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Non-fungible token

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This is an old revision of this page, as edited by User5109nfsaln (talk | contribs) at 02:44, 15 March 2021 (simply not true. It was preceded by the Etheria project and possibly others.). The present address (URL) is a permanent link to this revision, which may differ significantly from the current revision.

For other uses, see NFT (disambiguation).
File:Hashmask 15753.jpg
This image, Hashmask[a] 15753 (1 of 16,384) by "Suum Cuique Labs GmbH", sold with an NFT on the Ethereum blockchain.

A non-fungible token (NFT) is a digital file whose unique identity and ownership are verified on a blockchain (a digital ledger).[1][2] NFTs are not mutually interchangeable (see fungibility). NFTs are commonly created by uploading files, such as digital artwork, to an auction market. This creates copies of the files, which are recorded as NFTs on the digital ledger. The tokens can then be bought with cryptocurrency and resold.

NFTs can be used to commodify digital creations, such as digital art, video game items, and music files. Access to any copy of the original file, however, is not restricted to the owner of the token.

Description

A non-fungible token (NFT) is a unique digital file stored on a blockchain (a digital ledger).[1] An NFT is a cryptographic token, but unlike cryptocurrencies such as bitcoin and many network or utility tokens,[b] NFTs are not mutually interchangeable, i.e. not fungible.[3][4][5] An NFT is created by uploading a file, such as an artwork, to an NFT auction market, such as KnownOrigin, Rarible, or OpenSea.[6] This creates a copy of the file recorded on the digital ledger as an NFT, which can be bought with cryptocurrency and resold. Although an artist can sell an NFT representing a work, the artist can still retain the copyright to the work and create more NFTs of the same work.[7][8] The buyer of the NFT does not gain exclusive access to the work,[9] nor does the buyer gain possession of the "original" digital file.[10] A person who uploads a certain work as an NFT does not have to prove that they are the original artist,[11] and there have been numerous cases where art was used for NFTs without the creator's permission.[12][13]

Uses

NFT technology can be used to cause artificial scarcity of a digital creative work by making only one NFT of that work with a unique signature.[14] NFTs of artworks are therefore similar to autographed items.[15] The unique identity and ownership of an NFT is verifiable via the blockchain ledger. NFTs have metadata that is processed through a cryptographic hash function, an algorithm that calculates a unique, 40-digit sequence of letters and numbers.[16] NFTs are also used to create the possibility of asset interoperability across multiple platforms.

Digital art

Art was an early use case for NFTs, because of the purported ability of NFTs to provide proof of authenticity and ownership of digital art, which, unlike physical art, does not have a preexisting means of recognizing authenticity.[17]

Games

NFTs can also be used to represent in-game assets which are controlled by the user instead of the game developer. The first use on NFTs in gaming was implemented by Tokenzone using a centralized approach. [18] NFTs allow assets to be traded on third-party marketplaces without permission from the game developer.

Standards in blockchains

Specific token standards have been created to support the use of a blockchain in gaming. These include the Ethereum ERC-721 standard of CryptoKitties, and the more recent ERC-1155 standard.[19] Token standards also exist on other blockchains that support NFT like Bitcoin Cash and FLOW blockchain.[20][2]

Ethereum

ERC-721 was the first standard for representing non-fungible digital assets on the Ethereum blockchain. ERC-721 is an inheritable Solidity smart contract standard, meaning that developers can easily create new ERC-721-compliant contracts by importing it from the OpenZeppelin library.[21]

ERC-1155 brings the idea of "semi-fungibility" to the NFT world, as well as providing a superset of ERC-721 functionality (meaning that an ERC-721 asset could be built using ERC-1155).[22]

Bitcoin Cash

The Simple Ledger Protocol (SLP) can be used to support non-fungible tokens by minting a non-divisible token supply of 1 without a minting baton, called a simple NFT.

NFT1 was introduced onto the Bitcoin Cash blockchain in 2019 as part of the SLP token structure. The specification codifies a more capable type of NFT that allows grouping of many NFTs together.[23]

Flow

On the Flow blockchain, created by the team behind Cryptokitties,[24] the Cadence programming language represents each NFT as a resource object that users store in their accounts. Resources have important ownership rules that are enforced by the type system. They can only have one owner, cannot be copied, and cannot be accidentally or maliciously lost or duplicated. These protections ensure that owners know that their NFT is safe and can represent an asset that has real value.[25]

GFT Alliance

The GFT Alliance promotes and supports NFT distributed ledger technology for intellectual property partners (entertainment, gaming, film, arts, sports, etc.) including research, development, and education that empower on-going innovation for branded NFTs (GFT™ Authentic Digital Collectibles).  The GFT Alliance helps intellectual property partners create NFTs and smart contracts to be distributed and traded on a globally accessible, transparent and trusted distributed marketplace network.

