Wondering what an NFT is and how to play P2E crypto games? If yes, you are in the right spot. Check out everything about NFT, its creation, ownership, legality, 10 Types of NFT tokens popular in the crypto market, and how to get started with P2E NFT games.
If this isn’t enough for you, this article talks about blockchain, its types, and the blockchain used by NFTs. Read the full article to gain in-depth knowledge about NFTs with some Frequently asked questions.
Non Fungible Token
Basic Introduction to NFTs
NFTs have recently been in the news all around the market as we see everyone talking about them. People talk about making a fortune from NFTs just like a get-quick-rich scheme. But in reality, NFT is much more than you can read about on the Internet. The NFT market reached its peak of US $250 Million in 2020. In the first three months of 2021, US $200 Million transactions were reported. However, from 2021-2022, the NFT market has been playing moderately.
Why is it called Non-fungible?
To get a better idea about it, you need to understand the concept of fungibility and non-fungibility.
What is Fungibility?
In economics, fungibility is a property of a fungible asset by virtue of which, it is indistinguishable from others.
Fungibility is important because it allows for exchanges between different types of goods and services, leading to more efficient markets and increased trade. It also allows people to identify specific qualities in different items without examining them closely.
For example:
You can exchange one $100 note and two $50 notes. If there are N numbers of 100$ dollar notes, each dollar note is no different from the other and holds the same count value. The fungible property leads to an exchange of currency.
What is Non-Fungibility?
Non-fungible assets, on the other hand, are one-of-a-kind and cannot be divided. They should be regarded as a form of deed or title of possession to a one-of-a-kind, non-replicable item.
Owned vehicles and homes are non-fungible examples of similar products and assets that cannot be exchanged.
Non Fungible Token
A Non-Fungible Token [1]Wikipedia- Non-fungible token is a cryptographic asset, distinguishable from every other such existing token. It is distinguishable by the form of metadata and holds unique identification codes, face value, and count value. One NFT can never be equal to another NFT.
However, two such NFTs can be combined to form a breed of NFT, and there are so many types of NFT tokens in the crypto market.
What makes an NFT unique?
Each Non Fungible Token is associated with a digital or physical asset. The digital assets are mostly Digital Art, followed by games, music, films, etc. The physical asset produces digitized ownership of any real-life object, like real estate and precious metals. The digital and physical assets help to produce face value for NFT. Each NFT is recorded on the blockchain and is a unique asset.
What turns art into NFT is its record on the blockchain!
Creation of an NFT
An NFT has files associated with them. These files can be digital art, music, film, or physical assets. To create an NFT, you should have this file. Once you have the file, you must make it unique by recording it on the blockchain. NFT can be created very easily by anyone, with or without coding knowledge. Graphic designers extensively create attractive NFTs using basic software like Pixel Art, Adobe, etc.
Ownership of NFT
An NFT can’t be traded as cryptocurrencies on the exchange as there is no common count value associated with an NFT. The owner of an NFT holds a unique right of possession which can be transferred from one person to another in exchange for money, crypto token, or another NFT.
In popular culture, NFT uniquely identifies people, companies, and their assets. Artists add digital signatures into the metadata of the NFT.
Legality of NFT
There are disputes regarding NFT’s legality as they cannot be considered intellectual property. When the system of decentralization, blockchain, and associated cryptocurrency isn’t recognized and regulated by government bodies, it can be assumed that NFT falls into the same category. But since 2021, big multinational companies[2]Mastercard files 15 metaverse and NFT related trademarks [3]Ford files trademark applications for virtual cars and NFT marketplace and brands have requested the US Patent offices to make NFT their Intellectual property.
How do NFTs gain value?
Now the question arises, How do NFTs draw value? NFTs gain value based on the artist’s popularity in the physical world and various other factors. If it is one of the best types of NFT tokens like artwork, photographs, collectibles, etc., its value is based on multiple factors.
Experts say that there is no predetermined formula to predict the value, but it is depended upon factors like its appearance, rarity, nature of artwork, real-life application, effort in the making, and the story behind the creation.
Furthermore, vast factors like tangibility, security, and legality come into play. Tangibility and security depend on the platform for buying/selling, while legality varies from country to country.
