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The author expresses gratitude to his team, without which this book would not exist:
to Komova Victoria Georgievna for assistance in proofreading;
to Zabirov Ramil Shavkatovich – translation agency Aatoslingvo
What is this?
How are NFT and crypto related?
How did NFT tokens appear?
How does NFT work?
Where is NFT used?
NFT legal base
NFT has already taken over the whole world, but not everyone still understands what it is and how it works. Many of us would like to understand the world of cryptocurrency, develop own projects in this area, or, receive profits from investments in NFT. Cryptoworld is in a stage of active developing and in search of new talents. If you want to be one of them, now this is the best time for it.
NFTs are hard to understand, and there are two reasons for it:
– they do not exist in a real world
– this topic contains many technical terms
Our guide is written in a most understandable and clear language, without large use of technical words. In a few chapters you will get the general idea how to adapt to the NFT world, create your own project and make your first profit.
NFTs or non fungible tokens are digital assets that establish ownership of an object: pieces of art, music, in-game assets, videos, tickets for events, digital property, avatars or any other object. Now let's get in details.
One famous digital artist Beeple created a set of 5000 everyday drawings called "First 5000 days". Anyone can look at this collage online for free. This composition was sold at Christie's for $69 million. Why spend millions on something that you can just download or take a screenshoot?
NFT allows the buyer to own an object. The unique ID has a built-in authentication, that serves as proof of ownership. That is, NFT buyers acquire basically a code, which already manifests itself in a certain image, music, video etc.
Why people want to spend millions on what they can screenshot or download? NFT allows the buyer to own an object.
Turning your labour into a digital asset looks like a promising way of earnings. There are lots of reasons why you should do this, and we will thoroughly study every single reason.
NFTs are sold and bought in internet for cryptocurrency. Also, you have to know that NFTs are encoded with the same basic software as many cryptocurrencies, like Bitcoin or Ethereum.
But physical money and cryptocurrencies are interchangeable, that is they can be exchanged for each other.
NFTs are unique in that they differ from each other. Everyone has a digital signature, which makes this exchange or equivalence impossible. That's why we call them non-fungible.
In 2012, Meni Rosenfield posted an article in which he presented the concept of Colored Coins. These coins describe Bitcoin's method of representing and managing blockchain assets and coins can play a role of a signature to confirm ownership of assets. Basically, these are ordinary bitcoins, but with different way of usage.
This idea of colored coins was not implemented, but, created a base for NFT in a future.
In May 2014, a digital artist Kevin McCoy created the first NFT – Quantum. It was a pixelated pulsating octagon that changed its colors, forms and shapes within itself. It looked hypnotically alive.
According to Kevin, NFT became a natural development of a long-lasting cooperation between artists and technology. His work "Every frame, every episode" can be seen in Metropolitan Museum of Art even today.
Seven years after NFT Quantum was created, the one-of-a-kind piece was sold for nearly $1.5 million at Sotheby auction.
At the same time, blockchain Ethereum introduced a set of standarts according to which developers could create tokens. The standart has become a supplement to smart-contracts. We will talk about the importance of contracts later.
CryptoArt was initiated by a cultural phenomena like CryptoPunks, Rare Pepe and CryptoKitties. They got their popularity due to viral network effects and laid the groundwork for NFT era.
In 2014 Robert Dermody, Adam Krellenstein and Evan Wagner created a Counterparty, a peer-to-peer financial platform and open source distributed internet protocol built on Bitcoin blockchain. Counterparty made it possible to create assets and had decentralised exchange, that allowed other people to create their own traded currencies. This allowed to share ideas and possibilities, including the memes trade without any problems with fakes.
In 2015 Counterparty became a partner of Spells of Genesis.
In 2016 with an NFT Rare Pepes premier on the Counterparty platform, a new era of memes began and got an enormous success. Pepe the frog, or, Rare Pepes, is a comic character and become an internet sensation.
After Rare Pepes success, John Watkinson and Matt Hall created a project called Cryptopunks and attention to NFTs just increased. Cryptopunks will never have two identical characters, and their number will be limited to 10,000.