History

In June 2017, CryptoPunks were released on the Ethereum blockchain by American studio Larva Labs, a two-person team consisting of Matt Hall and John Watkinson.[14][26][27] Then, MoonCatRescue became the second non-fungible token project, which flew under the radar, but eventually took off on March 12, 2021. In late 2017 another project called CryptoKitties was released and went viral[28][29] and subsequently raised a $12.5 million investment.[30]

In 2018, RareBits, an NFT marketplace and exchange, raised a $6 million investment.[31] Gamedex, a collectible cards game platform made possible by NFTs, raised a $800,000 seed round.[32] Decentraland, a blockchain-based virtual world, raised $26 million in an initial coin offering,[33] and had a $20 million internal economy as of September 2018.[34] As of 2019, Nike holds a patent for its blockchain-based NFT-sneakers called ‘CryptoKicks’.[35]

In May of 2018, Atom Tickets, 20th Century Fox, Marvel Studios launched a Deadpool 2 NFT series under the GFT Exchange. The smart contract allowed users to move the NFTs to the public chain and sell through Opensea.io after a six month promotional window. Considered one of the first major Hollywood studio launched NFT program, only 67 of the NFTs remain in existence. Yahoo, Deadline and blockchain publications announced the NFT program.

Dapper Labs, in partnership with the NBA, launched a beta version of their NBA TopShot collectible and tradable NFT-based app in the first half of 2020, which they had been working on since 2018.[36] It sells tokens in packs that they say contain multimedia and data smashed together. On October 1, 2020, it was announced that they had exited the beta and opened to all fans.[37] As of February 28, 2021, Dapper Labs was reporting over $230 million in gross sales in the app.[38]

In August 2020, the Museum of Crypto Art (MOCA) made history for what was at the time the largest-ever purchase on NFT art marketplace Nifty Gateway, acquiring "Picasso's Bull" by artist Trevor Jones for $55,555.55 worth of Ether — a sale that Nifty Gateway described as an important milestone in the art world that validated NFTs as a new medium of art. MOCA placed #20 in the Cointelegraph's top 100 most notable people in Blockchain 2020.[39]

In February 2021, the musician Grimes sold around $6 million worth of tokens representing digital art on Nifty Gateway.[40] Later in February of 2021, an NFT representing the meme animation Nyan Cat was sold in an internet marketplace for just under US$600,000.[41]

The American digital artist Beeple's work Everydays: The First 5000 Days was the first NFT of an artwork to be listed at prominent auction house Christie's and sold for 69.3 Million USD on 11 March 2021.[42][43] The day before the auction, Beeple said, "I actually do think there will be a bubble, to be quite honest. And I think we could be in that bubble right now."[44] The speculative market for NFTs soared in the year leading up to early 2021 when the same investors who had speculated on cryptocurrencies traded greatly increasing volumes of NFTs.[45] The massive price increases in early 2021 might hint at an economic bubble about to burst like in the Tulip mania of the 17th century.[46][47]

In a race for the publicity, the first full album represented by an NFT to enter auction was Whale Shark by Canadian electronic artist Clarian, which was released on March 4, 2021.[48] Kings of Leon's album When You See Yourself, released on March 5, 2021, had been planned to be the first musical album sold with NFT tokens.[49][50]

Carbon emissions

NFTs mostly run on a proof-of-work blockchain, which is less energy efficient than a proof-of-stake blockchain.[45] The British AI artist Memo Akten created an online CO2 calculator to criticize the unreasonable carbon footprint for Ethereum-based NFT transactions.[51] In early 2021, a German conceptual artist auctioned a single transparent pixel for 1 Ether, thereby emitting 125 kg of CO2.[52] An analysis of data from an NFT market found that the average NFT art transaction used 340 kWh of electricity and had a carbon footprint of 211 kg of carbon dioxide, equivalent to around a month's worth of electricity consumption for a resident in the EU, driving for 1,000 km, or flying for 2 hours.[53]

NonFungible.com stated that blockchain miners utilize the same volume of energy regardless of NFT usage.[54] The carbon emissions concerns go back to 2015[55] and are not exclusive to or impacted by NFTs. Rather, they are a trait of proof of work blockchains.

See also

Notes

  1. ^ A Hashmask is a collectible piece of digital art put together by an international group of artists in the organization Suum Cuique Labs of Switzerland.
  2. ^ Network tokens are used to identify and validate payments over card networks, made with a specific merchant. Utility tokens are a type of cryptocurrency that represent access or discount to a product or service.

