In this Blog, we will dive into the world of NFTs (Non-Fungible Tokens), understanding what they are, their origins, NFT standards, and various related topics. Let’s get started!
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What are NFTs?
NFT stands for Non-Fungible Token. Unlike fungible assets, NFTs are unique digital assets that cannot be duplicated or copied. They utilize blockchain technology to verify their authenticity and ownership. NFTs often make headlines with their distinct values and are bought and sold online.
We can refer to this as NFTs 1.0. Static NFTs that are almost exclusively image-based collectibles of varying rarity.
Understanding NFTs
To grasp the concept of NFTs, let’s consider an example. Imagine a restaurant bill worth Rs 500. The value of this bill is equivalent to another Rs 500 bill, and they can be exchanged. However, a bill worth Rs 30 cannot be exchanged with a Rs 500 bill because they belong to different groups. Similarly, a rare note holds a higher value and cannot be easily exchanged with notes of the same currency from the same group. This uniqueness makes non-fungible items rare and unable to be traded or exchanged.
How do NFTs Work?
Every NFT is a unique digital asset stored on the blockchain. While currencies can be duplicated, and paintings can have copies, NFTs are digitally verified and cannot be duplicated or replicated. Similar to buying and selling cars or bikes, NFTs can be bought and sold as assets, granting exclusive rights to their owners.
The Origins of NFTs
The first NFT, named Quantum, was created in 2014 by Kevin Mccoy and Anil Dash. In 2015, the first NFT project called Etheria was developed on the Ethereum blockchain. NFTs gained attention in 2017 when they followed ERC721 standards. However, their true popularity emerged in 2021.
NFTs in Various Industries
Initially, NFTs were predominantly used in gaming and collectible purposes. However, as the NFT market grew, their applications expanded to various industries such as music, event ticketing, virtual real estate, gaming, food and drink, supply chain, decentralized finance loans, art and collectibles etc.
What platforms allow NFTs to Create, Buy or Sell?
Several platforms allow buying and selling NFTs worldwide, offering diverse collections and opportunities for creators and buyers. Some of these platforms include:
These platforms host a wide range of NFTs, including digital art, collectibles, music, virtual real estate, and more, catering to different tastes and interests within the NFT market.
Creating NFTs
Creating NFTs is a straightforward process. You can choose any platform Third Party or within the Polkadot ecosystem that supports NFTs. Several projects already offer NFT support, while others have a futuristic approach to incorporating NFTs. Platforms like parachains.info allow you to filter and explore projects that support or plan to support NFTs. Additionally, the website provides detailed information on listed projects.
List of Polkadot Projects Support NFT’s
Astar – Astar and Shiden Networks are crucial smart contract infrastructures in Polkadot. Astar backs NFTs using EVM and WASM smart contracts, offering familiar tooling for EVM NFT developers. This accessibility attracts developers keen on exploring Polkadot’s ecosystem, supported by an engaged community of artists and NFT enthusiasts.
Basilisk – Basilisk, a Kusama parachain, enhances ecosystem liquidity and hosts a comprehensive NFT platform leveraging the Uniques pallet. Notably, it facilitates minting NFTs with royalty fees distributed to the original creators via the runtime pallet. Basilisk also includes a feature for placing buy orders for specific NFTs. Users can instantly view and engage with these NFTs on KodaDot.
Efinity – Efinity, developed by Enjin, known for ERC1155 and tools for NFT integration in games, is an NFT bridge chain for Kusama and Polkadot. It aims to create a paratoken standard for seamless token migration among Polkadot parachains and integration with Ethereum and various EVM systems. This initiative seeks to facilitate interoperability, enabling tokens to flow effortlessly between different blockchains within the Polkadot ecosystem and beyond, enhancing overall blockchain connectivity and utility.
Kodadot – KodaDot, a leading open-source NFT marketplace on the Dotsama (Kusama/Polkadot) network, aims to consolidate diverse NFT standards (Kusama, RMRK, Asset Hub, Basilisk, etc.) in the ecosystem, simplifying user interaction.
Its key strength lies in fostering open-source collaboration, gathering a network of over 90 contributors, making it the top-ranked dapp in the Polkadot GitHub community.
In 2022, KodaDot won first prize at the Polkadot North American event for implementing MoonBeam and MoonRiver NFT EVM smart contracts, enabling seamless end-user interaction.
Moonbeam – Moonbeam and Moonriver are full Ethereum Virtual Machine (EVM) deployments, providing Ethereum-compatible RPC endpoints. This allows Moonriver / Moonbeam users to leverage popular EVM toolkits like Hardhat, Remix, Truffle, Metamask, etc., facilitating a swift attraction of existing user bases. Numerous high-profile teams are launching or re-launching their products on these platforms. However, Moonbeam’s EVM nature implies it shares limitations with other EVM chains concerning NFT customization and feature richness. Despite this, being a Substrate chain permits integrating custom pallets into its runtime, enabling NFT-focused optimizations at the chain level. This flexibility ensures EVM compatibility while enhancing storage and interactions for feature-rich NFTs.
