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Introduction

Our lives have changed a lot in the past few decades because of technology. New developments are always coming out every time. There was a time when it was difficult to cure malaria, but today malaria medications are everywhere. We also have cars that are run on rechargeable batteries rather than natural fossil, and now we can chat with another person in the comfort of our homes.

Just recently a new form of technology, blockchain, has brought about a new trend. This new trend has seen collectors and investors paying a huge amount of money to own digital collectibles. These digital collectibles are called NFTs.

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Define NFT

The acronym NFT means Non Fungible Token. It is a type of token that is non fungible. In other words it is a token that is generated on a blockchain that has unique features and can't be exchanged for anything else.

It is commonly used as a piece of digital artwork that is underpinned to blockchain technology, and can appear in different forms. There are different types of NFTs that are popular, some of them includes images (pictures & memes), music, videos, songs, etc.

Because they are non fungible, they are one of a kind, unique, not interchangeable or divisible. For instance, in the real world, items like boats, cars, and a Mona Lisa painting fall under this category because they are not interchangeable, divisible, as they are unique and one of a kind.

By design they give you ownership of someone else's work. An example is buying a copy of the Monet Print but only the author has the original copy. This means that a creator can have an artwork with only one original version or can decide to generate different numbered copies for that artwork.

The concept of non-fungible tokens started on the Ethereum blockchain. Two artists that are digitally inclined created Crypto Punks which became available to the public in 2017. Crypto punks are digital images that are highly pixelated and are one of a kind. As of March 2021, Cryptopunk #3100 was sold for a whopping $7.58 million.

What distinguishes NFT from one another is it's metadata and an identifier which makes it unique, an example being a barcode. The aim of NFT is to replicate the tangible attributes of a physical item like uniqueness, scarcity, and ownership proof digitally.

Show the Difference between Fungible and Non-fungible tokens.

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Making the comparison between a fungible and non fungible token, we are relating them to blockchain technology. A fungible token is a crypto currency like Bitcoin, Litecoin etc. And a non fungible token is a unit of data that represents a digital item that is unique, which is stored and verified on a blockchain.

On the blockchain the fungibility of a token is described using a code script.

A fungible token is one that has more than one unit, for which all of them have the same value. Therefore, they are not unique, they are indistinguishable from one another, they are interchangeable, they are not one of a kind.

For example, Bitcoin is a highly fungible token. It has a circulating supply of 19,083,775.00 BTC in the market all of which has the same value at the current market price. Because of it's fungible nature, BTC can be issued to anyone and at any place and still be of the same market value.

Fungible tokens can be swapped because their value, not because of any unique features that characterizes them.

Non fungible tokens are tokens that represents items that are unique and non-divisible whether they are tangible or intangible. Unlike fungible tokens, they are one of a kind and distinguishable.

Both fungible and non fungible tokens rely on blockchain technology for their storage, however, the main difference between them is the contents that's being stored.

While fungible tokens store value, non fungible tokens store data, for instance, an academic title or artwork and the ownership can easily be proved.

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Are NFTs Interchangeable?

They are not interchangeable because they represent items that are unique and divible. And these item used metadata to differentiate them.

NFTs are used to represent ownership of items that are unique and one of a kind. They are represented digitally. Hence to represent them a unique way of representing them has to be in place

The common way is the use of blockchain technology. This technology is responsible for the creation of crypto currencies. However crypto currencies by nature are interchangeable, divisible, and not unique.

So a new type of 'currency' was designed. One that is unique, not interchangeable and divisible. It also shows proof of ownership.

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Differences between an NFT and other currencies?

As we have come to see from above, the main difference between an NFT and other currencies is that NFT based on their name and function are non fungible in nature, while currencies are fungible in nature.

That said one NFT is not equal to another NFT because they are distinct, unique, distinguishable, etc. Thus an NFT value varies depending on the perceived value it gets and the demand for it. But a currency like USD or BTC is equal to another USD or BTC because they have they same value and are not unique or are indistinguishable.

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Is there an NFT marketplace?

NFT market places are platforms that was created to enable digital creators and collectors come together to interact. Their interaction entails creating, buying, and selling of tokens that represents ownership of unique items that are either tangible or intangible.

On these platforms the tokens can be minted (i.e the way of creation new NFT), stored, displayed, and finally traded.

But to perform any operations, you would need to have a crypto wallet, some amount of crypto currency in the wallet, and an account on the platform.

There are many types of platforms based on the features of the platforms. Some of them are art oriented and others are based on specific niches. Examples are:

• Opensea - it is a universal platform which host a wide variety of NFTs representing ownership in artworks, in-game items, domain names, and more.

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• Rarible - an NFT market place that is operated by community members who owns RARI tokens. They host a wide range of NFTs but it is basically art oriented.

• NBA Top Shot - this is an NFT market place where digital collectible cards of memorable NBA moments that are recorded in video bought and sold. It runs on the flow blockchain.

There are other market places that exists and have their specific areas that they perform.

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How to invest in NFTs?

To invest in NFTs you need to pass through a market place.

As you begin your journey to investing in an NFT, you need to do a little research on an NFT that will have a potential upside value. It can be of any form like art, music, etc. There are sites that lists upcoming NFTs like Rarity.tools, that will be released in the future.

You can look at things like the team behind the NFT and whether it is on chain or off chain.

Then you have to purchase the coins or tokens for the NFT. Most NFTs are generated on the Ethereum blockchain, hence you would most likely need to get Ethereum coins. However other blockchains like Tron, Solana, Flow, Binance, etc also host NFTs.

You can get the coins of these blockchain networks on their platforms or on reputable exchanges. While getting the coins you need to be weary of the fees involved in purchasing the coins.