References

  1. ^ a b Dean, Sam (March 11, 2021). "$69 million for digital art? The NFT craze, explained". Los Angeles Times. Retrieved March 12, 2021.
  2. ^ a b "Non-Fungible Tokens 101: A Primer On NFTs For Brands And Business Professionals". Forbes. 2021-02-28. Retrieved 2021-03-10.
  3. ^ Schroeder, Stan. "Crypto trading card game 'Gods Unchained' looks pretty sweet in first gameplay trailer". Mashable. Retrieved 2018-11-18.
  4. ^ Merriam Webster Definition
  5. ^ "WTF Is an NFT, Anyway? And Should I Care?". Wired. ISSN 1059-1028. Retrieved 2021-03-13.
  6. ^ Allyn, Bobby (March 5, 2021). "What's An NFT? And Why Are People Paying Millions To Buy Them?". NPR. Retrieved March 12, 2021.
  7. ^ Salmon, Felix (March 12, 2021). "How to exhibit your very own $69 million Beeple". Axios. Retrieved March 13, 2021.
  8. ^ Clark, Mitchell (March 11, 2021). "NFTs, explained". The Verge. Retrieved March 11, 2021.
  9. ^ Thaddeus-Johns, Josie (March 11, 2021). "What Are NFTs, Anyway? One Just Sold for $69 Million". The New York Times. Retrieved March 13, 2021.
  10. ^ "NFT blockchain drives surge in digital art auctions". BBC. March 3, 2021. Retrieved March 12, 2021.
  11. ^ Debré, Elena; Mak, Aaron (March 11, 2021). "How in the World Did a "Digital Artwork" Sell for $69 Million at Christie's?". Slate. Retrieved March 12, 2021.
  12. ^ Schreier, Jason (March 9, 2021). "Gaming Crypto-Artists Court Controversy While Cashing in on NFTs". Bloomberg. Retrieved March 12, 2021.
  13. ^ Mason, Jessica (2021-03-10). "What Is Going on With Cryptocurrency, NFTs, and Fan Art?". The Mary Sue. Retrieved 2021-03-12.
  14. ^ a b Gemmell, Katharine (March 8, 2021). "Should You Buy a Bitcoin-Inspired Image of Lindsay Lohan?". Bloomberg. Retrieved March 12, 2021.
  15. ^ Peters, Jay (2021-03-05). "Please do not give billionaire Jack Dorsey money for his tweet". The Verge. Retrieved 2021-03-12.
  16. ^ "Want to Buy an NFT? Here's What to Know". The Wall Street Journal. March 13, 2021. Retrieved March 14, 2021.
  17. ^ "The Art World Needs Blockchain – Irish Tech News". irishtechnews.ie. Retrieved 2018-05-02.
  18. ^ "CryptoKitties shows everything can — and will — be tokenized". VentureBeat. 2017-12-04. Retrieved 2018-05-02.
  19. ^ Volpicelli, Gian (24 February 2021). "The bitcoin elite are spending millions on collectable memes". Wired UK.
  20. ^ "Uniswap UNI Token was "Shining Star" of DeFi this Past Week, while Ethereum based NFTs Rising in Popularity". CrowdFund Insider. 2021-03-07. Retrieved 2021-03-10.
  21. ^ "EIP-721: ERC-721 Non-Fungible Token Standard". Ethereum Improvement Proposals. Retrieved 2021-02-28.
  22. ^ "EIP-1155: ERC-1155 Multi Token Standard". Ethereum Improvement Proposals. Retrieved 2021-02-28.
  23. ^ "NFT1 Specification". Bitcoin Cash Specification. 2019-07-11. Retrieved 2021-03-10.
  24. ^ "FAQ". www.onflow.org. Retrieved 2021-03-13.
  25. ^ "FLOW Non-Fungible Tokens". FLOW NFT Specification. 2021-03-04. Retrieved 2021-03-10.
  26. ^ "This ethereum-based project could change how we think about digital art". Mashable.com. Retrieved 2017-06-16.
  27. ^ Chevet, Sylve (2018-05-10). "Blockchain Technology and Non-Fungible Tokens: Reshaping Value Chains in Creative Industries". Rochester, NY. {{cite journal}}: Cite journal requires |journal= (help)
  28. ^ Wong, Joon Ian. "CryptoKitties is jamming up the ethereum network". Quartz. Retrieved 2018-05-10.
  29. ^ "CryptoKitties Mania Overwhelms Ethereum Network's Processing". Bloomberg.com. 2017-12-04. Retrieved 2018-05-10.
