital wearable or collectibles. “Wearables” or “collectibles” mean the skins or items that people or their avatars can wear on the Metaverse. Exactly as gaming.
Adidas recently dropped its first NFT in collaboration with the BAYC. The mint price was 0.2 ETH and it all sold out in a few minutes. Later in the same day, the floor price rose to more than 0.8 ETH.

The studio RTFKT launched series of digital collectible sneakers. We were closely watching this studio to mention it in this section of the article, then few days ago the studio announced that it was acquired by Nike inc.

Since the Music industry has many middlemen from Record Labels, Distributors, Streaming platforms… very little money actually goes to the artists. We are not talking about the Mega Stars like Drake, Rihanna, The Weeknd… these artists have enough leverage to gain massive amounts through other channels.

In contrast, NFTs offer various ways for artists to get funded by their communities and fan bases. In return, these artists can share a royalty of the earnings with the members who helped them raise money at first!

Few musicians/bands launched their own NFTs and sold it out in very short timeframes generating hundreds of thousands to millions of dollars.

One of the most successful Music NFT launches was in February by 3LAU, a DJ and EDM producer. Justin Blau aka 3LAU, made 11+ million dollars by selling 33 tokens in few days, ranging from artworks, a custom song, private music that was never shared, to physical vinyl sent to the buyers. A particular token was sold for 3.6m$ making it the highest unique NFT to be sold at that time.
To not fool you, this wasn’t an overnight success, Justin was involved in the crypto space for years. Mixing his artistic ear with his tech-savvy capabilities to set a new stage for musicians.

NFTs will be a GAME-Changer in music due to the various possibilities it offers. especially musicians with a strong community or fan base.
If you are a musician or an artist, this is your chance to start interacting with your fans and build some real connections with them. These are the people who will be supporting and funding you, instead of the Record Labels.

Social status

We know that Bentley, Lamborghini and Ferrari are bought not necessarily for their power and speed but to communicate to other people that the owners are of a high status. Also known as Social Signaling. The same goes for wearing Louis-Vuitton, Supreme…
The fact that we are now witnessing NFT collections like CryptoPunks and BAYC selling for at least 150,000$, we can rest assured that there is more to NFTs than art or gaming only. It can also be about building inclusive communities that everyone wants to be a part of.

NFTs are like real-world paintings. They can be insanely valuable, but just because something is painted, it doesn’t make it valuable. The same goes for NFTs, you are not going to get rich by owning one, but if you buy the “right” one, in the “right” time, you’ll be able to make some money.

This IS NOT A FINANCIAL ADVICE! Do not invest more than you can afford to lose. Experts say that 90% of the existing NFTs are gonna lose a huge part of their value if not all of it. But the left 10% is going to… well let’s discover together.

All of this is now possible thanks to Blockchain technology. First emerged in the form of Bitcoin. “Blockchain” is a huge topic in itself to cover, we will only talk about the basics that you need to further know about NFTs.

Blockchain

To simplify it, think of blockchain as a public ledger, a digital book on which transactions are approved and recorded in a way that makes it almost impossible to hack, change or delete. There are many blockchains out there, the first one was Bitcoin, now there is Ethereum, Solana, …

For a blockchain to exist, it must have a large network of nodes. Nodes are computers that are part of a blockchain’s network, they execute some calculations to make sure the sender (or buyer) has enough money to proceed with that transaction. When the transaction is confirmed, it is then recorded into the blockchain. Once it’s done, no one can edit it, or delete it.

The network motivates people to join and do that work (validating & recording transactions) by paying them incentives in the form of cryptocurrencies. Bitcoin network pays BTC for its miners, Ethereum pays ETH, … The incentives paid to these miners for recording transactions are what’s known as Gas Fees. Basically, when you send cryptocurrency to anyone (to buy somethings or as a gift), there’s a “small” amount that is reduced to pay the nodes for their work.

Back to NFTs, they are all minted/created in the blockchain.

