What Are NFTs (Non-Fungible Tokens)?
Non-Fungible Tokens (NFTs) are unique digital assets that can be bought and sold. NFTs are different from fungible tokens in that each NFT is unique, and cannot be replaced by another NFT. For example, a fungible token such as DAI can be replaced by another DAI token, but an NFT such as a CryptoPunk cannot be replaced by another CryptoPunk. They are all unique.
Types of NFTs
There are many different use cases for NFTs, and they can be categorized into different types. The most common types of NFTs are:
- Art NFTs: Art NFTs are NFTs that are used to represent digital art. For example, Art Blocks is a platform that allows artists to create generative art NFTs.
- Collectible NFTs: Collectible NFTs are NFTs that are used to represent collectible items. The line between art and collectible NFTs can be blurry, so it's not uncommon to see collectible NFTs that are also art NFTs. For example, CryptoPunks are a collection of 10,000 NFTs representing unique digital avatars.
- Gaming NFTs: Gaming NFTs are NFTs that are used to represent in-game items. For example, Axie Infinity is a game where players can collect, breed, and battle digital creatures called Axies. Each Axie is an NFT.
- Utility NFTs: Utility NFTs are NFTs that are used to represent utility items. For example, ENS uses NFTs to represent domain names. And Uniswap uses NFTs to represent liquidity positions.
NFT Standards
All popular NFTs adhere to a certain NFT standard. An NFT standard is a set of rules that defines how an NFT should be implemented. By using these standards, NFTs can be easily integrated into applications such as wallets, DeFi applications, and Revoke.cash. The prevalent NFT standard is ERC721, but another popular standard is the "semi-fungible" ERC1155.
The concept of NFTs already existed before they were standardized. Because of this, there are several older NFT collections that do not adhere to any standard. For example, CryptoKitties only partially adheres to ERC721, even though their creators were one of the main driving forces behind the creation of the ERC721 standard. CryptoPunks is even older, and therefore does not adhere to any standard.
NFT Marketplaces
NFTs can be bought and sold on NFT marketplaces. The first NFT marketplace was OpenSea, which was launched in 2017. Since then, many other NFT marketplaces have been launched, including Blur and Sudoswap. There are also NFT marketplaces that are specific to certain NFT collections. For example, CryptoPunks can be bought and sold on its own marketplace.
Recently, NFT marketplace aggregators have also become more popular. These aggregators allow users to buy and sell NFTs across multiple NFT marketplaces. Both Blur and OpenSea have launched their own NFT marketplace aggregators.