  30. ^ "CryptoKitties raises $12M from Andreessen Horowitz and Union Square Ventures – TechCrunch". techcrunch.com. Retrieved 2018-05-07.
  31. ^ "Crypto-collectibles and Kitties marketplace Rare Bits raises $6M – TechCrunch". techcrunch.com. Retrieved 2018-05-07.
  32. ^ "Blockchain startup Gamedex raises $0.8 million seed round to build platform for digital collectible card games like Pokemon – TechStartups". techstartups.com. Retrieved 2018-05-07.
  33. ^ Russo, Camilla (2018-06-12). "Making a Killing in Virtual Real Estate". Bloomberg. Retrieved 2018-09-05.
  34. ^ Hankin, Aaron (2018-09-04). "People are making more than 500% buying property that doesn't actually exist". MarketWatch. Retrieved 2018-09-05.
  35. ^ Beedham, Matthew (2019-12-10). "Nike now holds patent for blockchain-based sneakers called 'CryptoKicks'". Hard Fork | The Next Web. Retrieved 2020-12-23.
  36. ^ Shieber, Jonathan (27 May 2020). "CryptoKitties developer launches NBA TopShot, a new blockchain-based collectible collab with the NBA – TechCrunch". TechCrunch. Retrieved 4 March 2021.
  37. ^ Labs, Dapper (1 October 2020). "Dapper Labs Opens NBA Top Shot Beta to All Fans". PR Newswire. Retrieved 4 March 2021.
  38. ^ Young, Jabari (28 February 2021). "People have spent more than $230 million buying and trading digital collectibles of NBA highlights". CNBC. Retrieved 4 March 2021.
  39. ^ "Top 100 People In Blockchain and Crypto". Cointelegraph. Retrieved 2021-03-12.
  40. ^ Kastrenakes, Jacob (2021-03-01). "Grimes sold $6 million worth of digital art as NFTs". The Verge. Retrieved 2021-03-04.
  41. ^ "Why an Animated Flying Cat With a Pop-Tart Body Sold for Almost $600,000". NY Times. 2021-02-25. Retrieved 2021-02-28.
  42. ^ https://www.christies.com/features/Monumental-collage-by-Beeple-is-first-purely-digital-artwork-NFT-to-come-to-auction-11510-7.aspx?sc_lang=en&lid=1
  43. ^ "Beeple Brings Crypto to Christie's". NY Times. 2021-02-25. Retrieved 2021-02-25.
  44. ^ "What are NFTs and why are some worth millions?". BBC. March 12, 2021. Retrieved March 12, 2021.
  45. ^ a b Thaddeus-Johns, Josie (February 24, 2021). "Beeple Brings Crypto to Christie's". The New York Times. Retrieved March 12, 2021.
  46. ^ Papuc, Andreea; Alloway, Tracy (March 8, 2021). "Five Things You Need to Know to Start Your Day". Bloomberg. Retrieved March 12, 2021.
  47. ^ Schachter, Kenny. "Are NFTs the Next Tulip Bubble? Kenny Schachter Doesn't Care—and He Sold His Own Grandma on the Crypto Web to Prove It". Artnet. Retrieved 2021-03-11.
  48. ^ Robin Murray (March 5, 2021) Wait. Did Clarian Beat Kings Of Leon's NFT Record? Clash Magazine.
  49. ^ Samantha Hissong (March 3, 2021). "Kings of Leon Will Be the First Band to Release an Album as an NFT". Rolling Stone.
  50. ^ "NFT meaning explained as Kings of Leon offer music industry first". Newsweek. 2021-03-05. Retrieved 2021-03-09.
  51. ^ Memo Akten (2021-02-23). "The Unreasonable Ecological Cost of #CryptoArt". Retrieved 2021-03-01.
  52. ^ Haarich, Max (2021-02-28). "NFT Art - Historic or Hysteric? Making a Point About the Latest Crypto Hype That Might End With Three Guinness World Records". Medium. Retrieved 2021-02-28.
  53. ^ Quito, Anne (March 10, 2021). "How much would you pay for a virtual sofa?". Quartz. Retrieved March 12, 2021.
  54. ^ Laglasse, Maxime (March 13, 2021). "The ecological impact of NFTs". NonFungible.com. Retrieved March 13, 2021.
  55. ^ McCook, Hass (February 11, 2015). "An Order-of-Magnitude Estimate of the Relative Sustainability of the Bitcoin Network, 3rd Edition" (PDF). Independant. Retrieved February 11, 2015.
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