So far in our beginner’s guide, we’ve approached blockchain technology with a bird’s eye view. For those who have been following along, you should now be reasonably familiar with what blockchain is, how to find opportunities , and how to start investing in the space.
Now, it’s time to dive deeper into slightly more advanced, but essential concepts within the blockchain realm – as it turns out, there’s more to do in this world than buying crypto coins and waiting for profits.
As with any investment, it is key to know what you are investing in. In partnership with Luno’s education hub, Luno Discover , here’s a read to help you understand why people have been paying extraordinary amounts for these NFTs, why they are not just “jpegs” or “pngs”, and how that all ties into play-to-earn games, the metaverse and DeFi. Unique identity in the digital world
Let’s start off with an idea that took the world by storm in 2021: non-fungible tokens , otherwise known as NFTs. Chances are, you’ve heard about them, or at least seen one before.
Perhaps, it was the cartoon apes – from the Bored Ape Yacht Club collection – that are worth hundreds of thousands of dollars today; or the Everydays collage by Beeple, which was purchased by a Singapore-based investor for US$69.3 million – the highest price ever paid for an NFT.
The original Starry Night painting hangs at the Museum of Modern Art in New York. People are free to buy copies of it online and have them framed, however, these aren’t worth nearly as much. Collectors value the original at over US$100 million , while prints can be obtained for as little as US$10.
With digital art, the process of valuation and verification isn’t quite as simple. If you look at the two images below, there’s no way to tell which one is the original Super Mario artwork. Both of them look exactly the same. Image Credit: Nintendo For the longest time, this made it difficult for digital artists to monetise their work. Why would someone pay for art when they could just as easily download it and make a copy?
This is where NFTs come in. Before that, it is important for you to know what a token is. The blockchain application of tokens and NFTs
Crypto tokens refer to assets which operate on top of an existing blockchain.
Take the Ethereum blockchain, for example. Although it uses Ether (ETH) as its native cryptocurrency, the chain also supports other crypto assets which can be classified in one of two categories.
First, there are cryptocurrencies such as Polygon (MATIC) and Loopring (LRC), which operate on top of the Ethereum blockchain. These are referred to as fungible tokens, since they are non-unique and interchangeable – i.e. 1 MATIC token can be replaced with another MATIC token. All tokens built on the Ethereum blockchain are also called ERC-20 tokens .
Next, there are non-fungible tokens (NFTs). An NFT refers to a unique asset which can’t be replicated or interchanged for another. Blockchain technology allows any file to be associated with a unique digital signature and stored as an NFT. In this case, NFTs cannot replace one another in any circumstance due to its uniqueness.
A digital file is converted to an NFT through a process known as minting. Once minted, the file becomes wholly unique and original.
Anyone can verify its legitimacy – tracking the original creator and the hands it passed through – by looking at the transaction history recorded on the blockchain. If someone were to make a copy of an NFT, you’d be able to distinguish it from the original, even though both look the same. Where to find NFTs?
Dedicated online marketplaces have emerged for users to buy and sell NFTs, and different blockchains have their own NFT ecosystems and marketplaces.
Currently, Ethereum is the most popular blockchain for NFTs, followed by Solana. OpenSea is the biggest NFT marketplace by trading volume / Screenshot of OpenSea OpenSea leads the way as the most used trading platform, with over US$600 million in trading volume in June . Although it started off as a marketplace for NFTs hosted on the Ethereum blockchain only, OpenSea has since introduced support for other blockchains as well – Solana, being one of them. Other popular marketplaces include Solana’s Magic Eden.
Investors will notice that the NFT landscape differs from blockchain to blockchain. Projects launched on Ethereum tend to be more expensive, partially due to the ‘gas’ fees – this is charged any time an […]
source Part 3: A beginner’s guide to crypto for S’poreans: NFTs, play-to-earn games, DeFi
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