There are two types of asset classes in the crypto market. First, you have conventional cryptocurrencies, whose blockchains can issue millions or even billions of identical coins that you can use as digital cash or tokens to power decentralized apps (dApps).
The second type of crypto assets is non-fungible tokens (NFTs), one-of-a-kind digital assets with a unique blockchain identity that differentiates them from every other NFT in the world.
This article focuses on NFTs, particularly on what is an NFT, the different types of NFTs you can find on the market, and where to buy them.
What Are NFTs?
NFTs are digital assets that use blockchain technology just like fungible cryptocurrencies do. However, NFTs are unique, meaning no two traders can have the exact same NFT at the same time.
NFTs are usually sold as part of a larger NFT collection or NFT edition with a limited number of non-fungible assets. All of the tokens in a collection or edition are one of a kind, but they may have some similarities with the other tokens in the same collection/edition.
For instance, if we take a look at some of the leading NFT collections, like Bored Ape Yacht Club or CryptoPunks, we’ll notice that all individual tokens have the same theme.
Every CryptoPunk NFT shows a pixelated crypto punk, but they all have different hairstyles, facial expressions, skin tones, accessories, backgrounds, and other elements. Because of this, every CryptoPunk NFT is unique. Also, every NFT has its own blockchain identity, and no two blockchain addresses can simultaneously hold the same NFT.
When Was the First NFT Launched?
The first NFT project, Etheria, was launched on the Ethereum (ETH) blockchain in 2015, but it didn’t attract much attention. It wasn’t until the crypto bull market of 2021 when NFTs really exploded in popularity.
During this period, various artwork NFT collections rose to prominence, with single NFTs being sold for several hundreds of thousands of US dollars, mainly on the Ethereum blockchain. Ethereum is the most popular network for launching NFT projects, thanks to its high dApp versatility, but it’s also the most expensive blockchain because of the high transaction fees.
In 2022, various additional blockchains such as Solana (SOL), Cardano (ADA), Polygon (MATIC), and others became popular for NFT projects because of their much lower fees and NFT minting costs.
“Minting” is the process through which authors create NFTs. The process essentially ties the blockchain identity of the NFT to an underlying asset, such as a piece of artwork, an in-game avatar, or a virtual plot of land.
How Do NFTs Work?
When an NFT creator mints their collection, the next step is to distribute or sell the collection on the market. Some NFT projects airdrop a portion of their NFTs to eligible crypto enthusiasts, others are distributed as rewards for brand loyalty by companies, but the majority are sold on NFT marketplaces.
Many NFT projects have a pre-sale phase during which a few whitelisted NFT enthusiasts get to purchase an NFT from the collection before the team has revealed the NFT’s contents.
The whitelisted users are active community members who have shown their enthusiasm for the NFT project in the collection’s Discord channels and Twitter profile. These users get a special discount price when buying the NFT. Once the NFT collection’s minting goes live, anyone can buy the NFT but at a higher price.
However, it’s very difficult to buy a hyped-up NFT collection during the minting process because thousands of users simultaneously compete with each other by submitting higher transaction fees, hoping to outbid other users who want to purchase an NFT from the collection.
Because of this, the majority of NFT collectors only get to buy a specific NFT on the secondary market, which is usually a popular NFT marketplace like OpenSea. The prices of these NFTs are higher than the pre-sale prices, and when the collection’s reveal day arrives, the prices can either jump or fall massively or remain relatively the same.
This depends on the hype around the project. If there are a lot of people interested in the collection, the price might jump considerably after the reveal, especially if the community thinks that the contents of the collection are really cool.
If the artwork or the added utility proves to be disappointing, then the price of the collection might experience a sharp drop, and early investors could end up with NFTs that are next to worthless.
The Most Popular Types of NFTs
Although the NFT market is very young, there are already various NFT categories that show how these unique crypto assets can be used in various ways.
Artwork NFTs
The most popular category of NFTs is artwork NFTs. There are thousands of artwork-focused NFT collections that depict all sorts of art. You can find anything from animal-faced avatars with different clothing and accessories, anime-style characters, and abstract artwork all the way to collections that depict real-world photos tokenized in the form of NFTs.