RMRK – RMRK presents NFT 2.0 standards in three code flavors: 1. “Colored coins” approach, initially a Kusama chain “hack”, now deprecated. 2. Solidity contracts, compatible with EVM blockchains within and beyond Polkadot Documented here. 3. Rust code (Substrate pallets), compatible with Substrate chains. Code is available here.
These standards enable the creation of complex NFT systems without smart contracts, termed as “NFT legos”.
Asset Hub – The Asset Hub is a versatile parachain enabling the deployment and transfer of both Fungible and Non-Fungible Tokens (NFTs). It hosts the Uniques pallet and the NFTs pallet, featuring NFT 2.0 functionalities.
Unique – Unique Network is an NFT-specific blockchain providing innovative features and aiming to be an infrastructure provider for B2B use cases. It has launched two NFT projects and plans to offer open-source marketplace technology for easy integration. Quartz serves as its Kusama counterpart.
Ajuna Network – Ajuna facilitates the integration of tokenized virtual goods for Unreal and Unity games. Collaborating with Integritee enables execution of gaming engines in trusted environments. Their aim is to establish an interoperable, decentralized gaming ecosystem allowing virtual goods exchange.
Aventus Network – Aventus is an enterprise-grade layer 2 blockchain offering scalability, security, and interoperability. It enables businesses to access blockchain benefits across ecosystems and industries, supporting various use cases and enhancing transaction capabilities.
Bit.Country Continuum – Bit.Country revolutionizes community creation with personalized metaverses, leveraging NFTs, play-to-earn functionalities, and a gamified approach on Web3.0, fostering a democratized economy and community engagement within its network.
Darwinia – Darwinia Network is a cross-chain messaging system for decentralized apps. Its light client-based cross-chain protocol allows seamless messaging between Substrate and EVM chains. The SDK enables developers to craft Web3 apps, ensuring smooth user experiences across diverse chains.
Practical applications for Darwinia Network: – Cross-Chain DEX: Exchange assets across multiple chains in a single transaction. – Borrowing & Lending: Pledge collateral on one chain and borrow assets from others. – NFT Market: Participate in auctions on different chains. – DAO Governance: Unified multi-chain governance without asset movement to a central chain. – Multi-Chain Gaming: Transfer or utilize NFTs across various chains. – Cross-Chain Arbitration: Seize opportunities to trade or rebalance assets across chains.
Moonsama – Moonsama pioneers the first NFT collection and marketplace on Moonriver Network. Comprising 1,000 exclusive NFTs, it grants access to various metaverse environments.
It introduces a protocol bridging on-chain assets and off-chain apps, starting with the Moonsama Minecraft Metaverse. The protocol evolves to include new features and environments like Exosama, Pondsama, and Raresama.
The Moonsama Multiverse Portal, compatible with EVM blockchains, interconnects NFTs across games, metaverses, and blockchains. It makes spaces and games blockchain-ready by transferring assets between worlds.
Please go through with this video to know about the instructions and UI information presented on the website Parachains Info.
NFT Standards
An NFT standard is a set of guidelines and specifications defining how Non-Fungible Tokens (NFTs) are created, managed, and function on a specific blockchain network. These standards establish the rules and structure for NFT smart contracts, detailing attributes like token metadata, ownership, transferability, and interoperability. Various blockchain protocols, such as Ethereum, use NFT standards like ERC-721 and ERC-1155, outlining the protocols for creating unique digital assets with distinguishable characteristics. These standards enable developers and creators to ensure consistency and compatibility across different NFT implementations, facilitating the seamless exchange and interaction of NFTs across platforms, games, and marketplaces.
NFT standards are essential to ensure compatibility between different blockchains, making it easier to trade NFTs across various platforms. They also provide a standardised framework for developers to create and manage NFTs while fulfilling technical requirements. Ethereum introduced popular fungible token standards like ERC20, whereas ERC721 became the most famous NFT standard.
The NFT 2.0 Era
NFT 2.0 refers to the next generation of NFTs built on the Polkadot and Kusama ecosystems. These NFTs offer new features and capabilities beyond traditional NFTs. They are interoperable, serve multiple purposes, and can be programmed using smart contracts. Polkadot and Kusama ecosystems are actively developing and supporting NFT 2.0 projects.
Benefits of NFTs on the Polkadot Network
The Polkadot network offers several advantages for creating and trading NFTs. It is more scalable and efficient compared to Ethereum. Below are some of the key factors that are considerably giving
Scalability: Polkadot’s architecture is designed for scalability. It can handle a larger number of transactions per second compared to many other blockchain networks. This scalability ensures that as the demand for NFTs grows, Polkadot can handle the increased transaction volume effectively.
Interoperability: One of the most significant advantages of Polkadot is its interoperability. It allows different blockchains within its ecosystem to connect and share information in a secure and trustless manner. This means that NFTs created on one Polkadot parachain can be easily transferred and utilised on another, enhancing their utility and value.
