What is NFT and how they reshape the digital economy

You’ve probably heard of NFTs – they’re being discussed everywhere. But what is NFT really? Non-fungible tokens are not just digital collectibles or works of art, but a fundamentally new category of assets based on blockchain technology. Unlike Bitcoin or Ethereum, which are interchangeable, each NFT has individual characteristics and cannot be exchanged 1:1 for another. This uniqueness is key to understanding what NFT is and why the technology is so transformative.

What is NFT really: More than just digital art

When you ask what NFT is, you must first understand that there is more to it than colorful images on the internet. An NFT is built on the blockchain and contains metadata that proves ownership, authenticity, and complete ownership history. This information is immutably stored in the blockchain – a decentralized database that does not belong to any institution.

The principle is actually simple: An NFT works like a digital certificate of authenticity. While a cryptocurrency like Bitcoin is fungible (arbitrarily interchangeable), an NFT is non-fungible – this means that each token is absolutely self-contained and not directly interchangeable with another. This allows artists, creators, and businesses to sell digital and even physical items with a clear ownership guarantee.

From Quantum to CryptoKitties: The Fascinating NFT Evolution

The history of NFTs goes back further than many think. The very first NFT project was “Quantum”, which was developed by Kevin McCoy in 2014 – long before NFTs became a mass phenomenon. At the time, the project attracted little attention.

The real breakthrough came in 2017 with CryptoKitties. This blockchain-based game allowed users to breed, collect, and trade virtual cats. Suddenly, NFT was no longer a technical abstraction, but something playful that ordinary people could understand. CryptoKitties proved that NFTs could have practical applications – and great market potential.

Since then, the NFT sector has developed exponentially. From digital art to virtual property in games to virtual real estate, the use cases are endless. The ERC-721 and ERC-1155 blockchain standards laid the technical foundation for anyone to create and manage NFTs in a standardized way.

How NFTs work and create their value

The technical framework behind NFTs is called “minting” – the process of creating a digital token on the blockchain. This token then represents the specific digital or physical asset.

The most commonly used blockchain for NFTs is Ethereum. The ERC-721 and ERC-1155 standards allow creators to generate unique or semi-fungible tokens. The ERC-721 standard gave rise to the concept of the truly distinctive NFT – each token has its own ID and cannot be duplicated. The ERC-1155 standard offers more flexibility and allows semi-fungible tokens to be created (for example, 100 identical virtual items, but uniquely identifiable as a group).

The value of an NFT is determined by several factors: rarity, community size, utility of the token, historical significance, and artistic value. An NFT by the famous artist Beeple is infinitely more valuable than a randomly generated work of art because Beeple’s reputation and understanding of art are behind it.

Practical ways to make money with NFTs

There are many ways to generate revenue with NFTs today:

1. Buy and hold: This is the longer-term strategy. They acquire promising NFTs and hope that their value will increase over time. This works especially well with NFTs from recognized artists or established projects.

2. Create and sell: Artists and creatives can mint and sell their own NFTs on platforms like OpenSea – be it digital art, music, or collectibles. Many unknown artists have achieved such impressive revenues.

3. Earn royalties: A big advantage for creators: they can set royalties on secondary sales. Every time someone resells the NFT you’ve created, you’ll get a predefined percentage.

4. NFT trading: As with cryptocurrency trading, you can buy NFTs at lows and sell them when the market value increases. This requires market understanding and good timing.

5. Yield farming with NFTs: Some platforms allow NFTs to be borrowed and receive token rewards in return. It’s like a digital loan business.

6. Stake NFTs: Similar to crypto staking, you can use some NFT assets to generate interest and rewards. This works especially with gaming NFTs.

How to approach NFT investing: strategies and risks

There are basically two approaches to investing in NFTs:

Direct Investment: You buy an NFT directly and hold it. They become owners and hope for an increase in value. This is the traditional method of investing, but it requires a precise understanding of the project.