In 2017 everyone started to talk about CryptoKitties. This is a game based on a blockchain, where people can adopt, breed and even trade with cats without leaving their digital wallets. Game become so popular that people started to get more and more earnings. CryptoKitties was on a news headlines, including famous CNBC and Fox News. Many people started to understand a true potential of NFT.
In 2018–2020 NFT was dominated by games. This is how the first decentralised virtual reality platform based on Ethereum was created, and it was named Decentraland. Thanks to this game, players started to own in-game assets and earn money.
On St. Valentine's day in 2018, artist Kevin Abosh joined GIFTO for a charity auction. The partnership led to a $1 million transaction for a CryptoArt piece called The Forever Rose.
From 2021, a new era of NFT has begun. The surge in purchases became striking, the amounts increased to astronomical. When Facebook has announced that it was moving to the Metaverse and renamed itself Meta, it became obvious that the exploding NFT time was just beginning.
Rapidly rising popularity of NFT just started to show its unlimited possibilities. If you want to catch one of this possibilities, you have to know how to do it.
NFTs are created from digital objects representing tangible and intangible objects. Most of them are digital collectibles.
The acquisition of NFT guarantees your exclusive ownership rights. NFT can have only one owner, and usage of blockchain technology makes it easier to verify ownership and transfer tokens between owners.
The creator of the NFT product can also keep certain information in metadata. For example, artists can sign their work, including a signature in a file.
NFTs exist in a blockchain, which looks like a distributed public ledger in which transactions are recorded.
Contracts of owning NFT contain special data that usually consists of:
– NFT name
– typical description
– image URL pointing to the data
– other random data
These data are called metadata. Smart-contract programming is coded in Solidity language.
Since everything is decentralised, there is no common point where all of it is stored. Smart-contracts cannot be removed and cannot be regulated by anyone or anything.
In chapter 6 of our guidelines we will discuss directions and possibilities for NFT. Let's go through general information, where active work is already underway in cryptospace.
Artists no longer need to rely on gallery or auction houses to sell their art pieces. They can sell their products right to the consumer. This also allows you to get higher income. In addition to this, authors can programm its NFT that way, in which they will get a profit from futher sales to a new owner. This is an advantage, as artists usually never get a profit from futher sales of their product.
Cryptoworld was born from the digital worlds for games. Thanks to NFT, players can monetize their time spent on a game and purchase items with the right of ownership.
Digital fashion is just on its rise. World-famous brands auction their own thematic products as NFTs in order to raise money for charity and expand their
audience. Many people introduce the ideas of virtual collections for their avatars.
In cryptoworld musicians can share their music among listeners without intermediaries, conduct a performance for millions of people in the Metaverse with incredible fantastic shows and keep a close contact with the fans.
Many celebrities begin to launch their own avatars or sell unique memories, pieces of art and moments in securitized NFTs.
Sport industry makes tokens out of the best moments of games, videoclips from games or sport inventory as a collectibles.
This is just a small part of NFT potential.
The main value of NFT is that it is a non-interchangeable token. Bitcoin or Ethereum are interchangeable. But there are no two identical NFTs. Even if multiple copies of the same NFT are created, each will be numbered or identified as a unique one in any different way. This makes NFTs collectibles.
Many NFTs are digital understanding of what already exist. For example, videoclips from NBA games, securitized versions of Instagram and many others. But NFTs themselves are one-of-a-kind items, as they have unique IDs.
Is there any legal protection of NFT?
Yes. Digital and physical assets are protected by NFT ecosystem, thus, allowing to establish clear traceability. Usage of non-interchangeable tokens in blockchain based on smart-contracts makes trading digital materials on the Internet safe and easy.
Legal framework around blockchain and NFT assets is still developing in many countries.
Is there any legal protection of NFT? Yes. Usage of non-interchangeable tokens in blockchain based on smart-contracts makes trading digital materials on the Internet safe and easy.
What is an NFT marketplace?
How do marketplaces work?
Types of marketplaces
Where and how to buy a cryptocurrency?
Gas fees on a marketplace.
NFT marketplaces are some kind of large internet stores, where people can take a look at an assortment of digital goods and make purchases. Since NFTs are in a blockchain, many of the NFT marketplaces will force you to have a cryptowallet.
