Non Fungible Tokens (NFTs)

[Charles-Tim]

What are NFTs
Non-fungible means something unique which can not be replaced with similar items. Like bitcoin, ethereum and litecoins are fungible because you can trade bitcoin for bitcoin, ethereum for ethereum, litecoin for litecoin, and have exactly the same thing. But NFT are completely different as they are non fungible, a digital art is an example of a NFT, if you trade a digital art with a another one, you can not have the same thing but completely different things unlike bitcoin and fungible coins and tokens.

The same goes for art pieces like Mona Lisa by Leonardo da Vinci or Starry Nights by Vincent van Gogh. There can be copied versions of every art piece, but the original is only one. Although, they are also non fungible, but such original art piece are not assigned a token, which makes such non fungible tokens.

Accordig to Wikipedia, non-fungible token (NFT) is a unit of data stored on a digital ledger, called a blockchain, that certifies a digital asset to be unique and therefore not interchangeable. NFTs can be used to represent items such as photos, videos, audio and other types of digital files. Access to any copy of the original file, however, is not restricted to the buyer of the NFT. While copies of these digital items are available for anyone to obtain, NFTs are tracked on blockchains to provide the owner with a proof of ownership that is separate from copyright.

NFTs used to represent virtually intangible items
NFTs are used to represent intangible items like:

Artworks
Virtual items within video games such as skins, virtual currency, weapons and avatars
Music
Collectibles (e.g. digital trading cards)
Tokenized real-world assets, from real estate and cars to racehorses and designer sneakers
Virtual land
Video footage of iconic sporting moments

NFTs as tokens
As mentioned above that NFTs are tokens, tokens do not have their own independent blockchain, tokens rely on the blockchain of another coin, such as ethereum blockchain, which is the most popular blockchain used for NFTs. But there are other bkockchains now supporting NTFs.

List of blockchain supporting NFT as of recent
Ethereum
Binance Smart Chain
Flow by Dapper Labs
Tron
EOS
WAX
Polkadot
Cosmos
Tezos

How to create your own NFT
Before knowing how to create NFT, you should know that creating NFT on one blockchain will be difficult or impossible to sell on another blockchain. Each blockchain has its own separate NFT token standard, compatible wallet services and marketplaces. There are platforms you can create your own NFT, but you will need to know certain requirements for creating NFT on certain blockchain. Ethereum is the largest for now, and will be used as an example.

Common marketplace for NFTs
OpenSea
Rarible
Mintable
SuperRare
Nifty Gateway
Foundation
Axie Marketplace
BakerySwap
NFT ShowRoom
VIV3

Requirements
To create NFT on ethereum blockchain, user will have an Ethereum wallet that supports ERC-721 (the Ethereum-based NFT token standard), such as MetaMask, Trust wallet and Coinbase wallet (not Coinbase.com). The user needs to have around $50-$100 worth of ether. Also, user need to sign a message with an address that will be used as login, and that will be required before the completion of NFT creation.


NFT scams
Normally, NFT scam are not yet common, but there are ways scammers can deplay different tactics to scam people using NFT, as people are getting to know more about NFT, this will attract scammers to make use if it. Below are lists of few ways scammers can make use of to scam people, knowing this is very important as a means of protecting oneself against such scam.

Replica Stores/Doppelgänger stores
Stores with fake domain which is not original but very similar or identical to the real domain, some people will think it is original domain which can be mistakenly accessed through search engine ads, clicking on the fake site. The best is to avoid such sites, never click on search engine ads, and only accessing the original site.

Fake stores
Replica domain is fake, but there are some domain that is not identical to any other domain but yet belong to scammers and fake as it is. Some people do not just care but like search engine to look for site URL, clicking on a fake NFT site will also result to scam.

Counterfeit NFTs or Artist Impersonation
If you were following NFTs in the recent weeks, you would be aware of the Banksy-styled artworks sold on the NFT markets for $1 million in crypto. Although I do not want to get into whether that was a copyright/ trademark issue, this sets a precursor for what is to come.  Counterfeit and real-world ‘inspired’ artwork/content will become a  problem shortly. Users need to be careful about what they are buying or bidding. It is difficult to verify the seller on such online marketplaces.

Giveaways/ Airdrops
It is not new that there are numerous fake giveaways, this happen in a way people are tricked to pay certain amount to receive double, this is very possible to make use of NFT for this. For example, if a NFT is worth $1000, scammers can tell someone to pay $500 to realease the token, but not knowing it is a scam. If the money is paid, the scammers has nothing to release.

Fake apps
There are many fake apps people have downloaded before causing them to lose money, the apps also make use of sites that are not legit but fake. As NFTs are becoming more common in the real world, these type of app can be available on playstore for download. People that download such app can be tricked in a way NFT token will be stolen. That is why it is good to make use of legit sites that we already know.

How to securely store NFT
For bitcoin, not your key not your coin. This is because bitcoin is stored on blockchain and can only be accessed through digital signature produced by a private key, that is why private key is very important. Anyone that have access to the private key can unlock bitcoin from the blockchain using digital fingerprint (address), public key and the digital signature generated by the private key. That is why bitcoin users needed to protect their private key. This does not only applies to bitcoin, but to all cryptocurrencies making use of blockchain technology. Also, NFTs are using blockchain to store tokens, the tokens are stored on blockchain, although not having blockchain of their own, the reason they are called tokens. They are stored on the blockchain of a coin like Ethereum, Tron and Binance smart chain.