Cross-Chain Compatibility: NFTs on the Polkadot Network can seamlessly move across different blockchains connected to the Polkadot ecosystem. This cross-chain compatibility ensures that NFTs are not limited to a single blockchain but can leverage the features and strengths of various interconnected chains, expanding their potential use cases.
Low Transaction Fees: Polkadot’s consensus mechanism and economic model help in maintaining lower transaction fees compared to some other blockchain networks. Lower fees make it more cost-effective for creators and buyers to engage in NFT transactions, encouraging a vibrant ecosystem of NFT trading and creation.
Security: Polkadot employs a robust security model, including shared security among parachains. This means that NFTs on Polkadot benefit from the overall security of the network, reducing the risks associated with hacks or attacks. Enhanced security is crucial for ensuring the integrity and authenticity of NFTs.
Community and Governance: Polkadot has a strong and active community, including developers, validators, and enthusiasts. Its decentralized governance model allows participants to have a say in the network’s development. This active community and governance structure ensure that the network evolves to meet the needs of its users, including those involved in the NFT space.
Innovative Development: Polkadot’s architecture encourages innovation. Developers can experiment with new ideas and technologies within the Polkadot ecosystem. This innovation-friendly environment can lead to the creation of novel NFT projects, applications, and standards, driving the NFT space forward.
Support for Complex NFT Use Cases: Polkadot supports complex NFT use cases beyond simple ownership and transfer. NFTs can represent a wide array of assets, including real estate, intellectual property, and more. The flexibility of Polkadot’s framework allows for the development of intricate NFT applications tailored to specific industries and needs.
NFT through Bridging
Connecting Substrate and EVM chains is hard but important for NFTs. Combining users from both sides is a big deal, so many projects work on this.
Besides RMRK and Efinity, other projects are also trying:
MyNFT: Makes it easier to move things between EVM chains.
RMRK <-> EVM Simplification bridge: Converts RMRK NFTs to simpler forms for EVM chains.
Conclusion
NFTs have revolutionised the digital asset landscape by introducing unique, verifiable, and non-fungible tokens. With blockchain technology as their foundation, NFTs have gained popularity across various industries, ranging from art and gaming to music and virtual real estate. The concept of owning and trading digital assets with exclusive rights has captivated both creators and collectors. As the NFT ecosystem continues to evolve, the Polkadot network emerges as a promising platform for NFT development and trading, offering scalability and efficiency advantages over other networks.
FAQ’s (Frequently Asked Questions)
Q: What is the difference between fungible and non-fungible assets?
Fungible assets are interchangeable and can be exchanged on a one-to-one basis. For example, money or cryptocurrencies are fungible because one unit is equivalent to another. Non-fungible assets, on the other hand, are unique and cannot be exchanged on a like-for-like basis. Each non-fungible token (NFT) has distinct characteristics, making it irreplaceable.
Q: How are NFTs verified and authenticated?
NFTs are verified and authenticated through blockchain technology. Each NFT has a unique digital signature or token ID stored on the blockchain, providing proof of ownership and ensuring its authenticity. The decentralized nature of blockchain makes it difficult to counterfeit or replicate NFTs.
Q: Can NFTs be copied or duplicated?
No, NFTs cannot be copied or duplicated. Unlike traditional digital files that can be easily replicated, NFTs have their ownership information stored on the blockchain. This means that even if a digital file associated with an NFT is copied, it will not have the same value or ownership rights as the original NFT.
Q: How can NFTs be bought and sold?
NFTs can be bought and sold on various online platforms called NFT marketplaces. These marketplaces provide a platform for creators to list and sell their NFTs, while collectors can browse and purchase NFTs using cryptocurrencies. Transactions are typically conducted using blockchain-based wallets and smart contracts for secure and transparent exchanges.
Q: What are NFT standards?
NFT standards are specifications that define the structure and functionality of NFTs. They ensure compatibility and interoperability between different NFTs and platforms. One of the most popular NFT standards is ERC721, which was introduced on the Ethereum blockchain. NFT standards provide a framework for developers to create, manage, and interact with NFTs.
Q: What are the benefits of using the Polkadot network for NFTs?
The Polkadot network offers several advantages for NFT development and trading. It provides scalability, allowing for a larger number of transactions to be processed efficiently. The interoperability of Polkadot allows NFTs to be easily transferred between different chains within the ecosystem. Additionally, Polkadot’s governance model and security features contribute to a robust and reliable environment for NFTs.
Q: What is NFT 2.0?
NFT 2.0 refers to the next generation of NFTs built on the Polkadot and Kusama ecosystems. These NFTs go beyond the capabilities of traditional NFTs by offering programmability and multi-functionality through smart contracts. NFT 2.0 introduces new features and opens up possibilities for more complex and dynamic NFT experiences.
Q: Is NFT Legal in India?
The Indian government has been working on cryptocurrency regulations. These regulations might involve provisions related to money laundering. However, as per 1st November 2023, there are no signs of any regulation on Cryptocurrencies except a FLAT 30% TAX on profit earned and 1%TDS (Tax Deduction at Source).
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