10 Cool Tidbits I Learned About NFTs

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Little by little, I widened my journey of discovery to include the fascinating world of non-fungible tokens (NFTs). There are some really cool tidbits that I learned about NFTs along the way and I want to share them with you.

One

A NFT is not just a pretty picture! The NFT consists of:

an underlying smart contract
metadata
media file(s).

The point of the NFT is to record the ownership of the digital asset on-chain. It is also commonly used to create a record on-chain for a physical asset in the non-digital world.

Two

The smart contract for the NFT contains the:

token ID - a unique identifier for each individual NFT
wallet address - identifying ownership information
functionality code - used to update the record for the NFT.

Three

The metadata of the NFT can be used to:

house the source and receipt data
create an encryption pouch around the NFT
store the origin data
hold the traits data or the properties
link or point to external resources.

NFT Tidbits Structure.jpg

Four

While the non-fungible tokens are stored on the blockchain, most often the media files for NFTs are stored off-chain. This is especially the case for large images, complicated images, complex files, and executable files. Examples of these include: generative art, music files, high resolution images, large documents, and long programs.

IPFS is a distributed storage solution, while the giant cloud service companies provide centralized storage options. Akash Network offers a decentralized cloud services alternative. The most widely used and popular blockchains that offer decentralized hosting services are: Filecoin and Arweave.

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Five

There are many different NFT standards used across the universe of blockchains.

In Ethereum, Polygon, and most EVM blockchains including Avalanche, these token standards are widely used:

ERC-721
ERC-1155.

Comparing the two most common standards for NFTs, their underlying smart contracts have powerful features:

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While ERC-1155 registers fungible tokens and NFTs in the smart contract, there is another token standard used in Ethereum that does this a little differently. ERC-998 also handles both fungible and non-fungible tokens, but accomplishes this by merging them into one NFT. The biggest benefit of this is that multiple tokens can be contained and transferred with one transaction.

Six

Here are some examples of token standards for NFTs used by other blockchains:

BNB Chain -> BEP-721, BEP-1155
Stacks (Bitcoin) -> SIP-009
Solana -> SPL
Tezos -> FA2
NEO -> NEP-11
Tron -> TRC-721
Cosmos -> CW-721
Secret -> SNIP-721
Stargaze -> SG-721.

Seven

The CW-721 standard used in the Cosmos is based on Ethereum’s ERC-721 token standard. In turn, Stargaze Zone’s SG-721 standard conforms to the Cosmos CW-721 token standard and adds a set of optional extensions on top of the CW-721 base.

Eight

The universe of cryptocurrencies is constantly evolving and connectivity is at the forefront of this development. NFT bridging technologies are being created and implemented at a fast pace. Creators and owners of NFTs are increasingly able to move their digital assets from one blockchain ecosystem to another.

Here are some possible transfer routes offered by bridges:

Plasma NFT Bridge Polygon ⇔ Ethereum
Portal NFT Bridge Solano ⇔ Ethereum
Cross-Chain NFT Bridge Binance ⇔ Ethereum
Stacks Bridge Stacks ⇔ Ethereum.

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Nine

The Stargaze Zone and Gravity Bridge Teams are working together to bring ERC-721 NFTs from Ethereum to the Cosmos and back. However, in order to enable easy and inexpensive transfers across the blockchains of the Cosmos, a standardized solution is needed to streamline this interoperability.

Members from multiple development teams in the Cosmos are working together to implement a new token standard: ICS721. The ICS721 standard for NFT interoperability across the Cosmos blockchains was originally created by the IRISnet development team and is now being readied for implementation by members from the Gravity Bridge, IRISnet, Stargaze, OmniFlix, CraftEconomy, Talis, UnUnifi, and AquaOnJuno Teams.

Once this standard is widely implemented, transfers of NFTs across Cosmos blockchains will be as common and efficient as fungible token Inter-Blockchain Communication (IBC) transfers are currently.

NFT Tidbits ICS721 Workgroup.jpg

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Ten

A technological wave of innovation is rolling across the ecosystems of cryptocurrencies. NFTs are no exception with many development teams pushing the boundaries of what is possible with these tokens.

One such exciting area that I am learning more about goes by many different names for this new category of NFTs: Nested, Container, Utility, Bundled, Layered, or Composable. Teams from protocols like Charged Particles and Loop Finance are developing NFTs that have multiple components built-in to create additional utility as well as financial value.

Charged Particles in the Ethereum and Polygon ecosystems has developed nested NFTs, which hold their own smart wallets that can contain:

LP tokens
DeFi assets
social tokens
speculative tokens
other NFTs.

Loop Finance in the Cosmos ecosystem has launched its first generation of Reward NFTs with Tradooors NFTs. This new category of NFTs can be staked and generate a stream of reward tokens over a predefined period of time. Multiple levels or tiers can contain different amounts of reward tokens and also include additional tokens from a different project, protocol, or DAO. The next reward NFT to launch on the Loop Marketplace is a social impact project called Los Amigos. It further drives the frontier of NFTs by providing the holder with a slew of benefits: five different social impact tokens, pre-IDO swap access, automatic reservation listings, and discounts on future NFT mints. Using these new NFTs, the Loop Team is able to wrap vested token emissions into a staked NFT product, while giving the opportunity for holders to support charity and social impact DAOs.

The possibilities for this new category of NFTs are exciting, including:

interest bearing tokens
vested tokens
index accounts of multiple tokens
time released airdrops
royalty payment streams for creators
music albums with bonus NFTs (audio, video, and art)
concert tickets with bonus NFTs
conference tickets with bonus NFTs (merchandise “bags”)
gaming starter packs
gaming treasure chests.

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From Skeptic, to Curious, to All-In

When I started in crypto I immediately gravitated to where I was comfortable based on my education and work experience: economics, finance, and business. And, I am thoroughly enjoying learning about DeFi, tokenomics, and DAOs.

However, I have discovered that NFTs are tremendously important and they are transforming many trades, functions, companies, and industries. If you share my excitement, you can read more in my recent articles about NFTs (see the Sources section below). For example, in “The Evolution of NFTs” I write about the types of creative use cases being developed right now.

I am most excited about the artists, creators, developers, and business professionals that are moving the NFT space forward with innovative products, distribution methods, and community building efforts. The tools that are coming to market now are taking the universe of NFTs beyond its earliest creations of fan driven tokens, collectibles, and PFPs. We are now seeing entire suites of tools launching, which allow creators to connect directly with their audiences. I am eagerly looking forward to continuing my journey and bringing you more of these interesting tidbits!

Tot ziens – Opa.

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