Blockchain and its four types
An art becomes NFT only if it is recorded on the blockchain. If not, it is just an image. But 80% of all the existing NFTs belong to the Ethereum Blockchain.
What exactly is Blockchain?
A blockchain is a digital database or ledger that stores data in a distributed network among different nodes. While the traditional database stores data in tables, blockchain stores data in a block and connects all the blocks in a chain. Each block has a limited capacity for data storage.
When the data fills up the block, it gets connected to the previous block and forms a chain. The connection of each block to form a chain makes the records inside interchangeable. A time stamp governs the block to make a permanent timeline of the data chain. Since this data is shared among the entire peer-to-peer network with an irreversible timeline, the blockchain can never receive a double entry or modification into the record.
How secure is blockchain?
A blockchain network is not limited to a particular group of computers but covers computers at different locations. There is no government or such body to govern this type of data management, making blockchain a part of decentralization.
A private key protects each transaction or data entered by the user. This key is known only to the owner/user, inaccessible and unknown to other blocks.
The blockchain will prohibit any such edits if a hacker tries to get into a block by bypassing the private key to alter the record. The blocks in the chain would compare that alteration to their records and invalidate it. Hence, editing transactions or data recorded in the blockchain is impossible.
What are the types of Blockchain?
1. Public Blockchain:
One of the very first of the four blockchain technologies is the Public Blockchain, on which Bitcoin started to operate in the last decade. The public blockchain is so because it is accessible to the public. This permission-less blockchain runs on the principles of DLT (Distributed Ledger Technology) as it distributes the information across a P2P network. Both the parties involved in buying and selling reach an escrow agreement on the current state of the ledger for this decentralized chain to run efficiently. Anyone can access previous and current records on this blockchain to gather information or conduct mining. The complex calculations verify the transactions which can never be altered on the supply chain.
Usually, public blockchains are open source but are slower as most people use this technology. Public blockchain uses the Consensus Algorithm via Proof of Work and Proof of Stake.
Usage: Most Bitcoin Mining Activities, Social Activist Groups, and NGOs.
2. Private Blockchain:
A private blockchain operates on the same functionalities but in a closed environment. It behaves like a blockchain, but it isn’t. A single entity controls the restrictive environment as the people given access to the network can only enter. Enterprises use it mainly to provide permission, security, accessibility, and authority to people of interest. The user can’t access the source code of such a blockchain. Hence, private blockchains are a little less secure.
Usage: Companies and organizations.
3. Hybrid Blockchain:
The hybrid blockchain is a combination of public and private blockchains. Firms use this blockchain to make some of their data accessible only to internal members and the rest to the public. This type of blockchain uses a smart contract algorithm to maintain verifiable confidentiality. If you want to access your information, you can easily do it using a smart contract in a hybrid blockchain.
Usage: Medical records, governments, and institutions.
4. Consortium Blockchain:
Consortium Blockchain (federal blockchain) is similar to private and public blockchains in case of operation. But it is handled by a group of organizations for an effective business. Members of the world’s best organizations come together to work in a decentralized environment through these federal blockchains.
Usage: Organizations like finance sectors.
Blockchains that NFTs use
- Ethereum: 80% of 10 Types of NFT tokens popular in the crypto market use ERC-721 for Non-Fungible Tokens and ERC-1155 for Semi-Fungible Tokens.
- Flow: 100K NFT transactions carry on each day as this blockchain is well used for the sports NFT sector.
- Solana
- Cardano
- Binance Smart Chain
10 Types of NFT tokens popular in the crypto market
1. Artwork
Most people would think of an “image” or “animated picture” when NFTs come to mind. Artwork is the best among 10 types of Non Fungible Token. These NFTs account for 99% of all the existing NFTs. PFP (Profile Picture NFTs) are the most popular digital flex in the NFT market. Most celebrities use PFP to showcase status, uniqueness, and patronage.
Artists can sell their physical art of drawings and paintings in digitized NFTs with their unique signatures in metadata. The “First 5000 Days” by Beeple was the best-selling NFT of all time at US $69 Million, until PAK sold NFTs worth US $91.8 Million.
