What is an NFT and why you should care

up:date August 17, 2021 by Bonn Brandt

NFTs: Connecting a global audience with the artist

NFTs, social tokens, DAOs, DeFi, and community building are some of the most discussed topics in the creator and crypto ecosystem. Decentralised platforms and applications (in short DApps) based on blockchain technology give artists, collectors and investors independence from current and obsolete systems. NFTs are the most important improvement to the arts since the patronage of the Medici in the 1500s.

Digital artwork of a guitar player standing in a fantasy world
Likewolf NFT Collector Card

Collector's cards contain the utility to access to Likewolf shows worldwide for life. In total, 100 unique designs will be made available to the NFT market.


Overview of the NFT Space

The NFT industry is flourishing. Over $2.5 billion worth of NFTs have been traded since the start of 2021. Close to $2 billion dollars have been invested in NFT projects and protocols in recent months.

Giant brands like Coca Cola, celebrities and influencers like like Snoop Dogg and Lindsay Lohan have all joined the NFT industry.

Artists and creators around the world are showcasing their work by using NFT technology to sell their creations, and finding a new generation of collectors for their art.

What exactly is an NFT?

A Non-Fungible Token (NFT) is an application that enables the creation of an ownership identifier for unique digital items on a blockchain. It provides creators with the ability to submit various attributes to any unique digital item on a blockchain.

There are many different types of tokens that can be used in the digital marketplace. A non-fungible token (NFT) signifies a piece of data recorded on a digital ledger referred to as a blockchain. It confirms that the digital asset is unique, owned and authenticated, thus making it non-exchangeable. The ownership and authenticity of a digital asset is confirmed by the NFT.

The Blockchain is a decentralized ledger that tracks the ownership and transaction history of each unique NFT. The artist/creator retains the copyright and reproduction rights, unless otherwise stated.

NFTs enable future trading of the item. Additional benefits can be granted to purchasers through certain add-ons that unlock premium content included in the NFT.

Non-fungible tokens derive their worth from their scarcity, demand and uniqueness. What makes the object irreplaceable is the non-fungible element. The tokens themselves are not the artwork, they only contain the entry.

NFTs enable transparent and traceable ownership. When an NFT is transferred to another person, this is recorded in the blockchain. And this record is accessible to everybody at any time.

With Etherscan you can track all transactions on the Ethereum blockchain.

digital abstract NFT painting of a guitar player
One man Band - NFT Crypto Art by Likewolf

Imagine a world where anything is possible and dreams become reality.


History of NFTs

Kevin McCoy created the first work to receive an NFT-like certificate of ownership by tokenising a project titled Quantum on the Namecoin blockchain on May 2nd 2014, three years before the term NFT was introduced. This first NFT was auctioned by Sothebys on 10 June 2021 for $1.4 million.

After the Ethereum blockchain gained prominence over Bitcoin-based token platforms in 2017 by integrating the token creation and storage protocol directly onto its blockchain, which removed the requirement for third party platforms such as Counterparty, the term "non-fungible token" was coined by Ethereum.

Later that year, the American studio Larva Labs released CryptoPunks, a project containing 10,000 unique collectible 8- bit graphic characters with proof of ownership stored on the Ethereum blockchain.

At the end of 2017, a somewhat similar project called CryptoKitties followed, a game where users can adopt and exchange virtual cats. The success of this project skyrocketed. It brought in an investment of $12.5 million and individual kittens were sold for over $100,000.

Decentraland, a blockchain-based virtual world, mobilised US$26 million in an Initial Coin Offering (ICO) in 2018 and had an economic capacity of US$20 million as of September 2018.

Nike patented a process called CryptoKicks in 2019, which uses NFTs to verify the authenticity of sneakers and provides customers with a virtual version of the shoe.

Developer Dapper Labs released the beta version of NBA TopShot, a project to sell tokenised collectibles of NBA highlights, in early 2020. Based on Flow, a newer and more powerful blockchain than Ethereum.

