Know All About NFT’s

Indroduction about NFTs:

NFTs have played a key role in building mainstream consumer awareness of web3. NFTs of digital artworks such as Beeple’s Everydays — The First 5000 Days, collectibles such as Bored Ape Yacht Club avatars, and parcels of virtual land have sold for millions of dollars, both through traditional auction houses and on web3 marketplaces like OpenSea.

Like cryptocurrencies, NFTs are held in wallets. Technically, an NFT is not the digital file itself, but a database entry on the blockchain that attributes ownership to a particular wallet.

cryptocurrency-coin-in-blockchain
cryptocurrency-coin-in-blockchain

The provable scarcity of individual NFTs means they can function as digital status symbols, helping to explain why they are sometimes compared to Rolex watches and Lamborghini sports cars. Various consumer brands, including Coca Cola, Nike, and McDonalds, have sought to capitalise on the craze by issuing (or dropping) their own NFT ranges, as have football clubs such as Manchester City and Glasgow Rangers.

Web3 nft token image
Web3 nft token image

Celebrity endorsements are a common means of promoting high-profile NFT projects. Some wealthy celebrities like Reese Witherspoon and John Terry appear to be enthusiastic collectors, while others including Paris Hilton and Floyd Mayweather seem to engage with them in a more straightforwardly transactional way.

However, not all NFT drops are extravagantly priced or associated with a well-known brand or celebrity (see, for example, The Pluto People or the case study on Les Éléfants Terribles). NFTs are said to offer digital artists a new way of selling their work directly to the public, without having to pay commission to agents or galleries, as well as the potential to earn ongoing royalties from future sales of their work in the secondary market. The same benefits are said to be available to musicians and creators of video content, whose products (respectively audio and video files) can also be represented by NFTs.

NFT marketplaces as DAOs:

Meanwhile, establishing NFT marketplaces as DAOs (see Blockchain article) has been proposed as a means of pre-empting the emergence of a new generation of dominant intermediaries – the web3 successors to Spotify, Youtube, TikTok et al. The idea is that creators would have the opportunity to co-own the platforms through which their work is traded, and to determine their decision-making via governance tokens.

NFT prices:

As with cryptocurrencies, NFT prices can be volatile, while trade in NFTs is prone to fraud and market manipulation. When NFTs are initially issued (or minted), the underpinning smart contract may be designed to siphon cryptocurrencies and other tokens from buyers’ wallets.

Opensea NFT Prices
Opensea NFT Prices

Meanwhile, prices in the secondary market can be artificially inflated by wash-trading – that is, the trading of an NFT between wallets controlled by the same individual or group. The pseudonymity offered by the web3 facilitates both practices.

All About Web3

Web3 Introduction

The term web3 refers to the putative next generation of the web’s technical, legal, and payments infrastructure – including blockchain, smart contracts and cryptocurrencies. For its advocates, the peer-to-peer character of web3 means it represents a more equitable vision for the web than its current iteration, Web 2.0, which is dominated by powerful intermediary platforms (Facebook, Amazon, Apple, Google and other big tech companies).

Web3 projects categories:

Most existing web3 projects fit into one of three categories:

• Decentralised Finance or DeFi – peer-to-peer, blockchainbased financial services including savings, borrowing, payments, and credit-scoring. Many (although not all) DeFi apps run on Ethereum.

• Digital Services – decentralised internet service provision, cloud storage, web infrastructure, data analytics, and identity management

• Collectibles – digital artwork, sports memorabilia, and virtual goods Current examples of web3 unicorns (companies valued at > $1bn) include:

  • Ripple, an international payments provider
  • Aave, a protocol for borrowing and lending crypto assets that runs on Ethereum
  • Chainalysis, a data analytics platform for compliance, risk management, and cybercrime investigations
  • Forte, a gaming infrastructure platform
  • OpenSea, a digital collectibles marketplace
  • Sorare, an Ethereum-based fantasy football game in which virtual player cards can be bought and traded

The web3 community is to be found in group chats (known as servers) on the messaging platform Discord, and on Twitter, where members can often be recognised by one or more of:

• Hexagonal profile pictures

• Profile names with “.eth” extensions (referring to the Ethereum equivalent of domain names)

Ethereum
Ethereum

• Use of web3 slang

Capital for new web3 projects is typically raised not by selling equity, but by selling tokens to prospective users of the product or service, and/or to financial investors who believe the value of the tokens will rise in future.

metaverse communities
Metaverse communities

The process is known as an initial coin offering, token-generating event, or simply token sale. A proportion of the tokens is usually reserved by the founding team so they continue to have a stake in the project, and can incentivise staff and contributors (similar to share options in conventional startups).

Several different types of Web3 token:

There are several different types of token, including:

  1. Utility tokens, which grant rights of access to a product or service
  2. Governance tokens, which grant voting rights on decisions
  3. Non-fungible tokens (NFTs), which grant ownership rights over unique items of digital property, such as imagery, videos, and audio files

    Web3 nft token image
    Web3 nft token image

All such tokens are financial assets which can be traded in secondary markets. They are therefore more liquid and more volatile than startup equity or options, and can be used for the same forms of financial speculation as cryptocurrencies. Some consumer brands have financialised their loyalty programmes through token sales, notably a number of Premier League football clubs (in partnership with the web3 company Socios).