MAGICAL BIRD NFT
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You may have heard of NFT before. You might even know that NFT stands for non-fungible token. But you may not know exactly what that means and why this new technology is important for artists, creators and businesses.
Chances are you first heard about NFTs from a news story about an amazing purchase price, like when artist Beeple auctioned off his digital artwork Everydays: The First 5,000 Days for $69 million:
What does irreplaceable mean?
A substitutable item is one that can be replaced with an identical item. Imagine a dollar bill. My $1 bill has the same purchasing power as your $1 bill and any other $1 bill in circulation. In other words, they are interchangeable.
On the other hand, an irreplaceable item is unique and cannot be copied or replaced. The Statue of Liberty, the Mona Lisa and a ticket to the Super Bowl are must-have items. This means they are unique.
In the crypto world, if I hold one Ethereum token (ETH), it is fungible because it has the same value as any other ETH token held by someone else. On the other hand, I currently own Crypto Coven, an NFT project with a profile picture featuring drawings of witches with individual lore written for each one. Mine, named soursop the cloudless (image below), is a non-fungible token (NFT) because out of all 9,757 total Crypto Coven NFTs in existence, there is only one that looks exactly like mine.
Blockchain can best be described as a decentralized and distributed server. When you interact with a blockchain like Bitcoin, you're not just sending a transaction somewhere to a server farm like you would in a more centralized ecosystem like Amazon. Instead, thousands of computers (called miners) will verify parts of your transaction simultaneously. This makes the blockchain incredibly secure and essentially unhackable.
A token is simply a crypto asset that lives on the blockchain. There are many different tokens and many different blockchains. The most popular blockchain for NFT projects is Ethereum because it was specifically created to allow developers to build projects on top of it. NFTs contain code called a smart contract – a computer program stored on the blockchain that runs when certain conditions are met (more on that later).
At this point you might be picturing my Crypto Coven NFT hanging on the blockchain until I decide to sell it. That would only be partially true.
Blockchains are quite limited in terms of storage space. This is intentional because anything that ever appears on the blockchain stays there forever. There is a record that represents my ownership of my NFT on the Ethereum blockchain, but the image itself is not on the blockchain. so where is it? Images and other digital assets are usually stored elsewhere. IPFS, the Interplanetary File System, is one of the most popular storage solutions because it is also a decentralized protocol.
There are some on-chain NFTs, meaning they are fully stored on the blockchain. The most famous of these is Cryptopunks, a collection of 10,000 pixelated characters that are currently selling for a minimum of 62 ETH ($201,894.95). Cryptopunks are also one of the first ever NFT projects and therefore one of the most sought after. An example is CryptoPunk #3100, which was the highest ever sold for 4,200 ETH ($7.58 million).
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