The NFT market experienced rapid growth during 2020, with its value tripling to $250 million.

For the sake of thoroughness, the work of graphic designer Mike Winkelmann aka Beepl also deserves a mention. Over the last decade, he has published motifs on Instagram on a daily basis. Timed to coincide with the first big NFT hype in early 2021, a collage of his images, titled the "Everydays" series, was auctioned off for $69,400,000. Whether this work and the buyer will go down in art history is doubtful. But they will certainly get an entry in the Guniness Book of Records.

Since 2021 NFTs have reached the lower end of the mainstream. The introduction of smart contracts on the Cardano blockchain from mid-September is expected to be the next milestone.

Key NFT use cases

NFTs are digital assets that can be used for digital and real-world items such as music, concert tickets, merchandise, fashion, real-world experiences, art, videos, trading cards, tweets, video footage of iconic sports moments, digital publications, virtual land, tokenised real-world luxury goods such as wine, whisky, watches, real estate, cars, racehorses, designer sneakers and virtual items in video games such as skins, virtual currency, weapons and avatars. Basically, anything that can be digitised is also a potential NFT.

Digital scarcity and digital ownership will revolutionise the music and arts industry for consumers, artists and all parties involved. NFTs restore value and recognition to artistic work. For the first time, consumers can engage directly with creators and monetise them and their work.


Likewolf NFTs

Likewolf is an up and coming nft artists. He offers unique collectibles that are specially designed and created by him to connect with his audience. They provide the unique opportunity to turn Likewolf products into monetary rewards.

Likewolf adds utilities to its NFTs, which means buyers can receive add-on bonuses such as limited edition vinyl albums, handwritten and printed sheet music, guaranteed seats in the front row at the concert, exclusive rights to early releases, and VIP backstage access.

  • MUSIC NFTs: Likewolf ties a future real share of music royalties by minting and selling its original music in the form of NFTs. The owners of these embedded smart contracts are therefore entitled to earnings from that music. Sound and song NFTs are the digital certificate attached to the compositions. They represent proof of ownership of an original copy of a song or album. Ownership of and access to music will help artists market their art, drastically changing the arts and music industry in the years to come.

  • DIGITAL ART: Likewolf is a digital and analogue creator. By tokenising his new nft art projects, these objects are authenticated and ownership of the smart contract is transferred to the highest bidder who desires to purchase a given work of art. The exploitation of digital art through the duplication and distribution of digital copies of virtual artworks is solved in this way. Likewolf's digital crypto-art gets its value from digital authenticity of ownership. What gives Likewolf NFTs added value is not only the artwork itself, but also the fact that they belong to a sole individual owner.

  • CONCERT TICKETS: The tokenisation of tickets in the form of non-counterfeitable tokens offers an opportunity for the events industry. The security of blockchain technology makes it possible to prevent counterfeiting of tickets and other collectibles. Likewolf issues concert tickets for private and secret shows in real life, as well as for shows that take place in virtual reality in the Meta Verse, to which only Likewolf NFT holders can have access.

  • MERCHANDISE: Likewolf's NFT merchandise, apparel and accessories allow shoppers to access the label's provenance information by scanning a simple QR code on the limited edition label. Buying Likewolf NFTs gives exclusive access and purchase rights to merchandise before it hits retail.

  • REAL LIFE NFT EXPERIENCES: Likewolf moments in the form of NFT include access to VIP areas, participation in compilation of set list and participation in video production.


A worried face in a digital painting by Likewolf inspired by Munch's The Scream, an icon of modern art.
The Scream 2021, Likewolf

Inspired by Munch's The Scream, a prime example of modern art. Likewolf's Scream 2021 is available as 1/1 NFT.


NFTs create digital scarcity

The fact that featured digital objects can be viewed online for free, prompts the question why individuals are willing to spend large sums of money when they could simply access them via screenshot or download.