That is why we need to store NFTs using noncustodial wallets, so we will be able to have full control over our tokens, most noncustodial wallets are online/hot wallets, but we can go for offline wallets which are more secure. But, even if it is offline wallet we use like hardware wallet, we should still be very conscious about safety and security of our NFTs.

Some platforms can render centralized means of storing NFT, this will deprive privacy, also making owners not to have full control over their coins, noncustodial wallets should be used. To know how to protect NFTs, you should know how to protect yourself from online and offline scammers, check the articles below for further reading about how to protect oneself against hackers and scammers.

Good topics on security and privacy
Helpful links:
https://www.ledger.com/blog/create-your-own-nft
https://en.m.wikipedia.org/wiki/Non-fungible_token
https://www.coindesk.com/how-to-create-buy-sell-nfts?amp=1
https://www.cnbc.com/amp/2021/03/23/how-to-create-buy-sell-nfts.html
https://m.youtube.com/watch?reload=9&v=RISknGgDTW0
https://securityboulevard.com/2021/03/5-nft-scams-you-need-to-know-nft-scams-part-1/amp/
https://www.bankinfosecurity.com/blogs/non-fungible-tokens-course-theyre-attracting-scammers-p-3011

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[NeuroticFish]

From my understanding, a NFT is a digital signature/certificate telling that you own this or that. Nice.
But there's something I fail to understand with NFTs, and I'll come with an example.

Let's say that Jack Dorsey, instead of publicly auctioning his first tweet NFT, he makes multiple such tokens - on the same (is it possible?) or different blockchains - and sells them all.
Or let's say that a famous painter makes a wonderful painting, sells the NFT and then sells the actual painting too.
Clearly, these are scams. But how can they be prevented? How can I know for sure, as buyer, that I get the correct thing?

[Charles-Tim]

Let's say that Jack Dorsey, instead of publicly auctioning his first tweet NFT, he makes multiple such tokens - on the same (is it possible?) or different blockchains - and sells them all.

This is a complicated question as altcoin blockchains are complicated from their onset and getting more complicated. When NFT was introduced on ethereum blockchain, ERC721 was used for it. With this, you can only make one NFT for one virtaul asset, but this does not restrict scammers not to be able to make use of another NFT marketplace to make another NFT with the same digital painting as example. ERC1155 is more advanced, it support both fungible and non fungible tokens, and it support multiple tokens creation which makes the whole thing complicated.

https://medium.com/@bhavishramaswamy/erc-721-erc-1155-c9b18eb19a5d


So, I can say it depends. About using two different blockchains, it is very possible, but I have not tried one before.

Or let's say that a famous painter makes a wonderful painting, sells the NFT and then sells the actual painting too.

What is most important is the NFT which makes the painting valuable, there can be 100s of the same original paintings, but the person with the token only has the authentic copy.

Clearly, these are scams. But how can they be prevented? How can I know for sure, as buyer, that I get the correct thing?

Making use of a legit marketplace for it, also researching very well about the NFT you want to buy. NFT scam is truly on the rise, people need to be careful.
I do not have much knowledge and experience about NFT, the scam I read about it makes me create this thread, and that is why I included it along.

[NeuroticFish]

that's my explanation from my perspective.

It's an simplified and incomplete overview of the situation, but I've awarded you with 1 merit for the idea.

This is a complicated question

I didn't intend to make it simple or complicated  , but the fact it's not clear/straightforward made me ask.
Thanks for the answers.

[BlackHatCoiner]

I have never studied the way NFTs work. By reading this, I can admit that it was a nice read. I've previously tried to understand ethereum from their main page but failed decisively. They're making it look simple, by skipping the hard, juicy parts. Internet hasn't helped me today to understand the advanced technology behind this.

I may have understood it only in theory, but I have my questions:

• How do you ensure that X is the real owner of an NFT? I could upload Mona Liza as an NFT and pretend to be the owner of it. Who will prove me wrong and with what data?
• Have they their own blockchain? For example, are they broadcasted like transactions that must be confirmed? Could you double-spend an NFT?
• Do I need the third party? For example, rarible is an NFT marketplace. Is this place like Coinbase for Bitcoin? Can I exchange NFTs peer-to-peerly without having a rarible account?
  

I don't want to make false thoughts about ethereum, but I find something centralizing in this tokenized concept. I've dug the internet for non-custodian secure wallets that focus on the safety of your funds, but I've only found online custodian wallets and the ones that work exclusively on your browser, such as Metamask. Am I the only one that sees this?

[JooBra]

I think I saw also NFT's on Cardano blockchain so you can put them there too. Beside that NFT's are still young and have a lot of road in front of self to be accepted by large number of people.

[alex_andr25]

Creating NFT tokens with non-interchangeability is a very good solution. So they will not lose their demand and popularity. For a long time I could not understand what it was, until I came across this article. Thank you for the information