NFT

NFT (Non-Fungible° Token)

Overview

An NFT is a representation of ownership. Technically, on the Ethereum blockchain, an NFT is defined by the contract ID and the ID of the NFT within that contract.

NFTs make digital goods scarce. Even though Information wants to be free -- meaning any information (a song, a document, or an image) can be easily copied without destroying the original -- NFTs enforce a social contract to recognize the holder of the NFT as the owner. The agreement is mostly based on a collective belief: if everyone believes you're the owner of a Bored Ape, you are the owner of it.

While NFTs have unlocked a whole category of opportunities with digital goods so far, they can also be used to track ownership of physical goods, e.g. land. Some of the benefits remain (like decentralization), but someone still needs to physically enforce this property right.

Chains

NFTs became most popular on the Ethereum chain, and most blue-chip NFTs still live there. It's hard to find the total number of NFTs minted on each chain. On Ethereum, there were a total of 43 million NFTs in February 2022. Regardless, some of the top chains are

  • Ethereum
  • Polygon (Ethereum side-chain)
  • Binance Smart Chain (EVM)
  • Flow
  • Tezos
  • Solana
  • Cardano
  • Algorand
  • Klaytn (EVM)
  • EOS (EVM)
  • WAX
  • Tron

Some projects (e.g. games) run their own chains for performance and cost (Gas fee) reasons.

Standards

The key standards in the NFT space are the following.

Ethereum:

  1. ERC-721: the most basic NFT standard.
  2. ERC-1155: semi-fungible NFT standard, where one contract supports multiple tokens of multiple types (fungible°, semi-fungible, or non-fungible).
  3. ERC-2981: NFT royalty standard (Final)
  4. ERC-3664: more powerful NFT attribute standard (Review phase)

Other:

  1. Tezos: FA2/TZIP-012 multi-token standard
  2. Klaytn: KIP-17 Klaytn modified version of ERC-721