2. Gaming
Gaming NFTs are yet another popular space following the art. Play-to-Earn or P2E or Crypto games have their gaming assets converted into NFTs. Not to be confused if an entire game is converted into NFT, only some gaming assets and avatars are sold as NFTs. Gamers have started to buy NFTs in these games because they used to pay for the items they didn’t even own.
By NFTs, gamers are now able to hold their identity and score. These virtual gaming assets are available in the gaming store and can be character skin, coins, attire, weapons like guns, knives, bombs, etc. Once you start earning in such games, you get unique ownership of your gaming items. Some trending NFT tokens in the crypto market are games, including Gala Games, Gods Unchained, Axie Infinity, etc. are some cool examples of such NFT-driven games.
3. Collectibles
Collecting cards is a cool way to buy an NFT. The NFTs related to popular fields, events, and personalities are sold as vintage cards in form of collectibles. It started all back in 2017, with the rise of CryptoKitties- enchanting digital kittens that became popular among the world of crypto and NFT collectors. People buy trading cards for NFTs and collect them as a form of memory.
Recently, trading cards for Pokemon, Curio Clubs, and Bored Ape Yacht have turned out successful NFT tokens in the crypto market.
4. Sports Memorabilia
Sports Memorabilia is one of the best types of NFT tokens. The memory of sports is usually a form of a short clip from the archive of sports events. The best example is the collaboration between Dapper Lab and NBA TOP SHOT.
The short clips feature some of the most iconic basketball moments. Every clip is recorded on its blockchain Flow and sold as an NFT. The most successful sports memorabilia NFT is LeBron James Dunk Throwdowns, sold at US $380,000. Following NBA TOP SHOTS, Formula F1 racing and Cricket NFTs have also made a fortune to the creators.
5. Music
Many singers are selling their music albums as music NFT to make more money and generate more audience. Initially done by budding artists to gain popularity, established singers have now started selling their music. The platforms like Rarible, Mintbase, and Airnfts are go-to places for musicians interested in unique ownership. In 2021, the Album of Kings of Leon was sold as multiple NFTs.
Singer John Legend’s song “Our Song” is sold in exchange for crypto tokens. Pop stars like Ariana Grande, Justin Bieber, Travis Scott, etc., have done NFT Concerts! Singers such as Grimes and Nas have released their music videos as NFTs.
6. Photographs
Photography in the NFT space is a growing sector for budding creators and established photographers. Since 2022, famous photographers have been selling off their art in the NFT creator space. Photographers turn their photos and collections into NFT and put them on sale. Whenever the NFTs are resold, photographers earn their royalty income.
Some famous photographers like Julie Pacino and JN Silva are successfully selling NFTs of their work. Platforms like Open Sea and Foundation are great places to try your luck in photography. Eric Rubens, Joaquin Marco, Ryan Newburn, etc., are some famous NFT photographers. In 2022, the costliest photograph NFT was sold for around the US $2 Million.
7. Memes
Memers create memes using Pixel art and record them on the blockchain to make hefty money! Such fun cartoon characters are a part of the pop culture that trades on platforms like Open Sea. Memes are among the top types of NFT tokens in the crypto market.
The fact that meme NFTs make millions in themselves is a meme for the creators! Popular memes like Nyan Cat, Success Kid, Disaster Girl, etc, have made up the US $770,000. The best-selling meme NFT of “DogeCoin Dog” was sold out for US $4 Million in 2021.
8. Virtual Fashion
NFT in the Virtual Fashion industry is fun to dress up your digital avatar. Even Virtual clothing, necklace, and handbags are sold off as an NFT. You can either buy such Virtual accessories and clothing in a form of NFT or you can dress up your online avatar.
NFT in the Fashion space is adapted by big brands such as Chanel. The brand has started to sell off its products with an NFT associated. This records the origin of associated fashion products that help the brand to make money in the reselling industry.
9. Real World Assets
Online replicas are recorded on the blockchain for physical assets like land, house, and cars. Most Real Estate and luxury goods have an NFT deed associated with the physical property papers. The tokenization of such physical assets is becoming popular day by day among collectors.
10. Utilities
Domain Names:
One of the most bizarre things to be sold off as an NFT is a domain name. Decentralized Domain Name Services (DDNS) like Ethereum Name Service is an excellent example of such NFT where long-form addresses are transformed into flexible ones. You can buy a domain name from Decentralised Domain Name Services like Ethereum Name Service and Unstoppable Domains and sell it on an NFT platform.
