New in 2021

 Non-fungible tokens (NFTs) have exploded onto the scene in 2021, with cryptocurrency enthusiasts and investors clamouring to get involved in the burgeoning market. So, what are NFTs and what are some of the most interesting NFT crypto projects gaining traction?

What makes NFTs so popular?

NFTs are unique, or non-fungible, digital tokens that run on smart contracts on Ethereum and other blockchains. They can be used to distribute assets and verify their authenticity via the blockchain.

The concept of NFTs originated in 2015 and the first projects were launched in 2017. NFTs are being used to sell exclusive items, such as collectibles, online. As each token is unique and cannot be replicated, using NFTs creates scarcity that makes them valuable to collectors as well as artists and other sellers. They are bought and sold in auctions, with payment made in cryptocurrencies such  as Ether (ETH) and Bitcoin (BTC).

The future of NFTs includes applications in the growing area of decentralised finance (DeFi), where they can be used to put up valuable assets such as fine art, rare collectibles or even real estate as collateral for loans or as financial contracts for insurance, stock options or bonds.

Trends in the NFT industry

The cryptocurrency boom has created new millionaires looking for other digital assets that hold value to invest their gains.

The total traded volume for NFTs in December 2020 was around $12m. The figure soared to well over $500m in March 2021, according to data from NFT blockchain developer Enjin.

The best NFT projects in 2021 are involved in selling exclusive and limited-edition items, including digital art, music, trading cards and other collectibles, and attracting eye-watering prices. A series of NFT auctions of digital artworks and music from high-profile artists such as Grimes culminated in a work by the artist Beeple being sold for $69m at Christie's on March 11.

New NFT projects are being touted not only as the future of merchandise sales but also a way for musicians to regain ownership of their work in the era of streaming and file sharing, and for game developers to profit from creating in-game economies.

Now, let’s look at the list of NFT projects you should know about in 2021.

Best NFT projects: 10 projects to keep on your radar

• Worldwide Asset eXchange (WAX)

WAX is a decentralised peer-to-peer marketplace for trading NFTs. WAX uses the Delegated Proof of Stake (DPoS) consensus algorithm to maintain security. Developers can build decentralised apps, games and marketplaces on the platform.

The WAX token is based on Ethereum and users can earn rewards for staking their tokens to provide liquidity. The WAX token can also be traded on several exchanges, including Huobi, Bittrex and  Bancor Network. The token can be stored in any Ethereum-compatible wallet.

Top-rated NFTs from the likes of deadmau5, William Shatner and Topps have launched on the WAX platform, where the assets continue to trade on the secondary market.

• CryptoKitties

Launched in 2017 by developer Dapper Labs, it was the CryptoKitties protocol that brought NFTs to the mainstream. It was the first to use the ERC-721 standard, which allows for unique digital assets. In the CryptoKitties game, players raise and resell virtual cats for profit on the Ethereum network. CryptoKitties tokens are non-fungible, each representing a different digital cat. The interest in NFTs has seen a resurgence in interest in the game, which at its height in 2018 saw more than 1 million daily transactions.

• Enjin

Enjin was founded in 2009 to develop a gaming network. In 2017, it launched the Enjin Coin (ENJ)and began developing a purpose-build blockchain ecosystem for NFTs. in 2018, Enjin announced one of the world's first gaming multiverses and it now has more than 40 game developers using its platforms to create games.

Enjin has grown into an ecosystem of integrated digital products, for trading and monetising games. Developers can use the Enjin Coin to tokenise in-game items on the Ethereum blockchain. In March 2021, Enjin Coin had the highest market cap of all NFTs.

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More than 1,300 blockchain marketing campaigns have been powered by Enjin’s products, gamifying online engagement for companies such as Binance, CoinMarketCap, Kyber Network and CoinGecko.

On 31 March, Enjin launched Efinity, its next-generation blockchain for NFTs built on the Polkadot protocol.

• Decentraland

Launched in February 2020, Decentraland is a decentralised virtual reality world powered by the Ethereum blockchain that enables users to create and monetise content and applications. Users can purchase plots of virtual land, create customised avatars, participate in governance and trade rare digital collectibles.

