Non-fungible Tokens (NFTs) have been around for over a decade, but they gained mainstream attention in 2020 when prominent artists began adopting them.
Since then, NFT projects have shown the potential of the Web3 space for digital ownership and creative innovation.
NFTs can be tokens of a set (often called a collection) equal in value with the other tokens in the collection, or they can be unique 1/1 tokens.
These tokens may have a piece of media attributed to them, creating a unique type of asset that is most often compared to digital art.
They can be used for various purposes, most commonly to give NFT holders access to a special community and associated perks such as airdrops and voting rights. NFTs are also a significant element of the blockchain gaming space.
NFTs have also been used by musicians and public figures in creative ways to engage their communities and to give them the opportunity to own unique digital collectibles with perks like backstage passes or meet & greets.
NFTs are unique tokens stored on a blockchain, functioning like other blockchain-based assets. Your address contains both coins and NFTs seamlessly.
When you want to interact with something on the blockchain using an NFT, you’ll need to sign a smart contract. The process is identical to the process you would use to trade tokens on a decentralized exchange.
While NFTs exist solely on blockchains, their benefits often extend beyond the digital realm. For example, owning an NFT can grant exclusive access to a gated Discord channel or tickets to NFT-holder-only events.
Many products now include a certificate of authenticity as an NFT. NFTs play a key role in tokenizing real-world assets, offering a simple way to verify authenticity and ownership—a central theme in Web 3 discussions.
For example, since 2020 Breitling watches include a card that owners can scan to register their watches as NFTs. This provides a digital proof of authenticity, allowing customers to verify their watch is genuine with a secure, verifiable digital certificate.
For example, a university could issue a Soulbound NFT as a digital diploma, permanently linking the achievement to the graduate’s wallet. This ensures authenticity and eliminates the risk of falsification.
NFTs are most often traded on decentralized marketplaces like Opensea and Blur.
To connect to an NFT marketplace, link your Trezor hardware wallet to a third-party wallet like MetaMask or Rabby, and then use your third party wallet of choice to log in by signing a gasless signature, meaning that the signature does not require any transaction fees.
It is also possible to buy some NFTs directly from the creator of a collection or on sites which trade in fiat currencies like the US dollar, such as NBA Top Shot.
For more information about using NFTs with your Trezor device, please read this article.
The most common blockchains for NFTs are Solana, Ethereum, BNB Smart Chain and Polygon.
In 2023, a movement to create NFTs on Bitcoin through a series of unique workarounds called Ordinals was born.
Real-world asset tokenization involves creating NFTs on a blockchain that represent ownership or rights to a physical asset, such as real estate, art, or luxury goods. These tokens are backed by the asset and serve as a digital representation, making it easier to trade, verify authenticity, and enable fractional ownership.
For example, a property can be tokenized into smaller shares, allowing multiple investors to participate. Tokenization enhances accessibility, transparency, and efficiency in managing physical assets.
Like other areas of cryptocurrency and Web3, caution is essential when dealing with NFTs. While much of the space operates with good intentions, malicious actors do exist. Signing a smart contract without thoroughly reviewing it can expose your wallet to risks, including unauthorized access to your assets.
Always read every transaction you sign, paying close attention to the details. Verify that the URL of the website you are interacting with is legitimate and corresponds to where you intend to be.
Token approvals grant third parties access to specific tokens in your wallet. Malicious smart contracts can exploit these permissions to drain your wallet. Revoke unused approvals using tools like Revoke.cash to reduce risk.
Tools like WalletGuard can help protect against signing dangerous smart contracts. Consider installing WalletGuard in your browser to receive alerts and prevent accidental interactions with malicious contracts.
Services like Delegate.xyz allow you to link your hardware wallet to a hot wallet, enabling safer interactions with smart contracts. Delegating your assets to a hot wallet lets you prove ownership without risking them, making it easier to claim airdrops, join gated communities, or play blockchain games.
Cryptopunks is one of the oldest NFT collections, consisting of 10,000 computer-generated pixel art profile pictures. Created in 2017, Cryptopunks gained widespread attention in 2020 during the first NFT bull run. Notable sales include Punk #5822, sold for 8,000 ETH, valued at $23.2 million USD at the time.
Pudgy Penguins is an NFT project known for its creativity and innovation. Since its inception, it has grown from digital art into real-world products, such as plush toys sold in big box stores linked to NFTs. Uniquely, Pudgy Penguin holders own the intellectual property rights to their NFTs, enabling them to create real-world products using their Penguins.
Trading NFTs differs from trading cryptocurrencies due to their smaller supply and market size. It’s often compared to trading in the art market.
NFT owners can place listings for their NFTs if they wish to sell. Prospective buyers can also place offers on NFTs, allowing NFT holders to sell their NFTs if there is sufficient interest.
NFT markets typically have fewer participants, resulting in low liquidity. This can cause prices to fluctuate rapidly.
Generally, NFTs need to be converted into their base blockchain cryptocurrency first before they can be sold for cash.
For example, if you have an NFT that is worth 1 ETH, you will need to sell the NFT and receive 1 ETH which you can sell on an exchange.
You can use your Trezor device to store your NFTs on the same address as your other crypto assets. For example, if you have an address which has some Solana and Solana tokens, you can also send Solana NFTs to and from that address.
Owning an NFT doesn’t prevent others from digitally copying the media it represents. Instead, it means you hold a token on the blockchain that represents ownership of the asset—not exclusive access to the associated media.
Like other crypto assets, NFTs are tied to your wallet’s private key. If your private key is compromised, your NFTs and other assets in the wallet are at risk.
Bridging an NFT means transferring it from one blockchain to another using a protocol called a bridge. The original NFT is locked on its original blockchain, and a wrapped version is created on the destination chain. This allows users to access lower fees, expanded utility, or cross-chain marketplaces. However, bridging carries risks, such as security vulnerabilities and compatibility issues, so always use trusted bridges and secure wallets.