What is a non-fungible token? Understanding the different types of NFTs.

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Indorse

7 min readMay 14, 2021

Over $700 million worth of non-fungible tokens (NFTs) have been sold in less than 5 months. With this spectacular rise of NFTs, we have been seeing a lot of different applications and forms of NFTs; and it has become difficult to keep track of all of them! To get a better understanding of the exploding world of NFTs, let’s explore together the different forms and shapes they can take.

What’s an NFT? Where’s the non-fungibility?

A non-fungible token (NFT) is a unique digital asset that cannot be replaced.

In contrast with most of the physical artwork out there, digital collectibles can be replicated very easily (it’s a pure matter of ctrl c & ctrl v). It is also impossible to discern the original digital artwork from the replicas.

That’s where the concept of NFT comes in handy. By ‘tokenizing’ digital artwork you create a certificate of ownership and authenticity. This certificate can be sold and passed on to the next buyer/owner.

The main idea behind these unique digital collectibles is that they guarantee ownership and cannot be tampered with.

Still a little confused about non-fungibility?

Picture this: you can replace a $20 bill with another $20 bill, but you couldn’t replace the Mona Lisa as easily, right? So by turning a digital artwork into a non-fungible token, you essentially create a guarantee that the collectible is authentic and unique in a sense.

Anyone can verify that certificate, as it is publicly available on the blockchain. You can easily know its provenance. In hundreds of years from now, we will know the exact history of ownership of the NFT; no chance of buying a fake one — no ‘Made You Look: A True Story of Fake Art’ drama.

Now… did you know that NFTs are not only about digital artworks? Let’s take a deep dive into the world of non-fungible tokens and learn about their current different forms and utilities! 👇

NFT Art

As of now, the widest application of NFTs has been in the art world. NFTs are a fantastic innovation for digital artists to display and market their work. NFT marketplaces provide great exposure opportunities.

Digital artists can now gain more ownership over their work; for example, they can receive a percentage every time their work is resold. In other words, when the value of the art piece drastically increases, the artist is now able to benefit from it, without any complications.

With NFTs taking the art world by storm, we have seen an amazing array of different digital collectibles: digital designs, videos, gifs, photographs, memes, social media content, and even pixels.

Beeple’s collage ‘Everyday's: The First 5000 Days’ sold for $69 Million at Christie's

Video Games / Metaverse applications

While a lot of the attention goes to the digital art space, the application of NFTs in video games is also booming. NFTs can take the form of video game skins, avatars, or collectibles within a video game.

For example, you could buy a rare sword in a game, and re-sell once you are done using it (or done playing the game). These video game NFT applications are becoming interoperable as well: you can purchase NFT Avatars or items that can be used across different games.

The metaverse — a growing virtual universe where people can create their own world — offers tremendous opportunities for NFT applications. One example: digital land! There is currently a virtual real estate market that is developing: a digital house was recently sold for $500K.

The metaverse in its current form seems to link together virtual reality, virtual currency, and non-fungible tokens — all for the enjoyment of some courageous explorers!

Here are some projects developing these forms of NFTs: Sandbox, Decentraland, Somnium, Cryptovoxels, amongst others.

Trading Cards

You probably know about physical collectible cards, such as baseball cards or Pokemon cards. Trading cards that call themselves NFTs are essentially the virtual version of the physical asset. There is a huge section of different trading cards you can currently buy on OpenSea, the largest NFT marketplace.

Projects: Sorare, Gods Unchained, CryptoKitties, etc.

Sports

Sports teams are currently jumping at the opportunity of creating their own NFT collectibles. The first sports organization that led the way was the NBA! NBA Top Shot allows fans to purchase short video highlights of their favorite basketball team.

There are many different NFT collections launching across different sports, for example in boxing or Formula 1.

Music

Singers and composers are also entering the world of NFTs. Recently, King of Leon became the first band to release an NFT album. Many different musicians are now looking for ways to monetize their art through the blockchain and NFTs.

This is a change that will affect the entire music industry. While most of the revenue generated from music currently goes to third-party intermediaries, such as distribution platforms or record labels, the blockchain might shift that balance in favor of the artists. NFTs can notably allow for better management of intellectual property rights and improve the distribution of royalties.

Domain name

With domain names as NFTs, a domain name owner can control his domain with the use of private keys, as opposed to traditional domain names that require the oversight of an external organization. Domain names NFTs can also link to crypto wallets in addition to websites: image the infinite possibilities here...

Unstoppable domain announced that the domain “win.crypto” blockchain domain NFT was sold for $100,000, which was the most expensive NFT domain name ever sold.

Interesting trend, domain names in the crypto world are also found as a string of emojis. If you’re curious to learn more about it, check Ens. domains or Unstoppable.domains — you might want to acquire your own blockchain-compatible domain name.

Fashion

Fancy a pair of designer sneakers? In this pandemic era, where everything is closed, there won’t be many occasions to wear them … So how about you buy a pair for the avatar you’re using in your favorite video game or Metaverse?

You heard it right: the fashion industry is now jumping on the NFT train. The connection between NFTs and the fashion world actually makes a lot of sense, no one buys luxurious fashion items because they are useful, they are purchased for the identity, culture, and exclusivity they represent. NFTs check all these boxes: they are exclusive, scarce, and represent the identity of the brand just like a physical item.

Some of these virtual luxury fashion items are as expensive as their physical version. To give you an example, check out this virtual hoodie that was sold for £19K. Or what Gucci is currently planning for its NFT shift.

👀 Best practices when buying or creating NFTs

As mentioned earlier, the principle of NFTs is that they provide a tamper-proof guarantee of ownership of a particular (digital) asset. NFTs live on the blockchain, so as long as the blockchain exists, they will remain on it.

When you buy an NFT you don’t just acquire the certificate of ownership, you get the assets associated with the collectible: the media (image, video etc.) and metadata.

The smart contract of an NFT is stored on the blockchain, and the best practice is to also store the NFT’s assets on it as well. Currently, the only safe storage alternative to the blockchain is IPFS — an alternative open source technology to HTTP, focused on speed and security.

Unfortunately, there are NFT project teams that do not follow these best practices and store the NFTs’ assets on centralized servers. By omitting these important steps when ‘minting’ their NFTs, all their creations become vulnerable to manipulation and damage: on a centralised server an NFT could easily disappear.

For the collectors — When buying it is very important to verify the storage type of the NFT, in order to ensure that the asset will still exist in the future, in your wallet. Following these best practices also ensures that NFTs fulfill the purpose of their very existence: guaranteeing the ownership of a virtual item.