Fungible- means interchangeable; these are items or goods
This NFT
that can be exchanged because they are effectively identical
and carry the same value.
•Prime example of a fungible asset is money or currency, a
500-peso bill will always be a 500 peso bill whether it is five
100 peso bill or ten 50 pesos bill, they still have the same
worth.
Non-Fungible - is something that is not interchangeable or
even divisible, something that is unique and can't be replaced.
•Assets like diamonds, land, or baseball cards are not fungible
because each unit has unique qualities that add or subtract
value. For instance, because individual diamonds have
different cuts, colors, sizes, and grades, they are not
interchangeable, so they cannot be referred to as fungible
goods.
Token- a thing serving as a visible or tangible representation
of a fact, quality, feeling, etc.
- is nothing more than the digital representation of an asset,
which can be anything, as long as it has recognizable and
certifiable properties. A digital asset can be any digital
document, sound content, image, etc. that is transported in a
digital format. In the world of blockchain technology, a token
is a virtual token whose value is issued by an organization.
- a token is an object with a certain value only within a
specific context. A token is an object that represents
something else, such as another object (either physical or
virtual), or an abstract concept as, for example, a gift is
sometimes referred to as a token of the giver's esteem for the
recipient.
A non-fungible token (NFT) is a unique digital identifier that
is recorded on a blockchain and is used to certify ownership
and authenticity. It cannot be copied, substituted, or
subdivided. The ownership of an NFT is recorded in the
blockchain and can be transferred by the owner, allowing
NFTs to be sold and traded. It grants object a particular right
recognizable as “Ownership”; in essence, “Certificate of
Authenticity”.
-cryptographic tokens that are similar to the sense of
cryptocurrency. NFTs are each unique and limited in quantity.
They are the key building blocks of a new blockchain-
powered digital economy. NFTs are cryptographic tokens that
have a unique identifier to each unit that cannot be copied,
substituted, and subdivided. These tokens are distinguished by
their non-fungibility and non-interchangeability.
-NFTs change the crypto paradigm by making each token one-
of-a-kind and irreplaceable, making them non-fungible,
meaning that one token may be worth more than the others.
Due to the distinct and non-transferable ID, digital asset
representations are equated with digital passports to
differentiate it from other tokens.
-NFT is just like an artist creating a work of art for one person
only. Person who buys it hold the right of ownership and
ability to resell it and make profit.
-NFT are equated with a digital passport to differentiate it
from other tokens, PASSPORT contains data of the owner,
name, date of birth, and other biometrics. Just like NFT, it
contains information/data.
Fungibility in NFTs
The capacity of an asset to be exchanged for a similar item
without losing its value is referred to as fungibility.
is one of the unique trading cards.
In the world of digital currency, the value of one Bitcoin is
similar to that of the other one. But same is not the case for
non-fungible tokens. In this case, the value of the NFT token
will be different from a similar token. Each token has its own
unique characteristics and the assets of the real world, such as
the rare stones, artworks, and the luxury products of the
collector.
PROPERTIES OF NFT (UIAPP)
Uniqueness
•It can be challenging to check the originality of the assets
online, in consideration of how it is easily to copy and paste
texts, artworks, images and many other assets in digital form.
It is more challenging to artists, companies, and producers of
contents to utilize digital sphere. This where the NFTs comes
in.
•NFTs are unique, unlike the fungible assets. The blockchain
can secure artworks originality if the artworks are turned into
an NFT
•It is the NFT that gives the artists’ artworks originality or
uniqueness.
•Take Bored Ape #7990 from the Bored Ape Yacht Club
(BAYC), for example. This artwork can easily be copy-pasted
online. However, no matter how many visual copies exist, the
original version will always be defined through the metadata
of the NFT. Even if an impostor makes these visual copies
into NFTs, it can be determined which NFTs are the original
through the NFT’s code and provenance, which is the next
property we will discuss.
•Valued because of their rarity and uniqueness.