After doing your research and getting the necessary coins, the next step is to choose the market place to get your NFT. When you have done this, you register on the platform afterwards, you connect your wallet to the platform.

Any NFT that is to be bought or sold will either take play at a flat rate or it would undergo an auction proceedings.

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How to create a new NFT

To create a new NFT, you begin by choosing the format you want the NFT to be in. It can be in any multimedia file like photo, text, audio, video, and digital painting. Then you need to generate ideas that can be used to create a new NFT. There are so much that you can think of like high quality tweets, high resolution artistic representations, etc.

You can also tokenize assets in the real world ranging from real estate to designer sneakers.

After deciding the content to create and the file to store them as, you need to convert it to an appropriate file, especially a digital file.

While creating your NFT, bear in mind that the perceived value of an NFT is based on its uniqueness and the following demand for it. You can also have a collection of collectibles where you offer different versions of your NFT. Some being more exclusive than the others.

Then you undergo a process known as minting. This is the process by which a new NFT is created. This ensures that the NFT is generated on the blockchain which then make it tamper proof, more secure, hence being very difficult to manipulate.

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Is it possible to have an NFT stolen?

Yes an NFT can be stolen, but not in ways that is common. It usually occurs when you fall prey to the traps of scammers and hackers.
They set digital traps where once fallen into, your NFT is exposed to the scammers and hackers.

Ideally, based on blockchain technology, it is impossible for your NFT to be stolen unless you fall prey to the hands of scammers and hackers. These hackers persuade their people to gain access to their wallets.

Therefore, the only way for your NFT to be stolen is if you expose your wallet or you will fully give out your NFT. This way, NFTs are 'stolen' everyday through deception, deceit, and exploitations.

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And why use a distributed file system like IPFS in this area?

Before, an NFT makes use of HTTP URL that makes it have a data point location somewhere on the internet and is being stored on a server. The issue with this arrangement is that NFTs are supposedly immutable. The questions that arises are who runs the server?, what happens if the server experience a fault?, what happens if the data is deleted or if it is an incorrect data that is sent?

This means that by using HTTP URL, there is a sudden trust on the server providers to remain uncompromised and the content it serves is what it gives out when it is searched for. Also, even though the token of the NFT is stored on a blockchain, making use of the HTTP URL was a weak link.

IPFS on the other hand allows users to store and retrieve data using a CID. Using the IPFS CID, NFTs makes reference to the data itself rather than the HTTP URL. It should be of note that the IPFS is note a server or a data storage, but a layer which is hosted on a data storage. This way if anyone asks for the CID, the get the unique content being referenced by the CID back, as long as it is being broadcasted on the network.

Further more, an IPFS is a system that is universally compatible with other data storage systems as It can retrieve data from anywhere. It can get data from centralized storage, local computers, and decentralized storages.

A misunderstanding of IPFS is that it is a 'permanent' storage. For NFTs it helps to protect the rot that accompanies links through URLs and which are stored off-chain.

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How are NFTs used in art, video games and collectible card games?

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The art industry especially digital art has experienced a disruption in it's market dynamics thanks to NFTs. The landscape changed with the introduction of crypto punks in 2017.

In the past five years the interest and perceived value in digital art increased, this increase was significant in the last two years. NFTs and blockchain technology has helped sparked these interests.

Video games are employing blockchain technology to create new games that includes NFTs. This make it such that every player who is involved in the game can gain profits.

This means that in game elements like rewards, avatars, etc can be converted into real cash. It has developed a new model called Play-to-Earn where players can spend hours on a game and gets rewarded. The rewards are derived by obtaining items in the game which have been created as NFTs.

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And how are NFTs revolutionizing property titles?

NFTs are being used in real world applications. One of such is the real estate business. In this business, deeds are being employed such that buyers make use of title insurance company, escrow holders, and lawyers to approve the deeds and then go on to search for any holdings on the public title records.

Using NFTs helps buyers to by pass the third party intermediaries as it helps to verify ownership, to showcase holdings on public titles and helps to settle transactions quickly and easily, because of blockchain.

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How are NFTs regulated?

There's no regulations on NFTs yet as most regions and jurisdictions don't have any regulations or legislation.

But existing regulations can be applied to some digital tokens and assets in some instances. This depends on the functions of the tokens, it's characteristics, and the jurisdiction and regulatory framework scope where the NFT and key people are located.

An instance is the UK where a trade for NFT to cash or any crypto asset triggers a requirement for registration as proposed by the conditions of the Money Laundry Regulations 2017.

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And what are the solutions to the limits of NFT development?

There are various limitations surrounding the development of NFTs. We shall be looking at some of them with their respective solutions.

One issue of NFTs is that is usually created on a single blockchain platform. Thus it is very difficult for users on other platform to be able to get an NFT on an existing platform. A solution to this is the creation of a Multichain NFT platform. Through this way the NFTs can be developed on various platforms based on the blockchain networks. So when it is produced, it can survive on various platforms based on their underlying blockchain.

Another issue is the regulations regarding NFTs. Though there is non at the moment, there are still some existing laws that can help mitigate some aspects of the NFTs. Also, new regulations are being drafted out which would be used in the not too distant future.

Lastly, the issue of theft is at the forefront of NFTs. There have been situations where NFTs have been sold without the notice of the main owner. An example is the fake Banksy that was put on sale in the Opensea platform but later turned out to be a scam.

To prevent such issues, NFTs holders should be very careful in handling their assets information and be careful of whom they give access to.

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Conclusion

NFTs have been a welcome development in the blockchain technology ecosystem. It's use case is undeniable and very clear to see. It has single handedly changed the way which digital art creators interact with their fans.

It is also changing the dynamics of other industries like video games and real estate. Its inherent characteristics is what make it a viable option