Users need fungible tokens as well as NFTs to participate in Decentraland. They connect with their crypto wallet through a web browser to set up their avatar, which receives a virtual passport to represent their virtual identity. The Decentraland uses its MANA token, which can be purchased from cryptocurrency exchanges to buy land and in-game assets. Users can also purchase items that are supported on NFT marketplaces.

• Rarible

Rarible is an NFT marketplace for creating and trading rare collectibles that was founded in January 2020. The platform supports a wide variety of digital assets, including art, memes, music, domain names and DeFi insurance policies.

The creation of NFTs, called minting, is straightforward with an Ethereum wallet and allows artists to release teasers for their content. Rarible gained attention for launching its own governance token, RARI, which is more commonly used in the DeFi space, with a goal of becoming a decentralised autonomous organisation.

Rarible is demonstrating ways to integrate NFTs with DeFi, teaming up in September 2020 with Yearn Finance and Nexus Mutual, a blockchain-based insurance platform to provide insurance coverage for NFTs.

• NBA Top Shot

Bringing NFTs into the mainstream, the National Basketball Association (NBA) has launched an officially licensed blockchain application for trading collectibles with Dapper Labs. The application is built on the Flow blockchain rather than Ethereum. The Top Shot NFTs contain video clips of memorable game moments and include player statistics as well as information about the NFTs trading history. Limited packs of NFTs are issued weekly, with prices depending on their rarity.

• Codex Protocol

Codex is a decentralised title registry secured by blockchain for the verification of authentic NFTs. NFT creators can create a digital record for a collectible that then travels with it, so that prospective buyers can verify its authenticity by checking its identity and ownership history on the Codex Viewer. That creates confidence that collectors are buying authentic products.

• OpenSea

Founded in 2017, OpenSea is the largest decentralised NFT marketplace. It lists more than 50 categories of rare assets for trading, including digital art, CryptoKitties, Decentraland and domain names. The platform enables developers to build marketplaces for their digital assets on Ethereum and interoperable standards such as ERC721 or ERC1155 and earn commission from secondary items. Game developers can build customisable storefronts to automatically trade collectibles.

• Ethereum Name Services

The Ethereum Name Services (ENS) domain naming platform was launched in 2017 on the Ethereum blockchain. The domain names are non-fungible and can be integrated into the NFT marketplaces such as Rarible and OpenSea. Users can receive any cryptocurrency, NFT or token to their domain name and launch secure, private and decentralised websites. There are more than 238,000 domain names registered on the platform with more than 71,000 owners.

• 0xcert

Concluding our list of the top 10 NFT crypto projects, 0xcert is a blockchain application programming interface (API) gateway that allows developers to build decentralised applications using NFTs as well as fungible tokens. Its framework aims to simplify the process of issuing NFTs on the blockchain to reduce development time.

What are some of the upcoming NFTs that could become the next hit?

The potential for the integration of NFTs with DeFi is driving a number of upcoming NFT projects to look out for in the future. They include Unifty, which is an NFT management hub that will feature copyright management and supports multiple blockchains, including Dai, Binance Smart Chain and Polygon. Upshot is a project that will enable the crowdsourcing of appraisals to establish an NFT’s value. NFTX will enable the creation of community-owned index funds so that investors can gain exposure to several NFTs through the ownership of one token.

You may have heard that the latest trend in the cryptocurrency world is buying and selling NFTs – sometimes for millions of dollars. But what does NFT stand for and what is behind all the excitement?

The non-fungible token (NFT) gained traction in 2020, drawing attention from the mainstream media and extending interest beyond blockchain technology enthusiasts to investors and consumers.

The acronym NFT stands for non-fungible token. NFTs are giving content creators a new level of control over their work, particularly in the worlds of digital art and collectibles. As assets that carry value, NFTs can also be used in the growing decentralised finance (DeFi) space, bringing together two aspects of the blockchain ecosystem that are exploding in popularity.

This guide tells you everything you need to know about NFTs – what they are, how they work, how to buy and sell them and the risks involved.

What are NFTs?