Indivisibility
•You can’t cut a vintage watch in half and expect to have it the
same worth as before. Just like the NFT, you have to transmit
the entire token to transfer NFT. The NFT cannot be divided
into smaller fractions.
•This implies that NFTs are not very liquid, but on a positive
note, it strengthens ownership since the future owner can
make sure the NFT is still intact and verifiable before
purchasing the asset.
Authenticity
•In the past, digital objects like artwork and photos made it
difficult to determine origin or confirm authenticity. This was
all altered by NFTs. ( It was difficult back then to determine
and to confirm the authenticity of the artwork and photos.
This all changed when the NFT has begun)
•To review, the blockchain is an openly accessible ledger that
is accessible to anybody worldwide. The primary means of
examining the past movements of an NFT is with blockchain
scanners like Solscan, Etherscan, and Polygonscan. ( To
review, blockchain was made to be accessible to everyone
worldwide. Examining the past movements of NFT is with,
the scanners like Etherscan, Polygonscan and Solscan.
•It is costly to confirm the authenticity of an artwork, in terms
of having a traditional art.
Portability
•NFTs are readily available and transportable. Similar to
cryptocurrencies, NFTs are portable and may be kept
accessible from devices like your computer or phone by
storing them in a digital wallet. ( They are transportable, as
well as readily available. NFTs are portable and accessible to
computers or phone just like cryptocurrencies they can be
stored in a digital wallet.
•This is advantageous than having conventional physical
assets that you have to transfer.
Programmability
•NFTs design can be modified, may add interface and new
features with a variety of decentralized apps. Its one property,
is that it can be programmed like software .
•Their programmability allows NFTs to progress and adapt
and progress with the times, only being limited by the
imagination of the creator even though NFTs, as of writing are
often utilized for digital art.
How do NFTs work?
Non-fungible tokens are types of Cryptographic assets that are
kept on blockchain that are distributed in a public ledger.
NFTs are separate from one another and they have a unique
identification with each other.It is easy to confirm ownership
using this data and to transfer this tokens.
OpenSea, or Mintable are the platforms that are usually used
by the artists to upload their digital file and to generate a smart
contract connect with it to, easily create NFT. With these
portals, the potential purchasers can access and view NFTs. In
terms of purchasing a NFT, it is required to have a
cryptocurrency account, most preferably Ethereum, in which
the author in return for the property being transferred receives
a transfer.
To produce NFTs, minting involves encrypting and recording
the blockchain of the asset's data. Moreover, the process of
minting has three steps: creation of new block, validation of
NFT by a validator and closing of the block. Assigning
ownership is a common step in the minting process and using
the smart contracts to control NFT transfers.
Special number that is connected to single blockchain address
when tokens are created. The address where the tokens are
kept are disclosed to the public together with the details of the
ownership and every token has an owner. NFTs can be
identified even if there are 5,000 NFTs because each NFT has
a unique identity.
NFTs can be created on a variety of blockchains, albeit they
may go by different names. For example, they are known as
Ordinals on the Bitcoin blockchain. A Bitcoin Ordinal can be
traded, sold, and bought just like Ethereum. The difference is
that Ordinals have serial numbers, to satoshis, identifiers and
smallest denomination of bitcoin while the Ethereum produce
tokens.
What is NFT art?
Non-fungible token (NFT) art refers to digital assets stored on
a blockchain that represent content or even physical items. Art
mediums that NFTs can represent include digital drawings,
paintings, music, film, poetry, or books. NFT art allows artists
to sell or rent their artwork beyond the physical world.
NFT art is a digital asset that the buyer owns and can sell or
trade on a blockchain platform. The sale of NFTs is a means
of selling digital art without building an extensive social
network. Blockchain transactions take place on NFT
marketplaces, reducing the obstacles of self-promotion.
What’s the difference between NFTs and traditional art?
NFT art and traditional art vary in many ways. In some cases,
NFT art can be more profitable because the artist can set the
commission percentage. Unlike traditional art, it can be resold
with the artist earning a royalty each time. Some of the other
notable differences include:
 Storage: Traditional physical art requires storage
space. NFT art requires a digital file that’s stored
with blockchain technology.
