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How the NFT Market Took Advantage of Blockchain Technology to Achieve Rapid Growth

Nonfungible tokens offer a new method to engage with the arts, music, sports, and media, among other things.

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It’s a lot of fun to talk about nonfungible tokens, or NFTs, because they’re a great example of how blockchain technology has an impact on people’s lives that extends far beyond the financial sector. They have captivated the world’s attention in recent months, as seen by hundreds of headlines, because they are a new way of interacting with culture, music, sports, and the media.

This article will explain what NFTs are, how they work, how the NFT boom began, and why blockchain technology has enabled NFTs to establish a new economy.

Why is there so much buzz around NFTs?

NFTs are a fascinating and entertaining topic to discuss because practically everyone enjoys music, art, games, and the internet. Every social media platform’s feeds are brimming with users who, despite having exhibited no prior interest in crypto assets or decentralized finance, are enthralled with nonfungible tokens. We noticed a number of celebrities and memes advocating NFTs in the first half of 2021.

This past March, Twitter’s CEO, Jack Dorsey, sold his first tweet as an NFT for an astonishing $2.9 million. Edward Snowden’s NFT, a portrait of the NSA leaker, was auctioned for $5.4 million (2,224 Ether) (ETH).

The NFT of the Zo Roth meme, better known as “Disaster Girl” because of the 2005 (and beyond) meme of her evil smile looking at the camera as a house is on fire in the backdrop, was sold for 180 ETH, or about $500,000.

Furthermore, traditional market corporations have decided to ride the NFT wave. In Brazil, for example, the first NFT Havaianas line was auctioned off last month.

Since December 2020, the amount of NFT transactions has increased by more than 25 times, indicating that NFTs have been ingrained in people’s daily lives. It could be one of your favorite songs, a program featuring your favorite superhero, or a game tool that your kids want. The increase in NFT transactions in the last six months, as well as business volume since the end of the third quarter before the recent spike, may be seen in the graphic below.

What are NFTs? How do they work?

An NFT can be thought of as a piece of software code that verifies a nonfungible digital asset’s property, or the digital representation of a physical nonfungible object in a digital media. For those that want a more technical perspective, here are some resources:

“An NFT is a smart contract pattern that provides a standardized manner of determining who owns an NFT as well as a standardized manner of ‘moving’ nonfungible digital assets.”

Any nonfungible asset, such as domain names, event tickets, digital currency in games, and even identifiers in social networks like Twitter or Facebook, could be the subject of an NFT in this situation. NFTs could be any of those nonfungible digital assets.

An NFT contains a data structure (token) that connects metadata files that may be permanently attached to an image or file. This token is used and customized to meet the needs of blockchain networks including Ethereum, Kusama, and Flow, among others. The artwork is uploaded to a blockchain network, which generates a metadata file in the token’s data structure.

You upload your art file to a platform that collects your file’s information and sends it through the entire back-end process of a product, otherwise known as your NFT, as a content creator, such as digital artist Beeple or rock band Kings of Leon.

Your NFT receives a cryptographic hash (key) — a tamper-proof register with the date and time stamp carried on the blockchain network — as a result. It is critical for any artist to follow the valuable data and ensure that it has not been altered at a later period.

Loading your art on-chain may provide you with a better understanding of when the art file’s information was tokenized. Because the data of the piece of art has been uploaded, no one can access or erase it, and the chances of your artwork being lost are nearly zero if your NFT is registered on a blockchain.

What role has blockchain technology played in expanding the capabilities of NFTs?

Traditional NFTs lacked a consistent representation in the digital realm until 2008. As a result, they were not standardized, the NFT markets were closed, and the platforms that issued and developed a specific NFT were limited.

With the introduction of colored coins on the Bitcoin blockchain, the first NFTs in blockchains were born. Although their script language was created to enable Bitcoin (BTC) transactions, it may also be used to communicate asset management instructions because it retains modest quantities of metadata on the blockchain.

CryptoPunks, created by Larva Labs and consisting of 10,000 collectible, “unique” punks, was the first NFT experiment based on the Ethereum blockchain. The punks’ interoperability with digital marketplaces and wallets was due to the fact that they “live” on the Ethereum network.

CryptoKitties, a platform that allows users to construct digital cats and reproduce them with different pedigrees, brought NFTs to the public on the Ethereum blockchain in 2017. This was a ground-breaking effort in terms of developing a complex incentive structure and discovering that NFTs might be utilized as a promotional tool. This sparked interest in auction contracts, which have recently emerged as one of the key mechanisms for pricing and purchasing NFTs.

The wonderful thing about using blockchain technology to improve NFTs is that it has greatly increased their benefits and possibilities. Through the ERC-721 standard, it has brought about the standardization of digital, nonfungible asset representation. ERC-721 is a pattern of smart contracts on the Ethereum blockchain that brings a standardized manner of confirming who owns an NFT and a standardized manner of “changing” nonfungible digital assets, similar to the ERC-115 and ERC-998 standards.