The main idea behind artwork NFTs is to allow their owners to enjoy unique art just like owning a physical painting or an artistic sculpture. The difference is that NFT artwork is in digital form and stored in crypto wallets, so users can view their NFTs at all times.
Initially, there weren’t any additional use cases for this class of NFTs. However, artwork NFT collections have lately expanded the functionality of their NFTs, with options such as NFT staking, crypto rewards, or access to presale phases for new collections.
Artwork NFTs are also the most popular form of NFT for taking profits. NFT traders tend to buy potentially popular collections before they start trending and sell them for profit.
Branded NFTs
Major brands have been entering the NFT market throughout 2022 with their own NFT projects. Brands like Nike, Gucci, Starbucks, and other companies have introduced NFT features that give users special benefits and access to real-world events and perks.
For example, Nike issued their CryptoKicks NFT collection in 2022 that allows users to buy a base digital sneaker and customize it with various accessories. Users can equip their metaverse avatars with these sneakers in virtual environments such as Decentraland and show off their NFTs.
Some brands, like Starbucks, reward users with unique NFTs for completing tasks on their brand platforms. These NFTs grant users free products, discounts, or access to special events.
Gaming NFTs
The gaming sector is the second most popular NFT niche right after artwork NFTs, as blockchain gaming is rapidly rising in terms of popularity and adoption rate.
Blockchain games use cryptocurrency to reward players and allow them to purchase new avatars, skills, or equipment on in-game marketplaces. All of the items on these marketplaces are tokenized as NFTs. Also, users need to have an NFT to play blockchain games.
For example, Axie Infinity, one of the most popular crypto games, requires users to own multiple NFTs of Axie creatures to play the game. Users can buy, sell, or upgrade these NFTs within the marketplace.
Blockchain games are commonly referred to as play-to-earn games because users can earn crypto rewards and upgrade their NFTs through the game. Gaming NFTs with better and rarer characteristics are more expensive, so players usually upgrade their NFTS through the course of the game and then sell them for profits.
Music NFTs
The music industry has also found NFTs as an incredibly useful way to tokenize songs and let artists earn royalties on their music. Artists can tokenize their songs or even whole albums and then sell them as NFTs. Each NFT is unique because it’s tied to a specific blockchain address, and NFT holders get special benefits for purchasing and holding these NFTs.
For example, some musical NFTs give holders free access to artists’ concerts, while other NFTs give users a portion of the NFT sales over time.
This means that NFT holders get to literally own the music and receive a small portion of the profits from the songs. The artists receive a portion of the profits each time someone resells their music, opening a new secondary market for musicians. With physical CDs, artists don’t get anything when someone resells the CD.
NFT Web Domains
NFTs can even tokenize web domains. Instead of using centralized web hosting services, users can create their websites on NFT web domains they directly control.
When you buy an NFT web domain through a platform like Unstoppable Domains, you get full domain ownership, and no one can just shut it down. NFT web domains add more security to websites because website owners don’t depend on third-party hosting service providers.
Physical NFTs
Physical NFTs are one of the most innovative types of NFTs. This class of NFTs refers to NFTs that are connected to real-world physical assets, such as paintings, documents, limited-edition clothing, or other assets. Users get to prove their ownership over a physical asset by scanning an attached QR code that shows they have the asset’s blockchain certificate, i.e., the NFT, in their crypto wallet.
The most popular use case for physical NFTs so far is to tokenize physical art by attaching blockchain address QR codes to it. This way, anyone can prove their ownership over a physical asset by showing their NFT.
NFT Event Tickets
NFT event tickets are still in their experimental phase, but they have considerable potential to prevent malicious individuals from selling fake event tickets and tricking people into stealing their money.
The idea behind NFT event tickets is that users can pay for an event ticket with crypto or even fiat currency and have an NFT ticket sent to their crypto wallet. At the event venue, they just need to show their NFT and scan a QR code to show that they have a legitimate ticket for the event.
Virtual Land NFTs
Metaverse virtual environments are becoming popular because they offer users the opportunity to engage in innovative virtual experiences.
One of the key features of these projects is virtual land and real-estate functionalities. For example, users can buy land and build houses, buildings, and other objects in the Decentraland metaverse.
The land comes in the form of NFTs that grant users the right to build objects on their virtual land plots. Numerous celebrities and popular brands are already buying land and opening virtual shops in the metaverse.