So, what is an NFT? Simply put, it is a type of cryptocurrency token that runs on smart contracts on a blockchain. This is typically the Ethereum blockchain, although other blockchains can run versions of NFTs. The concept originated in 2015, and the first NFT projects launched in the ERC 20 standard in 2017, with more standards appearing over the following two years. NFTs are now being developed on the ERC-721 protocol on the Ethereum blockchain, as ERC-721 tokens are unique while ERC 20 tokens are identical.

How do NFTs work?

NFTs differ from cryptocurrencies such as Bitcoin (BTC), Ether (ETH) or Cardano (ADA) that act as digital coins. NFTs are tokens that represent digital or physical assets – for example, a piece of art, music, or even potentially real estate – and contain additional information that a coin would not carry. NFTs can be used to authenticate works of art and other collectibles.

What does NFT mean? A token is a unit of currency. A non-fungible token is one that cannot be exchanged for something else. For example, a banknote is fungible in that it can be exchanged for other banknotes carrying the same value, however a plane ticket is non-fungible as it carries unique information and cannot be used in place of another passenger’s ticket. In the same way, an NFT is a unique token that can be used to distribute and verify ownership via the blockchain.

How are NFTs used?

Now, what are NFTs used for? NFTs are being used as a means to sell exclusive items online and have the potential to be used to verify anything that would have value in proving ownership, including:

Even tweets can be sold as NFTs. For example, Twitter co-founder Jack Dorsey auctioned his first tweet in March 2021 for millions of dollars, converting the proceeds to Bitcoin and donating them to charity.

Although digital items can be one of a kind, there is also value in items that might have multiple copies but retain value for collectors, such as sports trading cards.

What are some examples of NFTs?

High-profile NFT sales and projects launched by well-known celebrities and brands have highlighted the potential uses of the technology. Here are some recent NFT examples:

• Actor William Shatner sold 10,000 packs of memorabilia with a total of 125,000 digital photograph NFTs on the World Asset eXchange (WAX Blockchain) in just nine minutes in July 2020. The NFT format allows users to buy and sell the trading cards knowing that they are certified as authentic and carry the full trading history and ownership records. The packs contained shards that could be combined to create new collectibles. In addition, 25 cards could be redeemed for an autographed headshot and one card could be redeemed for an autographed action figure.

• Sportswear company Nike patented an NFT project in December 2019, a system called CryptoKicks that it would use to issue NFTs for footwear. CryptoKick tokens would be used to link physical shoes with digital versions with a range of applications, including verifying their authenticity, trading them on digital marketplaces, using them in video gaming and other virtual environments, and notifying customers when virtual shoe designs are manufactured. The digital shoes could change in appearance and value based on changes to the physical shoes, such as age and use, which would affect their value.

What are the most expensive NFTs ever sold? In February 2021, Crossroads, an animation by digital artist Mike Winkelmann, who is known as Beeple, was resold for $6.6m on an NFT platform called Nifty Gateway. That far surpassed the previous record for a single NFT of $1.55m and was 100 times the $66,666.60 the work originally sold for in November 2020.

At a similar value, music artist Grimes held a $6m NFT artwork auction in February 2021, selling 10 works in less than 20 minutes on Nifty Gateway. The WarNymph Collection includes videos, images and music. A one-off, 50-second video sold for $389,000, while 700 copies of two videos were sold for $7,500 each.

Also in February, the auction for the world's first tokenised album was held. In less than 24 hours, 3LAU, a famous American electronic music producer, sold 33 unique NFTs for a grand total of $11.7m.

NFTs and DeFi

NFTs have great potential to be used in the world of rapidly evolving decentralised finance (DeFi). For example, they can be used to put up fine art, real estate or other valuable assets as collateral for loans or as financial contracts for insurance, stock options or bonds that can be traded as products on secondary markets. They can also be used as governance tokens for NFT marketplaces.

While NFTs have been possible for a few years, it is likely the growth of DeFi that is making them more attractive as digital assets with a range of applications.

Why are NFTs important?

How is the hype around NFTs explained? As a digital record of a real-world asset, NFTs can be used to obtain and exchange ownership of physical assets in a digital marketplace. That has the potential to drive the NFT revolution in the buying and selling of rare and valuable items.