Although Ethereum is where the majority of the action is now taking place, there are other NFT patterns appearing on other blockchains. Mythical Games’ dGoods, for example, is focused on developing a cross-chain standard using the EOS blockchain. In late December 2020, TRON’s first NFT standard, TRC-721, was also formally launched. The adoption of this standard is likely to aid the Chinese blockchain in utilizing various distributed ledger technology-based apps and keeping up with Ethereum’s rapidly growing NFT industry.

Since then, a blockchain-registered NFT has genuinely become a “unique” item that cannot be forged, tampered with, or spoofed.

What are the primary advantages of blockchains for NFTs?

The first advantage of NFTs backed by blockchain technology is uniformity, as previously stated. Aside from standardizing the main properties of NFTs, such as property, transfer, and access control, blockchain technology allows NFTs to include extra elements, such as acquisition specifications. Interoperability, marketability, liquidity, immutability, proved scarcity, and programmability are among the other advantages. We’ll go over each one individually.

The NFT patterns enable interoperability, allowing NFTs to move more freely between ecosystems. Nonfungible tokens can be seen right away in dozens of various wallet providers, traded on many exchanges, and obtained in a variety of virtual worlds in a new initiative. This interoperability is only possible thanks to the open standards enabled by blockchain technology, which give a clear, consistent, and reliable application programming interface as well as the ability to read and write data.

By allowing unfettered trading in open markets, interoperability has increased the marketability of NFTs. Users can relocate their nonfungible assets outside of their original contexts using NFTs based on blockchains. They also have access to advanced negotiation tools like auctions and bids, as well as the ability to deal in any currency, ranging from cryptocurrencies like Bitcoin and Ether to stablecoins and particular digital currencies via a special application.

The rapid marketability of NFTs based on blockchains adds liquidity to marketplaces that can service a wider range of customers, allowing nonfungible assets to be exposed to a larger group of purchasers.

Immutability and proved scarcity are the fifth and sixth advantages of using blockchain technology in NFTs. This is because smart contracts allow developers to put strict supply limitations on NFTs and enforce long-term attributes that cannot be changed once they have been issued. As a result, because the specific qualities of an NFT are codified in the blockchain, they cannot alter over time. This is particularly intriguing for the physical art market, which is based on an original piece’s verified scarcity.

Recent trends and new industries, such as programmable art — which allows collectors to intervene with the original design of the art piece — have created an exciting trajectory in this new NFT world based on blockchain.

Immutability and scarcity are crucial in the market for NFT-represented art. The benefit of programmability may be something to consider in the digital art market. Async Art, a platform for negotiating and creating NFTs that allows owners to alter their graphics whenever they want, is an example of programmability. The ability for a song to change its composition is another example of programmability. As a result, the music may sound different each time you hear it. By separating a component into independent layers known as stems, these two examples are feasible. Each stem has various variations from which the next owner might pick. As a result, a single Async Music recording could contain a variety of unique sound combinations.

Takeaway

Many people are still unaware of the magnitude of the NFT boom and how blockchain is changing the way we consume art. Perhaps the topic merits a more in-depth discussion.

The programmability of smart contracts on the blockchain, which always guarantees a compensation to the content creator whenever their work is negotiated, is the hole-in-one of NFTs.

Assume that a certain piece of material (music, art, a domain name, a snapshot of a Pelé goal, etc.) is traded hundreds of times. A commission will be paid to the content creator in this situation.

Because a “partition of income” is encoded into the NTF’s smart contract code, content creators will no longer have to worry about the legal property of their artwork, this might totally transform the dynamics of copyright and intellectual property.

Nonfungible tokens and blockchain technology markets, for example, still have a long way to go in terms of scalability, marketing infrastructure, and appropriate jurisdiction in NFTs with decentralized storage. Nonetheless, we must not overlook the prospect of codifying the rights of the determined digital asset underlying an NFT transaction. This allows for the emergence of new enterprises and marketplaces that are governed not only by institutions or traditional trust validators, but also by those who create the material that is valued in social and productive centers.

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ART & COLLECTABLES

NHL Opens Hockey Collectibles NFT Marketplace

The NHL, along with its Alumni Association and Players’ Association, said on Thursday that it has joined with NFT platform Sweet to build a distinctive NFT marketplace and libraries of NFTs—individual blockchain tokens that denote ownership.

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The NHL’s market will fall between a full-fledged NFT trading platform and a website that enables momentary NFT drops, according to David Lehanski, the league’s executive vice president of business development and innovation.

By creating an NFT marketplace with exclusive releases, the NHL hopes to give fans a little bit of both. In preparation for the commencement of the 2022–2023 season, the NHL’s Sweet marketplace is anticipated to launch in October.

The NHL aims to gamify NFTs with “questing and collecting” components so that fans will interact and can be rewarded with benefits like other NFTs, according to Lehanski, who spoke to Decrypt.

Depending on a player’s performance, some of the NFTs will also be dynamic and alter over time. According to a statement, NFTs will also include “cinematic game highlights from past and present NHL seasons” or surprise packs of NFTs that may be seen in “3D interactive trophy rooms.”

Lehanski claimed that the NHL wasn’t yet ready to reveal which blockchain it would be constructing on. Though it might be on Polygon or Tezos if Sweet’s offerings are any indicator.

