All You Need To Know About NFTs

9 Jun 2022
A simple NFT guide on how not to lose (this time)

Albeit quite optimistic, Bob’s statement rings true more now than ever before with creators successfully selling online anything from images of Nyan Cat, ghosts flaunting Gucci, nihilistic looking apes, to even tweets. Now at this point, you’re probably fairly skeptical, perhaps a bit intrigued, although mostly dubious. So sit comfortably in your chair, grab your modern-day brush (aka mouse and a keyboard), set up your canvas (monitor), and let me take you on a guide so “you too can paint almighty pictures” alias NFTs.

“There’s an artist hidden at the bottom of every single one of us”.

So what exactly is an NFT?

NFT stands for a non-fungible token, to put it simply it is a unique, one-of-a-kind representation of various physical and digital goods.

So what is fungible? Very little things in life are fungible, but one example is gold — no value is forfeited if one would trade a gram of gold for another gram of gold. Some may say that fiat is fungible … and people may treat it as such, but technically fiat is non-fungible because they contain a unique barcode, allowing the government to track each coin or bill.

Fun fact. Most cryptocurrencies are actually NFTs. The only cryptocurrencies that are non NFTs are private cryptocurrencies as privacy is an indirect by-product of fungibility. This is why, in the Solana ecosystem, all currencies, including NFTs are referred to as SPL-Tokens. They are all tokens.

But back to non-fungibility! The “Scream” by Munch does not hold the same value as let’s say Van Gogh’s “Sunflowers”. Both artworks are unique, and therefore, have an inherent unique value.

As a result, NFTs have become collectible digital assets that hold value, just like physical art holds value. It’s worth noting, however, that NFTs are not restricted purely to the domain of art.

Different types of NFTs

We can distinguish the three most common types of NFTs on Solana:

  • Master Edition NFT — represents the non-fungible tokens and metadata that allows its creator to control the supply as well as the attributes.

  • Edition NFT — represents a copy of an NFT that is created from a Master Edition. Each edition has a unique edition number associated with it.

  • Normal NFT — represents a single non-fungible token and metadata that does not belong to any master edition. These are the real NFTs — if we want to be technical about it.

When an NFT is created they remain on the Solana blockchain forever. We call this immutability. However, the metadata isn’t always immutable. This depends on how the metadata is linked and hosted. If it is hosted on a decentralized file storage network, it is usually immutable. If not, it isn’t.

How did it all start and who was behind the very first NFT?

The first NFTs were called “Colored Coins” that operate on the Bitcoin ledger. A colored coin is a token that represents a digital or physical good — an NFT.

Each colored coin contains an identifier (hash), and proof of ownership that determined its purpose and capabilities as well as access (permission).

Two years (May 2014) after colored coins started to appear on the Bitcoin ledger, an artist named Kevin McCoy minted his first non-fungible token called “Quantum” on a chain named Namecoin, an OG Bitcoin fork that focused on DNS and freedom of speech. They are psychedelic images of an octagon, putting you in a trance with fluorescent colors. As of today, some of them go for a few million dollars.

The Future Of NFTs And Their Utility In the Metaverse

So what’s the deal with NFTs? Should I make it or break it? Well, unless you’re an art enthusiast —or in their local lingo, an art critic— ready to splurge BIG MONEY on the next BIG THING, most NFTs do not have an inherent value as they do not provide any functionality to their owner or network.

NFTs that have an inherent value are tokens that come with a unique set of attributes that gives the token holder access to an exclusive network, area, event, product, or service. Think of a passport, credit card, company stock, or movie ticket. These are OG NFTs.

So what makes an NFT valuable? One word: utility.

But enough boomer talk. Where do the NFTs come into play in the metaverse? NFTs are a great technology for metaverses because they allow for the tokenization of digital goods (in-game assets such as land, avatars, and items), which allows for direct ownership but also for better asset tracking and monitoring. After all, a blockchain is a digital ledger … made for accounting!

Furthermore, by representing all in-game items as NFTs, it enables the owners to trade these items in a safe manner on third-party marketplaces while avoiding any scams and ending up with a fake copy.

Now here is where it gets really cool. NFTs allow the creator to configure royalties. Royalties are a fixed percentage, a cut, that the creator or any other specified address receives upon every exchange. That means that the artist could potentially retrieve a small cut every time their NFT gets traded. This mechanism can be used to reward content creators in the metaverse, increasing the quality and quantity of content.

Another neat thing that can be done with NFTs, is configurable attributes. Attributes act as identifiers or permissions that are unique to an NFT. A simple example would be “color: blue”. A more complicated example would be “level: 3”. In the first example, we are identifying the NFT as having the color blue. In the second example, we are treating the NFT as something that one can only hold or use once one reached level 3 — the latter is utility, the former is not.

At Solice we hope to encode most of the game mechanics and rules in the attributes of our NFTs. This will give the NFTs inherent value as they will act as tokenized passes that will give access or enable users to unlock certain features in the game that are otherwise not attainable. Furthermore, we can use this mechanism to qualify for certain events and activities like minigames, quests, and loot drops.

Something else that we have been exploring is the fusion and splitting of NFTs. Fusion would allow users to combine two NFTs and create a unique new NFT (think of materials) while splitting an NFT would allow users to split an NFT into two NFTs (think of land).

As you can see. The possibilities are endless and these are just a few examples of the many ideas and features we are exploring.

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