It is challenging to assess the value of NFT technology, especially as it is an intangible asset in the form of digital artefacts.

Unlike most digital creations, where the supply is virtually always unlimited, NFTs are in essence one-of-a-kind or a limited edition, with a unique identification code and other metadata. Digital data is what makes NFTs so desirable as they are defined by their uniqueness, authenticity and rarity. A cut-off in supply therefore has to increase the value of a given asset, provided it is in high demand.

An NFT contains built-in authentication that serves as proof of ownership. Such proof of ownership of NFTs exist on a blockchain, which is a distributed public ledger that records transactions. NFTs are not only the perfect collector’s items of the 21 century, but also an interesting alternative investment asset.

How to buy and sell NFTs

To start your own NFT collection, there are some basic things needed:

  • A crypto wallet: Choose a wallet that is compatible with the blockchain network that supports the NFTs you wish to buy (see below). For instance, when buying or selling NFTs based on the Ethereum blockchain platform, you need to use a Ethereum compatible wallet such as MetaMask. For NFTs sold via the Solana platform, a wallet service such as Sollet must be used. For NFTs sold through a Carano based platform, use a wallet service such as Yoroi.

  • Funds: Before buying, listing or minting an NFT, you need to pre-fund your wallet with tokens. You also need to check which cryptocurrencies are accepted by the marketplace you intend to use.

  • A user account: In order to be able to buy NFTs, it is necessary that you create an account on the respective marketplace where you want to buy.


What is an NFT wallet?

NFTs are stored in designated digital wallets. The market leader for creators and collectors has so far been Metamask, which is operated by the Ethereum Foundation-backed company ConsenSys. With MetaMask, it is possible to display and directly transfer one' s NFTs/ERC-721 tokens.

Parallel to the offerings of the various blockchain providers, wallets are evolving that support the various other blockchains and are supported by the selected marketplace, for example Cardano' Yoroi Wallet.

NFT Marketplaces

Marketplaces for NFTs are platforms that allow NFTs to be stored, displayed, traded and in most cases minted (created).

Some NFT marketplaces only work with specific blockchains and others are compatible with certain other blockchain systems.

Universal and art-oriented platforms are the most popular. Niche NFT marketplaces also exist that offer certain types of non-transferable assets, such as gaming items, digital trading cards and virtual real estate.

In addition to the initial purchase, NFT platforms also offer a secondary market for buying and selling. On these after market, prices can vary considerably from the original purchase price.


5 recommended NFT marketplaces

  • OpenSea: This marketplace is the most established universal NFT marketplace. There you will find non-fungible tokens representing ownership of a wide range of goods, including artwork, sports collectibles, virtual worlds, trading cards and domain names.

  • NBA Top Shot: An NFT marketplace built on Flow where you can buy and sell digital trading cards with videos of memorable NBA "moments".

  • Decentraland: This platform has an in-house marketplace on which users buy and sell virtual land or in-game items such as wearables.

  • CNFT: (Cardano NFT) A digital marketplace created by Cardano Buzz, a popular Cardano staking pool.

  • NFT Maker: NFT Maker is a promising platform on the Cardano Blockchain.


What are Gas Fees

So-called miners, who operate the nodes, provide their computing resources that run the blockchain for a small fee.

Gas fees, which have to be paid for each transaction, go to the miner in return for their services in facilitating the transaction. Transactions on the blockchain work on a bidding system.

There is a permanent tension between miners and users. A low level of activity on the blockchain means that miners are seeking transactions that they can process, so gas prices drop. By contrast, if there is a lot of activity the transactions offering a higher gas fee will be favoured over those with lower fees.

The cost also depends on what kind of activity a transaction requires. As the processing power increases, so does the fee for the gas. For example, a transaction to send money from one party to another is relatively straightforward and does not cost much. Creating an NFT store, on the other hand, essentially involves writing lines of code on the blockchain, which requires more computing power and therefore a higher gas fee.