Lehanski stated, “We’re looking at everything,” and that the NHL’s top priorities in its search for a blockchain include “cheap gas expenses” and “environmental sustainability.”

The NHL is one of the most recent major professional sports leagues to enter the NFT market, following the NBA’s Top Shot NFTs, the NFL’s “play and own” NFT game, and MLB’s impending NFT contest.

Lehanski commented on the NHL’s approach to NFTs, saying, “There was clearly a lot of temptation to potentially moving very rapidly […] but we thought that was a little shortsighted.” He added that, in his opinion, spending the time to investigate indicators like fan behavior was worthwhile. Especially in relation to digital collectibles and gaming, NFTs have a long-term future as relevant and meaningful items for enthusiasts.

But according to Sweet CEO Tom Mizzone, the NHL’s NFTs won’t simply be targeted at hockey fans who are unfamiliar with cryptocurrencies; seasoned NFT collectors will also be able to participate in a way that feels natural to them.

It will undoubtedly appeal to that degen culture, he continued, but not to the extent that it excludes fancier consumer bases.

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NFT

MoonPay has officially launched HyperMint, a utility NFT minting service

MoonPay, a cryptocurrency payments company, announced Tuesday the debut of HyperMint, a new service that allows businesses to mint up to 100 million non-fungible tokens (NFTs) at once.

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Creators and companies can use the new service to attach photos, music, video, and other metadata to a token on their own platform.

MoonPay had been expanding its service since April, according to The Block. Its official debut is another step in the company’s strategy to build a full suite for businesses looking to release their own digital assets, which it previously referred to as “Amazon Web Services for NFTs.”

“Why take your intellectual property and list it on a secondary platform first, whether you’re Dolce & Gabbana, Selfridges, or Death Row Records?” In an interview with The Block, MoonPay CEO Ivan Soto-Wright said, “You might want to oversee that issuance yourself.”

Fox Corporation, Creative Artists Agency (CAA), Universal Pictures, Death Row Records, the United Kingdom-based luxury store Selfridges, lifestyle and gaming platform FaZe Clan, and music artist Timbaland’s Beatclub are among the companies that have already signed up.

Proof of attendance tokens, for capturing how many individuals attended an event, is one possible use case, according to Soto-Wright.

These digital assets would be utility tokens, as opposed to security tokens, according to MoonPay. Security tokens must be registered with regulatory organizations such the Securities and Exchange Commission in the United States.

MoonPay’s product portfolio already includes a fiat onramp infrastructure that allows people to buy NFTs using a debit or credit card, as well as a concierge service that educates high-net-worth individuals about cryptocurrency. MoonPay has also been rumored to be working on its own wallet in the future.

The introduction of HyperMint comes at a time when many of the most popular NFT projects have seen significant price declines due to the crypto bear market.

Because of their use cases, Soto-Wright believes NFTs will become shielded from broader market situations.

“I believe NFTs will be unpaired [because to crypto market conditions].” But I believe that will be unpaired in part due to the innovation that will accompany this asset class – you’ll see a slew of various NFTs that aren’t solely focused on the price movement of these assets.”

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NFT

Crypto and NFT-related accounts are prohibited on WeChat in China

Secondary NFT trading is also included by the policy, as the firm adds that “accounts that provide services or material connected to the secondary transaction of digital collections shall be dealt with.”

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WeChat, China’s most popular social media platform, has revised its policy to prohibit accounts from providing access to crypto or nonfungible token (NFT)-related services.

Accounts involved in the issue, trading, and financing of crypto and NFTs will be restricted or prohibited under the new standards and will fall under the “illegal business” category.

The corporation notes that “accounts that supply services or material relevant to the secondary transaction of digital collections will likewise be handled in accordance with this rule.”

On Monday, Hong Kong-based crypto news writer Wu Blockchain (Colin Wu) noted the move, pointing out the significance of the move given WeChat’s 1.1 billion daily users in China.

“Once such breaches are identified, the WeChat public platform will depending on the severity of the violations, instruct the violating official accounts to rectify within a time limit and restrict some features of the account until the permanent account is banned,” according to the new policy.

Between May and September of last year, the Chinese government implemented a phased ban on the local crypto sector. Given the time of the most recent WeChat policy amendment, it’s possible that the platform has been allowing some crypto activity to go undiscovered since then.

Furthermore, because the assets can be purchased in fiat, there is still a regulatory gray area in the country when it comes to NFTs. Nonetheless, to prevent potential regulatory difficulties related to the financialization of technology, most organizations and platforms prohibit secondary trading.

In April, the China Banking Association, the China Internet Finance Association, and the Securities Association of China issued a joint statement warning the public about the “hidden hazards” of investing in the assets.

Since March, popular platforms such as WeChat and the Ant group-owned WhaleTalk have been distanced from the technology, purportedly eliminating or banning NFT services from their networks due to a lack of regulatory clarity and fear of a Beijing crackdown.

Despite this, a local media report published on Thursday highlighted data revealing that the number of digital collectable platforms in China has increased by fivefold since February 2022, to over 500.

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