How to Store an NFT?
Since NFTs are blockchain-based assets, you need to store them in a cryptocurrency wallet. Just like you can accept fungible crypto coins to an appropriate public address, you can also accept NFTs. For example, if you have a wallet with an Ethereum public address, you can accept ETH, any ERC-20-based tokens, along with NFTs built on the Ethereum blockchain.
However, not all crypto wallets have NFT viewing features. It’s best to choose a crypto wallet that has a built-in NFT gallery section, such as Trust Wallet, Atomic Wallet, or Coinbase Wallet.
In case you want to use a wallet that doesn’t have an NFT gallery, you can view your NFT collection by connecting the wallet to an NFT marketplace like OpenSea.
Where to Buy an NFT?
To buy an NFT, you need to visit an NFT marketplace and connect your crypto wallet to the platform.
NFT markets are blockchain-based decentralized apps that allow users to connect their crypto wallets. Once you connect your wallet to an NFT marketplace, you can browse and buy NFTs if you have the appropriate cryptocurrency for that marketplace.
Here’s a list of some of the leading NFT marketplaces.
OpenSea
OpenSea is the most important player on the NFT scene because it’s one of the first and largest NFT markets. OpenSea has thousands of NFT collections, mostly on the Ethereum blockchain, but it also supports various additional chains such as Solana, Polygon, Arbitrum, Optimism (OP), BNB Chain (BSC), Klaytn (KLAY), and Avalanche (AVAX).
Apart from NFT artwork, OpenSea has one of the largest selections of music NFTs, NFT web domains, trading cards, and virtual worlds. The platform has the largest user base among NFT markets, and you can easily find all types of NFT collections, from famous blue chip collections all the way to beginner NFTs.
OpenSea also allows users to mint their own NFT collections and put them up for sale.
Rarible
Rarible is another one of the leading NFT marketplaces that acts as an aggregated trading platform. This means that Rarible allows NFT projects and blockchain games to create their own marketplaces to sell their collections, while Rarible pulls data from those markets and enables users to browse and buy those NFTs through the Rarible interface.
Rarible’s decentralized architecture allows the platform to seamlessly integrate thousands of NFT projects across Ethereum, Solana, Polygon, Tezos (XTZ), and the Immutable X (IMX) NFT network.
Binance NFT
Binance NFT is the official NFT marketplace of Binance, the largest crypto exchange platform in the world. The Binance marketplace supports a huge number of NFT collections on the Binance Chain, along with a solid variety of Ethereum collections. This market is best suitable for browsing and buying Binance Chain NFTs, but you’ll also find a lot of blue-chip collections.
To access the Binance NFT marketplace, you’ll need to have a Binance exchange account, but creating an account only takes a few minutes. Once you buy an NFT, you can store it in your Binance account or transfer it straight to your private crypto wallet.
SolSea
The Solana blockchain is one the largest networks for NFTs, right after Ethereum, and the popularity of Solana NFTs dramatically increased during 2022.
Minting an NFT on Solana is far cheaper compared to Ethereum, and the transaction fees are less than a dollar. SolSea is one of the largest NFT markets on the Solana network, and users can find all the leading Solana collections on this platform.
Additionally, the platform allows users to browse NFTs based on different categories like gaming, utility, collectibles, CGI, photography, comics, music, literature, education, and more. Also, users can browse NFTs by artists and rank creators according to their number of followers. Users can follow creators and like their collections, which adds a social media platform element to the SolSea marketplace.
CNFT
The Cardano blockchain is another network witnessing considerable growth when it comes to NFTs. CNFT is the leading NFT market on the Cardano network and one of the best places to browse Cardano-based NFTs.
The platform classifies collections according to the following categories: art, music, photography, metaverse, gaming, and collectibles. The Cardano NFT market is much smaller than Solana and Ethereum, but the number of NFT collections is rapidly growing.
Conclusion
NFTs are one of the key products of blockchain technology and can be used in numerous ways to tokenize both virtual and physical assets. The NFT market is still very young, and NFT creators are just beginning to explore ways to add more utility to their creations besides just producing attractive artwork.
In case you’re considering investing in NFTs, check out the marketplaces described in this guide for all the leading NFT collections across the most popular blockchains.