So, what’s the point of NFTs?

When an NFT is “minted”, on the blockchain and the associated content uploaded, the owner has proof that they are the sole holder of the token, establishing the scarcity of the asset.

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The adoption of NFTs could turn around the fortunes of the music industry, which has struggled with monetising content in the age of streaming and declining physical sales. Companies such as digital rights management platform RAIR see the potential for musicians to use NFTs to license and distribute their own content. The use of smart contracts on the blockchain would allow artists to earn royalties every time their work is resold.

It is worth noting that transferring ownership of an NFT does not transfer a trademark or copyright to the holder. And the creator can upload multiple versions of a piece of work, each with their own NFTs, so it does not only have to be one of a kind to be distributed in this way.

There is also huge potential for the use of NFTs in gaming – where they could form the basis of in-game economies. Players could use NFTs to claim ownership of items that are rare or difficult to win, as rewards for meeting challenges or participating in special events, to convert points into currencies for real-world transfer, and so on. And creators could use NFTs to monetise their work directly from players.

NFTs are attractive for investors because, as with any other asset that carries value, they can be bought and sold for a profit on an NFT market if the value rises. Institutional funds are getting in on the opportunity, with cryptocurrency investment firms buying digital collectibles to create value for their clients.

NFTs are just beginning to take off and there is potential for widespread growth throughout the digital economy. Their popularity exploded in late 2020, as cryptocurrency prices rocketed to new highs.

Analysis by NonFungible.com shows that the total volume of NFTs traded in 2020, including sales and in-game financial transactions, soared by 299 per cent to $250.8m from $62.9m in 2019. The number of active wallets almost doubled to 222,179, from 112.731 in the previous year.

Sales are expected to accelerate as more artists and brands use NFTs to bypass traditional routes to market and monetise their products directly from buyers.

How are NFTs created?

Are you curious about how to make and sell NFTs? The process of creating an NFT is known as “minting” – a reference to the way a physical coin is minted by a manufacturer. NFTs are minted through an NFT marketplace, where a creator uploads a digital file and assigns characteristics, such as whether it is a one-off, has multiple copies or is part of a collection.

Once the NFT is created, the owner can sell it on the marketplace in an auction.

While most NFTs so far run on the Ethereum blockchain, other blockchains such as WAX have the capability to mint digital tokens to which creators can attach files.

Now that you understand more about them, do you want to know how to buy NFTs?

How do you buy and sell NFTs?

If you are considering their potential as a speculative asset, you may be wondering how you can buy and sell NFTs. NFTs are traded in cryptocurrencies, so you first need to buy cryptocurrency and hold it in a wallet. You then need to sign up for an NFT marketplace, such as Nifty Gateway, OpenSea or Rarible.

Sales typically take the form of auctions with a starting NFT price, so if you enter a winning bid you will take ownership of the NFT. If the value subsequently rises, you can set up your own auction on a marketplace to sell it for a profit.

While buying an NFT does not transfer the copyright for the work, it does confer basic usage rights like posting an image online.

What are the risks of buying and selling NFTs?

Like any new asset that is in the early stages of development and adoption, NFTs carry some risk as are a long way from mass acceptance. If an investor opts to buy an NFT and interest in trading them subsequently stalls or even wanes, prices will fall and the buyer could be stuck with large losses.

NFTs are not exempt from fraud. NFTs claiming to be the works of well-known artists have been sold for hundreds of thousands of dollars but have been revealed to be fake. And in the same way that cryptocurrencies can be stolen, NFTs can potentially be subject to theft depending on how they are stored.

Another risk to consider is that digital content is not entirely free from deterioration in quality, file formats becoming obsolete, websites going offline temporarily or even permanently, or the loss of wallet passwords.

For creators, minting NFTs to sell content does not guarantee legal rights to ownership of their work, providing less protection from theft than they may expect. While NFTs and the marketplaces that sell them are decentralised, there can still be hurdles to gaining entry and exposure for their work. Many of the platforms are invitation only, in the same way as art galleries and other physical venues select artists to represent