Indirect speculation: They trade NFT-linked assets such as derivatives (CFDs) without owning the actual NFT. This makes it possible to speculate on price movements – but carries additional risks due to leverage.

Important: The NFT market is highly speculative. There is extreme volatility, liquidity problems with smaller projects, and the regulatory framework is still unclear. Careful due diligence is essential before investing in a project.

Telegram and the NFT Revolution 2024

In 2024, Telegram has become a surprising NFT hub. According to the Helikas Telegram Games Report, the platform saw a 400 percent increase in NFT transactions in the third quarter of 2024. This wasn’t just a statistical blip – the number of active wallets participating in NFT trading on a daily basis has grown from under 200,000 in July to over 1 million in September.

This development signals two things: First, NFT trading is becoming more mobile and accessible. Second, new ecosystems are emerging outside of the traditional large platforms. Telegram’s mini-app feature makes it easier for users to trade directly in the chat – a simplification that attracts millions.

Classic and new NFT projects that made history

CryptoKitties remains the reference project. It proved in 2017 that NFTs could be mass-compatible and inspired hundreds of subsequent projects.

The Bored Ape Yacht Club (BAYC) took the NFT concept to a new level. 10,000 differently generated cartoon monkeys became a status symbol. Some BAYC NFTs have sold for millions of dollars, not only because of the graphics, but because of the access to an exclusive community.

Emerging projects like X Empire NFT show that there is still room for innovation after the big names. These new players bring with them unique digital artwork and growing communities – often with focused applications in gaming or art.

Top platforms for NFT trading and creation

If you want to invest in NFTs or create some yourself, you need to know where to trade:

OpenSea is by far the leading trading platform. Over 150 different payment tokens are accepted, making it extremely flexible. OpenSea works as a decentralized exchange with low barriers – anyone can list an NFT.

Rarible is a decentralized alternative with its own governance token (RARI). The platform emphasizes user autonomy and allows creators to maintain complete control over their works.

SuperRare is the go-to place for high-end digital art. The curation culture is strict – only high-quality works of art are accepted. It runs on Ethereum.

Nifty Gateway has made a name for itself through the curation of exquisite digital art collections. Well-known artists such as Beeple are at home here. It’s a curated marketplace, not an open one like OpenSea.

Blur is the new favorite of professional NFT traders. The platform combines a marketplace with a lending protocol called Blend – traders can use NFTs as collateral to borrow funds.

What is NFT: Opportunities and challenges at a glance

Opportunities:

Blockchain technology guarantees transparent and secure ownership. There are no fakes – the blockchain cannot be tampered with. This is revolutionary for digital artwork, where authenticity has always been an issue.

NFTs are democratizing the creative industries. Anyone in the world can create, sell, and collect an NFT – geographical boundaries are irrelevant. Artists can sell their works directly to collectors, without galleries or agents.

Liquidity is high. NFTs can be traded instantly on global marketplaces. Unlike physical artwork, which takes weeks to sell, digital assets can change hands in seconds.

Challenges:

Ethereum gas fees can be prohibitively expensive, especially during periods of high network utilization. A transaction can suddenly cost $100+ – not practical for small investments.

Volatility is extreme. The value of NFTs can fluctuate wildly. A project worth millions today can collapse tomorrow. This makes NFTs high-risk objects of speculation, not stable investments.

Regulation is a big question mark. The NFT space is still largely unregulated. This creates room for scams, rug pulls (when developers suddenly abandon the project), and other scams. Investors are often unprotected.

Conclusion: NFT as a new frontier of digital ownership

What is NFT ultimately? It is the answer to the question of how to guarantee ownership in a purely digital world. NFTs represent a new frontier – not only for art collectors and game enthusiasts, but for anyone who wants to understand the future of ownership.

Technology is already reshaping digital art, gaming, and even real estate markets. But as with all innovative technologies, it is crucial to understand the underlying mechanisms and the risks involved. Before you venture into the world of NFTs, do your due diligence. Research projects carefully, understand volatility, and only invest in NFTs where you truly understand the project behind them.