 Selling venues: Traditional art can be sold online, in
art galleries, and through auction houses. NFT art is
sold online at NFT marketplaces.
 Audience: NFT art can reach many potential buyers
via the internet. Traditional art has a limited audience
if it’s in a gallery or auction house.
 Market volatility. NFT value is not purely
economic. The market for NFTs can depend on
things like social climate and relevancy.
Legal rights - Purchasing an NFT that represents another
asset does not necessarily give you ownership of that
intellectual property (IP). For example, you can own an NFT
of a video clip from a sports game. However, people can still
download and share the original clip without infringing on
your rights.
Ethical dilemmas - Plagiarism and art theft have led to artist
complaints surrounding the NFT market. For example, after
digital artist Qing Han passed away in 2020, her art was stolen
and sold as NFTs against the wishes of her family.
APPLICATIONS FOR NON-FUNGIBLE TOKENS
(CVCMSF)
there are many other sectors betting on this technology.
Here are a few examples:
 Collections - Like trading cards, but in digital
format. In 2021, an NFT card of a LeBron James
dunk on the NBA Top Shot platform sold for
$208,000.
 Videogames - NFTs can be used to represent assets
in video games, such as a terrain, a castle, or a
virtual weapon, which are owned by the player.
 Music - Blockchain technology allows musicians to
release their work as NFTs, in the form of limited
editions for example, and thus monetize it. During
the pandemic, it has saved the income of many.
 Cinema - Although less common, in March the
short documentary Claude Lanzmann: Spectres of
the Shoah became the first Oscar-nominated film (it
was in 2015) to be auctioned as NFT.
 Sports- Famous athletes are using NFT to earn
more income from their image. NBA player Spencer
Dinwiddie tokenized his contract so that others
could invest in him.
 Fashion - Nike has a patent that allows an NFT to
be attached to physical products, such as a pair of
trainers, and is called Crypto Kicks
An item sold through NFT should ideally have the following
features: (NFT Features: UAVIT)
- Uniqueness: NFTs are designed to represent a unique asset
that cannot be duplicated or replicated.
- Authenticity: NFTs should have a verification process to
ensure they are legitimate and created by the original creator
or owner.
- Value: NFTs should hold some kind of market value,
whether from its rarity, popularity, or creativity.
- Transferability: NFTs should be capable of being
transferred from one owner to another, with each transaction
being recorded on the blockchain for transparency.
- Interoperability: NFTs should be able to work with
different platforms, wallets, and marketplaces, making them
easier to buy, sell, and trade.
What’s on sale as NFT?
Almost any digital asset can be sold as an NFT, including but
not limited to:
 Digital artwork
 Photographs
 Music
 Videos
 Memes
 Sports collectibles
 Virtual real estate
 Decentralized applications (dApps)
 Gaming assets and items
Some notable examples of NFT sales include the Nyan Cat
gif, the tweet by Twitter CEO Jack Dorsey, and the artwork by
Beeple that sold for a staggering $69 million. The NFT market
is still in its early stages, and it remains to be seen what other
types of digital assets will be sold as NFTs in the future.
HOW ARE NFTS IMPLEMENTED? (CMLSR)
Non-Fungible Tokens (NFTs) are implemented through a
process that involves several steps:
1. Creation: The first step is to create a digital asset
that you want to turn into an NFT. This could be any
form of digital content, such as artwork, music, or
even a tweet.
2. Minting: The next step is to “mint” the
NFT. Minting is the process of turning your digital
asset into a token on the blockchain. This is done
using a smart contract, a self-executing contract with
the terms of the agreement directly written into code.
3. Listing: Once the NFT is minted, it can be listed for
sale on an NFT marketplace. There are many
different marketplaces available, each with its own
set of rules and fees.
4. Selling: When someone decides to buy the NFT, they
will pay the listed price and the NFT will be
transferred to their digital wallet. The transaction is
recorded on the blockchain, providing proof of
ownership.