The introduction of Proof of Stake, especially with the smart contracts released on Cardano this September, will solve this issue and propel the NFT market to new heights.

What are smart contracts ?

Smart contracts are simply programmes stored on a blockchain that are executed as soon as specified conditions are met. Typically, they are used to automate the execution of a deal so that all parties can be immediately certain of the outcome, without the need for an intermediary and without wasting time.

The software code of the NFTs (so-called smart contracts) controls measures such as verification of ownership and transferability. Like any software application, NFTs can be programmed beyond the basics of ownership and transferability to also include a variety of other applications and functionality, including linking the NFT to another digital asset.

ERC-721 was the first standard for representing non-fungible digital assets on the Ethereum blockchain. Solidity is a statically-typed programming language designed for developing smart contracts that run on the Ethereum Virtual Machine, also known as EVM. Solidity was initially proposed in August 2014 by Gavin Wood. The language was later developed by the Ethereum project's Solidity team, led by Christian Reitwiessner.

Cardano's upgrade promises to allow engineers to run advanced smart contracts and decentralized finance (DeFi) applications on the cardano blockchain. Cardano is an avowedly more scalable, secure and efficient alternative to all other Blockchains. Both the on-chain and off-chain code is written in Haskell, and Plutus smart contracts are Haskell programs.

Substrate is the modular blockchain framework on which Edgeware and Kusama are built, and the foundation for the whole Polkadot ecosystem. The Polkadot Relay Chain will not natively support smart contracts. However, parachains on Polkadot will support smart contracts.

F-NFTs, fractional ownership was established to address the lack of liquidity that exists in secondary markets. When an NFT is fractionalized, the tokens representing the fractions can be traded on a decentralized or centralized exchange. A smart contract can be written to automatically allocate a portion of the amounts paid for any subsequent sale of the NFT back to the original owner, thus giving the owner an ability to realize the benefits of the secondary marketplace (see the proposed EIP-2981 standard for handling royalty payments for ERC-721 tokens).


NFT Blockchains

A Blockchain, decentralised by nature, is a digital ledger distributed across a network of computers around the world. Instead of information being stored in a single location, it is distributed across numerous nodes on the blockchain. These nodes are the infrastructure of a blockchain. The nodes are connected to each other and continuously exchange information to ensure that all nodes are up to date.

The best-known blockchain project is undoubtedly Bitcoin. That said, the Bitcoin blockchain is limited to its use as a cryptocurrency platform. Thats not the case with all blockchains.

Some of these blockchain systems are interoperable. For example, you can buy Ethereum-based non-fungible tokens with Ethereum-based tokens (called ERC-20 tokens, which include USDT (+0.05%), USDC (+0.03%), BNB, DAI (+0.02%), etc). Others, such as Flow, are closed systems. For instance, you can’t buy NBA Topshot NFTs (that are based on Flow) with ETH or BNB.

  • Cardano smart contracts are about to be launched, a long-awaited and very positive catalyst for NFTs

  • Ethereum has been booming in the NFT rush

  • Binance Smart Chain The marketplace unites artists, creatives and crypto enthusiasts on a central NFT trading platform

  • Flow (by Dapper Labs) is a blockchain built to support gaming applications and digital assets.

  • Tron is a competitor to the Ethereum blockchain, claiming to beat the decentralized finance market leader on throughput, speed and fees.

  • Solana is the official blockchain of Lollapalooza

  • Polkadot Enjin raised $18.9 million to launch its first dedicated nonfungible token (NFT) blockchain on the Polkadot network.

  • Tezos branding will be displayed on the race suits of McLaren's Formula 1 and IndyCar drivers.

  • Algorand supports the creation of fractional NFTs and is the only decentralized network that is mathematically proven to be forkless.

  • Cosmos The official NFT implement guide and module development work are still in progress.

  • WAX is a carbon neutral blockchain that runs on a Proof of Stake system.