NFTs and the different blockchains

On the contrary to the internet, there are a lot of blockchains that exist today and there will be more in the future. Blockchains don’t necessarily communicate with each other (not interoperable with one another). That means an NFT minted (created) on a certain blockchain might not be transferable to a different blockchain.

To explain this better, you can send a picture or video to ANYONE in the world via the internet, either on Facebook, Whatsapp, Email or a WeTransfert… and that person can receive and open it using his android phone, iPhone or computer.
In contrast, an NFT can only be sent on the blockchain that it was created on. If it is minted in on the Ethereum blockchain, it can only be sent and received on it.

Another distinction you should be aware of, when talking about Ethereum, we mean the Ethereum blockchain, not the cryptocurrency $ETH, the Token of the blockchain valued at around 4,000$ currently.

  • $BTC is the cryptocurrency of the Bitcoin blockchain
  • $ETH for Ethereum blockchain
  • $SOL for Solana…
  • $MATIC for Polygon (and so on)

Now that you know each blockchain has its own NFT space, let’s sum up the most used or important ones, while mentioning the specificities of each:

1. Ethereum:

It is the blockchain that enabled us to create NFTs in the first place. Thanks to its Smart Contract functionality. Ethereum is now the leading platform in terms of Sales volume and the go-to blockchain for the Blue Chip NFT projects (recognized and well-established projects like CryptoPunks, BAYC, VeeFriends…).

The downside of the Ethereum blockchain is the limited number of transactions it can proceed in a second, that is the main reason why the Gas Fees of one single transaction can cost you between 15 to 150$ or even more, depending on how busy is the network.

Even though the cost of transactions is really High, that doesn’t stop Ethereum from being the number 1 choice for the most interesting projects. That’s because Ethereum is one of the most secure and well-trusted blockchains and it will probably be the case for years to come.

2. Solana:

Meanwhile, Solana ($SOL) is currently the fastest technology in terms of growth due to it’s ability to process a lot of transactions per second, making the Gas Fees less than a dollar. Many NFT projects and games are starting to launch on this blockchain. SMB and MonkeyBall both seem to be promising in the respective categories. Remember DO YOUR OWN RESEARCH, THIS IS NOT AN INVESTMENT ADVICE.

On the other hand, some experts are skeptical about the long-term value of Solana Network, as its infrastructure is less secure than Ethereum.

3. Polygon

Polygon ($MATIC) is a sidechain (we will get to that in the future articles) built on the Ethereum Network. Polygon is more of a scaling solution for the Ethereum blockchain that enables us to make transactions with very reduced costs (around $0.02) while maintaining many advantages of the Ethereum network.

Polygon is also a rising star in the NFTs space and being a serious competitor to the Solana chain. As for beginners, I would recommend you to first experiment with the Polygon NFTs eco-system before moving the Ethereum.

Other blockchains

Although there are other blockchains that allow us to use NFTs. We aren’t not well informed about them, that is why we’ll only be mentioning them so you can do your own research:

  • Flow
  • Tezos
  • WAX
  • Binance Smart Chain

NFTs are now opening a large fertile lands for the creators, artists and even users to make money and network with amazing individuals allover the world.

IMHO (In My Humble Opinion), there will come a time when NFTs will be a part of our everyday life, exactly like how are phones right now. Buying an NFT from Adidas or Nike will give us access to exclusive offers, owning a certain NFT will grant us the ability to enter a Club or a PUB. Some houses or apartments maybe bought and sold via NFTs… This doesn’t mean it will be the case in 2023 or 2024, but brace yourselves. It is coming!

If you made it until here, we would like to thank you for your time!

We covered up some of the basic aspects of NFTs and the relationship between them and blockchain.

Next:

During the coming articles, we will walk you through how to get started with NFTs, from setting up a wallet and discovering the never ending landscape of crypto. Both in the case of a wealthy person who can invest directly considerable amounts but also in the case of a newbie who has no budget or a very limited one.

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