5. Royalties: One of the unique aspects of NFTs is the
ability for the original creator to earn royalties every
time the NFT is resold. This is a major shift from
traditional art sales, where the artist does not benefit
from future sales.
NFT tokens also come with risks and challenges, such as
copyright issues and environmental concerns related to the
energy use of blockchain technologies, as such for NFT tokens
to circulate freely across different blockchains, some are
working towards standardizing their issuance. There were four
NFT implementation standards in 2021. Each of them runs on
the Ethereum blockchain, so the name of the standards starts
with ERC.
 ERC-721 is the first implementation of NFT on the
Ether (ETH) blockchain. It laid the foundation for the
very concept of irreplaceability, so each type of token
is awarded a separate smart contract, one per token.
 ERC-998 is the standard by which tokens are created
to own multiple other assets. On standard 721, it
takes three different tokens to own a nickname, a
character, and its weapon. With the 998 standard,
three different tokens are combined into one, and
ownership is inherited.
 ERC-875 is used to send more than one collectible
item per transfer.
 ERC-1155 is a superstructure that is used to conduct
tokens created through the other standards.
Conventionally, it is a “package” or “form” that can
contain other NFT tokens. Feature: one smart
contract for hundreds of types of NFT tokens. The
1155 smart contract itself also allows non-NFT
tokens to be stored.
Using standardization, there are platforms in 2021 that allow
you to create your own NFT token without programming
skills.
Where Can You Create and Sell an NFT? (OFERM)
There are several platforms where you can post digital art and
generate Non-Fungible Tokens (NFTs). Here are some of the
most popular ones:
1. OpenSea: OpenSea is the world’s first and largest
marketplace for user-owned digital items. You can
browse, create, buy, sell, and auction NFTs using
OpenSea.
2. Foundation: Foundation is a digital art platform
where art enthusiasts invite other artists to participate
in exhibitions and events. After being accepted into
the marketplace, invited artists can mint and sell their
NFTs.
3. Rarible: Rarible is a decentralized NFT marketplace
where you can create, buy, and sell digital
collectibles.
4. Mintable: Mintable is an NFT marketplace that
allows you to create, manage, and sell your NFTs.
5. Ethernity: Ethernity is a platform that offers limited
edition authenticated NFTs.
6. NFT Art Generator: The NFT Art Generator creates
your NFT collection and stores it on blockchains like
Ethereum or Solana
Here are galleries to place your digital art: (KAM)
1. KnownOrigin: a marketplace with its own ERC-721
token that allows you to prove ownership of a piece
of art.
2. ArtStation: ArtStation’s rise to prominence comes in
perfect timing with the growth of the video game
industry.
3. Museums: There are several museums that are
boosting the scene of digital art, such as the Whitney
Museum of American Art, ZKM Center for Art and
Media, New Museum, Walker Art Center, Museum
of Modern Art and MoMA PS1, Institute of
Contemporary Art, Ars Electronica Center, and San
Francisco Museum of Modern Art.
There are also sites for launching your own NFT marketplace,
for example, Pixura – Create your own Crypto-Collectible
NFTs. This project contains templates to start any project to
trade NFT assets under the ERC-721 standard in a minute.
CHARACTERISTICS OF NFTs (UIRAS)
 Unique: Uniqueness is the most significant
characteristic of NFTs. Smart contracts associated
with every individual unit record permanent
identification information. It is like a certificate of
authenticity.
 Indivisible: NFTs cannot be divided into smaller
units like cryptocurrencies. Each token represents a
whole, unique item, maintaining its integrity. This
characteristic ensures the uniqueness and authenticity
of the digital asset.
 Rare: NFTs are scarce assets. The scarcity and rarity
of an NFT define its value. Though developers could
create any amount of NFTs, they are often limited to
ensure rarity.
 Authenticity: NFTs, as we know, are backed by
blockchain technology. This particular characteristic
of NFT helps increase their authenticity. A
distributed ledger called blockchain comprising
details of NFTs, such as creation date and time is
made visible to the public. As a result, anybody
buying that NFT can easily check its history, which
increases transparency.
