NFTs have been edging into the mainstream more and more. Whilst you might have an understanding of what they are, have you ever thought about the inner workings? What better day to learn about them than the anniversary of their creation?
International NFT Day marks the anniversary of the coining of the term “NFT”. It’s also the anniversary of the acceptance of the proposal for the draft Standard ERC-721. If none of that is meaning much to you right now, let us fill you in!
Many of you will know NFTs from things like Bored Ape Yacht Club, or hearing about popular artists like Muse creating NFT versions of albums. These are great examples of the application of NFTs in the real world. Besides digital artwork, NFTs can take on many forms. For example, they can be used to ticket events, or they can be used to sell real estate.
Take away the surface level application – the arty profile picture or the concert ticket – and you’re left with a token. A string of code and smart contracts. Of course, this didn’t just burst into existence by itself. Let us take you through the birth of the NFT in its purest form, whilst celebrating the exciting potential it unlocks!
What Is an NFT?
Before we get into it, it will help to know what an NFT is – if you didn’t already.
NFT stands for “non-fungible token”. This means a token that cannot simply be swapped with another. It helps to think of this in terms of money. If you swap a US dollar with another US dollar, you have the same thing. You can’t do this with an NFT, because each one is unique.
At its core, an NFT is an authentication of ownership. It exists on the blockchain, proving immutably that a transaction took place, and something is now in the ownership of someone. What that particular token on the blockchain represents can vary.
We mentioned briefly that an NFT could be an album, or concert tickets. The uses for NFTs have been continuously growing as technology develops and people take more of an interest in web3 development.
What is ERC-721
Like any coin or token on the blockchain, code must be created and written in order for it to, well, exist. The makeup and properties of this code determine how the token acts and what it can do.
On the 20th of September 2017, a first draft proposal was accepted that meant the ERC-721 was the Standard for NFTs. Basically, the code was created that would enable people to create NFTs from a usable framework.
It stands for “Ethereum Request for Comment” -721. It was proposed by William Entriken, Dieter Shirley, Jacob Evans, Nastassia Sachs. The token was made to represent something that was unique from another token, even if it came from the same smart contract. The unique value could be dictated by rarity, age, or even its visual.
The visual aspect, in particular, was exciting because it meant the ability to directly attach visual assets to tokens. Whilst things have developed since, the original idea was that dapps could convert the token ID as an input, and output a visual.
The Potential of NFTs
The more creative and innovative people get with the application of NFTs, the more potential is unlocked. NFTs open a new world of digital ownership, that creates exciting new opportunities for investors, creators, and fans.
Because blockchain technology and NFTs are transparent, creators can regain control over their art. Any work they sell or auction provides revenue that goes directly to them. This transparency could also spell the end of unfair ticket touting, which sees thousands of fans miss out on massive events due to being priced-out.
Global accessibility and lower transaction fees also mean that more people can get directly involved in the things they’re passionate about. NFTs are the lifeblood of so many web3 marketplaces, and will help drive the creation of more web3 platforms. Users will own parts of the platforms they use, giving them a say in big decisions about how things are run.
NFTs help to herald the era of ownership, accessibility, transparency and innovation.