💜2.1 - ERC721 Ethereum NFT
Status: Open
Non- Fungible Tokens (NFT)
What some call seeds to harvest, others call tails on kitty cats. A non fungible token has taken the 21st century by storm with a furry of art collectables in the form of digital assets. NFT is a new super power for content creators, musicians and the starving artist. Fueled by the use of 'smart contracts', the Ethereum foundation started a radical new trend that many developers are excited to develop for.
We'll explore the nature of NFT's and how they work and what they're used for, the impacts of the technology and what we expect to see coming from the future growth of the ERC-721.
What is an NFT?
think of an NFT as a technology that represents ownership of particular assets, digital or physical. In other words, it is data that can be linked to a wallet or a person. They are smart contracts that describe the asset they are attached too, such as an art portrait or even a plot of land in real estate. The contract can be addressed to 1 or 1000 or 1,000,000 owners at a time; this is known as tokenization. People buy an NFT, and they are now either full, or part owner of the NFT contract, known as an ERC-721. Owners of an NFT have unique address that is integral to the blockchain network they purchased their NFT from, this is know as ownership.
The word 'own' in ownership, is a bit misleading... I'll cover this in the next section...
You may have heard friends or relatives swing a few of these words around but you never understood their correlation to one another. If you read our Lesson 0.1, EVM - Ethereum - you will know that the EVM is the virtual machine that keeps a unique record of every transaction that occurs on the network. When you buy an NFT, your wallet address is addressed a hash value linked to the instance of the NFT you purchased. "You are addressed an NFT"
The smart contract you interacted with, is an instance of the NFT. There are many NFT's with different instances, making every NFT contract unique. Similar to how you interact with tokens on the blockchain, these too are instances of smart contracts known as ERC20 contracts. However, unique doesn't always mean different. 1 NFT smart contract can be a copy of another with the same exact functions, constructors and live on the same blockchain. The code may be identical with a few exceptions; the main difference is the deployment. The blockchain you deploy to creates a new instance (hash) for your contract and posts that to the blockchain. "Just because twins look the same, doesn't mean they are the same person".
How do I tell the difference between twin contracts if they look the same and have the same asset?
from the Documentation -> "Fungible items, on the other hand, can be exchanged because their value defines them rather than their unique properties. For example, ETH or dollars are fungible because 1 ETH / $1 USD is exchangeable for another 1 ETH / $1 USD." I know 100% that the authenticity of the digital asset is real based on the history of what it was worth. Remember, the Ethereum blockchain is an enormous ledger of transactions, which means the value of the NFT since its inception has been traced across every wallet it's ever been resold by.
This is usually when people's mind's get blown 🤯 because that's the power of an NFT. An artist can create the next Mona Lisa, and can choose to write an ERC721 that pays themselves residual income every time it's sold to the next buyer... OR each time someone buys a share of the Mona Lisa, every owner of the NFT gets paid for holding it... 🤯 The possibilities of "what" an NFT is, is limitless and we've only began to scratch the surface.
You never own anything on the blockchain, you are only addressed.
Consider this
NFT's have turned art, clothing, in-game items, documents, domain names, collectables, tickets, music, and even real estate into digital tokens. It's a more efficient way of trading assets across borders. Networks that are EVM compatible can transfer assets across bridges and create markets in what is known as the Metaverse - Virtual spaces that share and showcase these Digital assets in virtual form for sale.
What makes an NFT unique?
the ERC721 is managed by a uniqueID and metadata that cannot be replicated, force NFT's to have 1 owner at any given time.
When someone mints, which simply means 'activates', the smart contract, the UniqueID(data) and the Metadata (hash) are address to the person minting the contract (message.sender == owner). Since all NFT's create Hash and data associated with that hash, they are a transaction that must be committed to the Ethereum blockchain ledger.
Can't someone steal my picture?
This newly minted NFT is addressed to the person who minted the contract. Thousands of people can mint a contract, doesn't that mean they're thousands of owners? Not exactly. The proof that your NFT is yours is determined by the uniqueID and the Metadata associated to the wallet that minted the contract (you). If someone would want to falsify your NFT, they would first need access to your Wallet's private key which is nearly impossible to crack.
Can't a screenshot be an NFT?
This is a funny myth that if someone mints an NFT, then someone else can simply take a picture of your picture, and sell it for the same amount of Ethereum you bought it for... If this section has taught you anything so far, you will know that this is nearly impossible. Unless the buyer had no idea how to check the history of transactions related to the NFT contract you minted, then yes, someone could simply take a screenshot and sell it to a unknowing customer. typically, all NFT's are traced by NFT marketplaces so consumers don't make silly mistakes like this.
Proof is in the pudding
We mentioned private key in the previous section. This is the 12-24 word phrase (seed phrase) you used to set up your web wallet such as metamask. The NFT you purchase is directly linked to this private key, but masks it with your public key. you might recognize this as the address you use to send crypto with at the top of your wallet. this is the address you share with friends and family to trade your digital assets. This is known as asynchronous key encryption - where one key unlocks the other, but the password to unlock the private key is unknown to the world and secure by you in your seed phrase.
all of this cryptography mumbo jumbo happens in the background, whereas all you have to worry about is trading and keeping your passwords and seed phrase a secret.
Never, and I mean NEVER... NEVER ever for a million years give your private key or seed phrase to ANYONE or to ANY entity unless you are recovering your wallet or your own assets. Write your private information down on a physical medium.
it's safe to say that all contracts are secured by the network, and have additional layers of security in your wallet. This combination of contract addresses, wallet data, key phrases, meta data and in some cases timestamps is what identifies you as the primary owner of your NFT assets.
The power of the Creator Economy
How can software and digital items be scarce if they can be made and duplicated a million times over ?
its simple... the contract creator puts limits on the contract itself, which gives the digital asset a rarity.
10,000,000 fans of a famous actors art piece is limited to 10,000 mints.
Each mint costs $5,000 All 10,000 are sold, and are resold to 10,000 new owners
1% of each sale is given back to the contract owner.
Divide 10 million fans by 10 thousand NFT's that they all desperately want, that famous actor has a lot of residual income.
Whats ever better, is that these NFT's can be used in Games, and in Decentralized Finance as reward devices to earn money in between trading lenders. Now the value of this NFT is worth $10,000
1 year later, this NFT is now in over 10 games, and an additional 2 Exchanges;
Do the hypothetical math now... try not to hurt your brain.
Ethereum Name Service
domain names for websites are really important for added you presence on the internet. Crypto added identity to the blockchain through the ENS --> a way to establish your identity for you crypto transactions and decentralized applications.
Sites such as Unstoppable Domains came out swinging and establish address's for wallets and websites that can be used for web3 websites, applications and wallets. This is pretty self explainable, so we wont dive too deep into this topic.
One thing we'd like to point out however, is digital identity. NFT's can be bought and sold on profiles that are attached to domain registries, which means that domain names can be bought and sold similarly to how Domain names are traded. This is done on Opensea.io where people compete to purchase top level domain names with Ethereum. Digital ownership and can also mean identity.
Use cases
in progress
in progressLast updated
