The world of cryptocurrencies and blockchain technology has brought about a new form of digital asset called NFTs. These tokens represent ownership of a specific asset and are stored on a blockchain, making them immutable and impossible to duplicate. NFTs have exploded in popularity in recent years, with various types of NFTs being created, each with its unique features and benefits.
In this simple guide, we will look at the different types of NFTs with a few examples to help you wrap your head around this concept.
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What are NFTs?
NFTs, or non-fungible tokens, are unique digital assets that are stored on a blockchain. Unlike cryptocurrencies, which are fungible, meaning that each unit is interchangeable with another, NFTs are non-fungible, meaning that each token is unique and represents ownership of a specific asset. NFTs are created using smart contracts, which are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. Smart contracts allow for NFTs to be programmed with specific features, such as royalties, ownership rights, and even the ability to evolve over time.
Learn more in this NFT for beginners guide.
Types of NFTs
There are several different types of NFTs, each with its unique features and benefits. Here are some of the most popular types of NFTs:
Art NFTs are digital art pieces that are represented as NFTs. These NFTs can be anything from a digital painting to a 3D sculpture, are often created by NFT artists and can be bought and sold on NFT marketplaces.
Gaming NFTs are digital assets that are used in video games. These assets can be anything from in-game items to virtual real estate. Gaming NFTs are often used in blockchain-based games, such as Axie Infinity, where players can earn cryptocurrency by playing the game and selling their NFTs.
Collectible NFTs are unique digital assets that are created for the purpose of collecting. These NFTs can be anything from virtual trading cards to rare digital collectibles. Collectible NFTs are often released in limited quantities, making them highly sought after by collectors.
Virtual Real Estate NFTs
Virtual real estate NFTs are digital plots of land that can be bought and sold on a blockchain. These NFTs are often used in blockchain-based virtual worlds, such as Decentraland, where users can create and monetize their own virtual real estate.
Domain NFTs are unique domain names that are represented as NFTs on a blockchain. These domain names can be bought and sold just like any other NFT, and they come with the added benefit of being unique and easily transferable.
Examples of NFTs
Now that we’ve covered the different types of NFTs, let’s take a closer look at some examples of NFTs:
Cryptopunks are one of the earliest and most well-known NFT projects, created by Larva Labs. These NFTs are 8-bit digital characters that come in 10,000 unique variations. Each Cryptopunk is completely unique, and some have sold for millions of dollars at auction.
Axie Infinity is one of the top play to earn (P2E) games where players can earn cryptocurrency by playing the game and selling their NFTs. The game features cute, cartoonish creatures called Axies that can be bought and sold on NFT marketplaces.
NBA Top Shot
NBA Top Shot is an NFT platform that allows users to buy and sell officially licensed NBA highlights. These highlights are represented as NFTs, with each one being completely unique and verified on the blockchain.
Decentraland is a blockchain-based virtual world where users can create and monetize their own virtual real estate. Users can buy and sell plots of land as NFTs, and they can use their virtual real estate to create games, art installations, and other interactive experiences.
ENS (Ethereum Name Service) Domains are unique domain names that are represented as NFTs. These domain names can be bought and sold just like any other NFT, and they come with the added benefit of being unique and transferrable on the blockchain.
Why are NFTs Valuable?
So what makes an NFT valuable? There are several reasons why people are willing to pay large sums of money for NFTs:
Unique ownership: NFTs represent unique ownership of a specific asset, whether it be a piece of art or a virtual real estate plot.
Scarcity: Many NFTs are released in limited quantities, making them highly sought after by collectors.
Provenance: NFTs are verified on the blockchain, which provides a transparent and secure record of ownership.
Digital scarcity: Unlike physical assets, digital assets can be infinitely reproduced. NFTs solve this problem by creating unique, one-of-a-kind digital assets that cannot be duplicated.
NFTs are a new and exciting development in the world of cryptocurrencies and blockchain technology. With different types of NFTs, each with their unique features and benefits, there is something for everyone in the NFT world. Whether you’re a collector, gamer, or art lover, NFTs provide a new way to own and invest in digital assets.
Can NFTs be sold for cryptocurrency?
Yes, NFTs can be bought and sold for cryptocurrency on NFT marketplaces.
Are NFTs only for digital assets?
Yes, NFTs are designed to represent ownership of digital assets.
Can NFTs be used as collateral for loans?
Yes, some lending platforms accept NFTs as collateral for loans.
Are NFTs environmentally friendly?
NFTs use the same blockchain technology as cryptocurrencies, which requires a significant amount of energy. However, some NFT projects are working on reducing their carbon footprint.