NFT marketplaces nominate listed assets in digital currency, but the most widely used is Ethereum. After you bought NFT, ownership passes from the seller to the buyer, who incurs a transaction fee on the Internet.
Cryptoworld is constantly developing and many different marketplaces are opening every day. Many of them will find its own niche in the market. In this guidelines we will take a look at the most popular platforms.
For artists, these platforms are the best at the moment:
Let's take a closer look at how it works.
First of all, you must have a crypto wallet. Even if you have such a wallet, you
have to make sure, that your currency is applicable for NFT. Many marketplaces transfer NFTs in ETH, while others might use Solana (SOL), Tezos (XTZ), FLOW and many other cryptocurrencies.
● to buy NFT:
Investors can buy NFT via auction or fixed-price listing. After buying, ownership of the NFT will be transferred to the buyer.
● mint NFT:
Many marketplaces allow users to mint their own NFTs. This includes its changing into a digital asset, placed on a blockchain.
● to sell NFT:
Marketplaces allow sellers to place their NFTs for buying by others. Usually, sellers pay a fee to the platform after a successful transaction, however, many other platforms offer royalties for futher sales on secondary markets.
There are some markets that specialize exclusively at NFT Art. OpenSea and Rarible have the leading positions in this race, and these marketplaces allow creators to place digital art NFTs and sell them to collectors.
These marketplaces are built on Ethereum blockchain and offer digital assets listed in ETH. Nowadays, OpenSea is the largest Ethereum marketplace, with a value worth of around $13.3 billion.
Solana NFT art markets are hosted on the Solana blockchain, offering a faster alternative to Ethereum. Besides, Solana is highly scalable. This makes it possible to reduce network fees. Nowadays, Solana itself is not so popular, but at the same time, Solanart and Solsea are the two largest.
Algorand is another blockchains network that started developing in NFT not long time ago, and several Algorand NFT marketplaces have emerged. Professionals consider Algorand as a way more ecological and scalable than the current Ethereum framework. Since it represents a blockchain with a clean proof of the fraction – PPoS.
Tezos is a blockchain with an open source that works with its own XTZ token. Tezos NFT markets became more popular during the last year, and large marketplaces such as Rarible now offer Tezos-based NFTs.
BNB NFT marketplaces use the popularity of Binance Coin, the native token of the Binance cryptocurrency exchange. The most popular marketplace will be definately Binance NFT Marketplace itself, which allows users to buy NFT listed in BNB.
Today there are several ways to do it:
Method 1: Buying and selling crypto with a bank card through a cryptocurrency exchange
Due to sanctions in Russia it is impossible to replenish the Visa and MasterCard account directly from a bank card. All transactions within the market are available to Russians, but you cannot deposit or withdraw your money. In orded to do this, you have to use p2p or any other exchange offices.
Method 2: Buying and selling crytocurrency with a bank card through online exchange office
There are a lot of offers on the market with a different range of reputation. The best way is to reach out to aggregators for help.
Method 3: Buying and selling crypto with a banking card through Peer-to-Peer platforms.
Here you can find the best offers, however, the risks are high as well. You have to choose more experienced market participants with long-standing reputation on the market, thus, you will reduce risks.
Method 4: Buying and selling crypto with a bank card through EPS (Electronic Payment Systems)
Some of the EPS allows the exchange of fiduciary funds inside the wallet for cryptocurrencies and vice versa, and also have input / output functions from a bank card. The list of some systems with support for cryptocurrencies: PayPal, WebMoney, Advanced Cash, Payeer, Perfect Money.
PayPal allows to work with crypto only to USA residents.
Method 5: Buying and selling crypto for cash through a courier
This method is popular for buying and selling crypto for large amounts. Most often, this method is used when you need to exchange amounts of at least 1 million.
Method 6: Buying and selling crypto for cash in office
Many large cities already have physical cash desks which you can visit by your own and exchange your money to crypto, and back.
Method 7: Buying and selling crypto for cash via ATM.
There are two options – Cryptomats and regular ATMs. In the first scenario you have to find valid ATMs with support for cryptocurrencies.