License NFT
Subscriptions for software are sold in the NFT creator space. The NFT holder can access the software as long as the collector holds the token. If the collector resells it, access is transferred to the new owner, and the SaaS company makes money off the deal.
Virtual Land
You can buy land in the metaverse through NFTs. The most expensive virtual land deal was about US $4.3 million.
Play to Earn NFT Games
The Play-to-Earn gaming model lets everyone in the ecosystem make money. Players score to win money, the owners sell off the NFTs of the gaming store items, and developers power the system to get a fee. Usually, games like these have NFTs and tokens of their own.
How to start with play-to-earn NFT games
- Firstly, you must understand how the Play-to-Earn (P2E) game model works.
- You have to choose the game that interests you.
- Find out the list of free Play-to-Earn games.
- Check if the game has any upfront cost for you to start with.
- If there is an upfront cost, are you comfortable paying that?
- Understand the gaming ecosystem to know how each contributor (player, developer, or node in the system) makes money.
- Get to know “Tokenomics”- the gaming rules governing the tokens, better.
- Gather more information about the gaming mechanics.
- Get yourself a crypto wallet and enroll in the game.
- You can buy NFT gaming assets by paying the price and gas fee.
NFT popular FAQs
Q1. How do NFT games earn money?
In NFT games, the P2E model is used to run the game. The developers get paid by the owners to develop such games. Players earn money by playing to earn rewards like NFTs or tokens. The owners make money when NFT is resold, depending upon market demand. The external users who power the node and provide computational power to the game earn money by rewards. Hence, everyone in the P2E gaming ecosystem makes money.
Q2. Can I lose money if I play NFT games?
Yes, chances are there for you to lose money. You must understand the mechanics behind such games. After gaining adequate knowledge about Cryptocurrency, NFTs, Blockchain, and P2E NFT games, you should try your luck.
Q3. How many NFTs are there?
According to the popular website nonfungible.com, 11 million NFTs exist. Websites Chinalysis and Financial Times state that there were 360,000 NFT owners in 2021. The owners hold wallets worth US $2.7 million. In September 2021, each day 103,765 NFTs were sold. Besides being so much in number, 9% of NFTs account for market capitalization.
Q4. What is the most expensive NFT?
Out of 10 Types of NFT tokens popular in the crypto market, best-selling NFTs have always been artworks. The most expensive NFTs sold were Beeple’s Everyday Series: The First 5000 Days worth US $69 million and Pak’s “The Merge” US 91.8 million.
Q5. How do I know if my NFT is rare?
The best way to know whether your NFT is rare or not is to check some rarity scores as follows:
- Trait NFT Rarity Ranking: You can enter NFT ID to check its rarity score based on popularity, supply, and other factors.
- Average Trait Rarity: You add all the rarity scores to find an average value.
- Statistical Rarity: You multiply all the traits to get a specific number.
Q6. Is it illegal to screenshot an NFT?
Even if you take a screenshot of someone else’s NFT, you can never be the rightful owner. The NFT belongs to the actual owner through its unique code registration on the blockchain. If you take the screenshot and keep it to yourself, you may keep it for years. But if you post it online, it is illegal. The owner can sue you as you would be liable for copyright and legal procedures. Hence, it is advised that you should not take a screenshot of the NFT that doesn’t belong to you.
Conclusion
The NFT market has been growing since 2017 and reached its peak in 2021-22. Every year, new NFT types are added up in the creator space. Besides NFTs being synonymous with artwork, NFTs are now about gaming, photography, music, fashion, etc. In the top 10 types of NFT tokens popular in the crypto market, real-life assets and utilities have made their mark. Unlike cryptocurrency, each NFT is priced differently and makes money due to factors like rarity, utility, appearance, and many more. Hence, you should try your luck in the NFT space to showcase your inner talent.
References & Definitions
| ↑1 | Wikipedia- Non-fungible token |
|---|---|
| ↑2 | Mastercard files 15 metaverse and NFT related trademarks |
| ↑3 | Ford files trademark applications for virtual cars and NFT marketplace |
