What is an NFT?
NFTs have been trending for a while. In short, NFT stands for non-fungible token. An NFT is an ownership record for a digital asset.
More specifically, an NFT is a unique digital item secured by blockchains and stored in a digital wallet. NFTs can't be copied or substituted, they are therefore used to certify authenticity and proof of ownership. Since each NFT is unique and irreplaceable they are quite different from traditional cryptocurrency tokens which are like-for-like (or, fungible) with one another. NFT projects can gain or lose value independent of the currency, just like a popular trading card or piece of art. As awareness around NFT art and the NFT market grows, NFT projects are evolving towards projects with more and more use cases and utility: longterm uses in the metaverse and in the real world. By now, you've probably heard of many popular NFT collections including Cryptopunks, Megapont, Bored Ape Yacht Club, and countless others. In addition, NFTs actively contribute to the mass adoption of blockchain technology.
At first predominantly popular on the Ethereum blockchain (ETH) and NFT marketplaces such as OpenSea, Nifty Gateway, and Rarible, these digital assets have become ubiquitous in Web3, spreading to other blockchains like Solana (SOL), Cardano, Polygon, Tezos, and Bitcoin via Stacks. Indeed, Ethereum is not a prerequisite to creating NFTs.
Despite being the first and largest crypto, by prioritizing security over programmability, Bitcoin long lacked the world computer aspect of ETH, making the take off of NFTs in the Bitcoin ecosystem difficult. Stacks made bitcoin smart contracts possible, allowing developers to build Web3 dApps (decentralized applications) and NFT marketplaces (the largest being Gamma.io), beyond Ethereum (ETH) and other blockchains, while enjoying the security of Bitcoin.
The Ethereum (ETH) ecosystem is a home to many NFT creators and collectors. On the Ethereum network, like on any other blockchain, NFTs are minted through smart contracts that assign ownership and manage the transferability of the NFTs. When someone creates or mints an NFT, they execute code stored in smart contracts that conform to different standards, such as ERC-721. Tokens that follow this standard are compatible with any Ethereum-based project.
Up until now, Ethereum was using the Proof of Work consensus mechanism, as does Bitcoin (BTC). However, soon, the current Ethereum Mainnet will merge with the Beacon Chain proof-of-stake system.
In September 2022, Ethereum announced the merge was in its final stages. This is the most significant upgrade in the history of Ethereum and sets the stage for future scaling upgrades. Proof-of-Stake, which reduces the amount of computational work needed to verify blocks and transactions that keep the blockchain, and thus a cryptocurrency, secure, will reduce Ethereum's energy consumption by ~99.95%.
What are popular NFT marketplaces on the Ethereum blockchain?
NFT marketplaces are the future of NFT trading, and OpenSea is the most popular NFT marketplace on the Ethereum blockchain network (ETH). With OpenSea's support for ERC-721 tokens, nearly every blockchain game can be traded on the marketplace. OpenSea also integrated Solana NFTs in April.
Similar to OpenSea, Rarible allows users to buy, collect and sell art, video game assets and NFTs. It is a fully decentralized finance (defi) platform has its own native token called RARI. The holders of RARI get to vote on company decisions like company policy changes.
MakersPlace is a leading digital art gallery where crypto and NFT enthusiasts can buy and sell rare digital art. The MakersPlace artist community is currently invite-only.
A few more names
Other NFT marketplaces on the Ethereum blockchain include Axie Infinity, NBA Top Shot, Mintable, KnownOrigin, and many more such as Nifty Gateway which has facilitated the sale of some of the most popular digital artists such as Beeple and singer/musician Grimes; or SuperRare, which brings more of a gallery attitude to the NFT space, with high-end digital art.
How are Ethereum NFTs and Ordinal inscriptions different?
Perhaps you've heard of Ordinal inscriptions, also called Bitcoin NFTs. In February 2023, this new development took over the crypto space, when Bitcoin Core developer Casey Rodarmor created the Ordinal Protocol, which allows users to inscribe data directly onto the Bitcoin blockchain.
Ordinal inscriptions are essentially Bitcoin-native NFTs. How do ordinals work? Unlike Ethereum NFTs, the data contained in an ordinal inscription lives directly on-chain, with the data being inscribed onto a satoshi (the smallest unit of Bitcoin). With Ethereum NFTs, the data is stored on decentralized services such as IPFS, and can be updated. Ordinals, however, are completely immutable: they can never be updated and can never be deleted, making them true digital artifacts. While use cases differ, Ordinal inscriptions are already showing many benefits for the Bitcoin blockchain.
Join the adventure
If you're feeling ready of explore, mint or create your own NFT collection, head over to an NFT marketplace or join Discord communities to learn more about NFT projects and artists as well as blockchains and their use cases.