  • Hedera Hashgraph promises a very scalable, high throughput solution with more than 10,000 TPS at a very low average transaction fee.


NFT Metadata Storage and Security

An NFT represents an entity by applying metadata. Metadata is data that contains information about the context of data. In relation to NFTs, they describe the essential properties of the NFT, including its name, description and everything its creator considers significant. They structure, identify and describe a core set of information of an NFT.

There are three main types of metadata: structural, administrative, and descriptive.

Structural metadata defines the internal and external structure relationships of digital asset components. It defines hierarchical structures, allows navigation and ordered sequencing in the presentation of digital objects.

Administrative metadata includes data pertaining to the creation, and required for the management, of a digital asset. The National Information Standards Organisation further breaks down administrative data into three subtypes – technical, preservation, and rights metadata. Essentially, data about the filetype, hashes, intellectual property, and permissions all fall under administrative metadata.

Descriptive metadata describes the document title of a digital asset, its physical attributes, keywords and other information. It helps to find and identify a specific digital asset, providing you are able to describe the object in question.

When you buy an NFT, you are actually buying a smart contract (your certificate of ownership) that references a set of metadata that includes, among other things, a link to your NFT file. For this reason, NFT marketplaces usually display the token metadata on the purchase page so that buyers can see exactly what their purchase entitles them to.

The IPFS (InterPlanetary File System) is ideal for storing and addressing data for NFTs (non-fungible tokens). Since an NFT cannot be easily changed once it has been created, storing, addressing and persisting the data for NFTs over time is recommended. As a rule, NFTs need structured metadata to describe the essential properties of the token.

IPFS allows NFTs to represent data of any size and format in a secure, verifiable, and distributed way that can stand the test of time.

While the smart contract is stored on the blockchain, NFT metadata is stored off-chain due to current storage limitations of the Ethereum blockchain.


Cyber Chiq® Scarcity creates value


Conclusion

In an era where the digital world is ever-present, it is time to possess a portion of this environment. The potential of digital assets to increase in value over time matches that of physical assets.

The digital and blockchain revolutions have enabled the acquisition and ownership of high-value digital assets thanks to NFTs. Based on blockchains, everyone's entire ownership history is virtually transparent from the outset.

NFT Technology assures consumers that they are purchasing an authentic object that comes from the creators themselves. To purchase an authenticated digital work certified by an NFT, it is necessary to visit an NFT marketplace

NFTs gain you access to cultural influence and boost your social status in the digital age. Investing in up and coming artists and projects can be the entry to a new world.

As with all crypto investments, the risk factor is dependent on strategy and a long term plan. For anyone familiar with the new currency, NFTs are only a logical consequence and a natural progression. Whether an investment in digital art develops successfully depends on marketing, just as in the traditional art market.

Every new generation is in search of self-discovery and identity. Finding this through art has been incredibly difficult in recent years. The art market was dominated by individual players who did not allow access to a larger public through exclusive and very expensive art fairs. NFTs are therefore a revolution and will put the long-established art market in its place. The original idea of collecting art is thus given a fresh boost.

Art bought and sold across the globe thanks to blockchain technology and smart contracts has the power to change the way people perceive themselves and the world. In recent years many collectors have shied away from new acquisitions due to the fact that collecting art involves the issue of storing, maintaining and insuring. Now there is at last the prospect of sharing a recent acquisition and one's own personal collection with the general public, while keeping originals safe and secure.

Trading artwork on the blockchain in the form of NFTs means that an artist's content can be distributed and sold globally in real-time across decentralised marketplaces. NFT art is not a short-lived trend, it represents a fundamental shift from the real to the digital.

NFTs have now entered the mainstream and are creating a thriving market in real time as the industry ultimately matures.

Exclusive LIKEWOLF NFTs are now available

Likewolf NFTs
acrylic painting of an abstract white dog on blue background

Since July 2021 Likewolf has been working on his album "Wh!te Dog Blues" which will be released in October. Likewolf is also an active NFT artist.