 Scarcity: NFTs are deployed using smart contracts,
which provide each NFT with a unique digital
identity and special features. This separates each
NFT from the others and allows them to exist
independently. Scarcity is a factor that drives more
value to those digitally owned assets.
HYPE FOR ART
An NFT is a unit of data stored on a blockchain. The surge in
NFT popularity within the digital art auction sphere has
attracted considerable attention. This trend is a response to the
challenges posed by the internet's capacity to replicate digital
content without honoring royalties, leading to a significant
shift toward NFTs as a solution. Non-Fungible Tokens, being
distinct and non-interchangeable, address issues of digital
ownership and authorship through blockchain technology.
This uniqueness prevents fungibility, giving artists control
over token supply and offering promising financial prospects
for creators in the future digital art landscape.
Mike Winkelmann better known as Beeple, a graphic
designer, has sold his $69 million Everyday NFT, showcasing
the growing interest in digital art. NFTs, while not entirely
digital, offer the advantage of owning a unique crypto token
that verifies purchase. This concept encourages artists to sell
more of their work, increasing their value. However,
environmental concerns may arise due to the mining and fuel
required for building and calculating these blockchains.
Despite some cultural value for art collectors and investors,
the author believes NFTs are not worth damaging the
environment for the sake of "non-objects."
Everydays: the First 5000 Days
 Is a digital artwork and it was produced by Mike
Winkelmann, a.k.a. Beeple. The piece is a collage
made by Winkelmann from five thousand digital
photos he took for his Everydays series. The
corresponding non-fungible token (NFT) was the
most expensive non-fungible token ever when it sold
for $69.3 million at Christie's in 2021.
Nyan Cat
 Chris Torres, creator of the psychedelic meme Nyan
Cat, an animated flying cat with a pop tart body
leaving a rainbow trail. It is sold for 300.00 ETH
(about $590,000) in an online auction. The
cryptographic hash of the image was sold, marking
his first experiment with nonfungible tokens (NFTs),
which have gained popularity in digital art and earth-
bound industries.
Weird Whales
 Benyamin Ahmed has launched two NFT collections.
His latest one is a series of pixelated pictures of
whales with unique characteristics. He calls them
“Weird Whales” – think, a purple whale wearing a
cowboy hat and smoking a pipe. The avid teenage
coder sells them in exchange for popular
cryptocurrency Ether. At the end of August, his
cryptocurrency wallet was worth $400,000.
 Ahmed is not the only one to benefit from NFTs. The
unique digital assets have gone from being a fringe
use case on the Bitcoin blockchain to capturing mass
markets, with NFT sales soaring 20-fold within a
year, from $13.7 million in the first half of 2020 to
$2.5 billion in the first half of this year.
WHAT MAKES AN NFT ART SO EXPENSIVE?
(UASHV)
Uniqueness
One of the crucial factors in determining the value of an NFT
art is its uniqueness. Unlike, traditional artwork which can be
reproduced, NFT art is impossible to duplicate. It is a one-of-
a-kind which makes each piece of art unique and special. A
NFT art which only has one copy would more likely be more
expensive compared to a piece of art with many copies.
Artist
The worth of the NFT art is primarily influenced by who
created it. Even if an artist's NFT art is only based on
speculation, it is likely to be more valuable if they have a large
audience or a reputation for creating high-quality work in the
traditional or digital space. Collectors are ready to pay more
for the prestige of possessing a work of art by a well-known
artist, and the artist's reputation gives authenticity to the
artwork.
Scarcity
Although original NFT artwork is one-of-a-kind, the majority
of collections in the space have thousands of copies. A
collection's value increases with its scarcity. An individual
piece from an NFT collection with 10,000 pieces will typically
cost less than one from a collection with 5,000 pieces. A work
of art gains value as it grows rarer. As a result, NFT art that is
available in limited quantities will be more valuable than that
which is not.
Historical significance
A piece of art is most likely to be worth more if it is associated
with a significant event or demonstrates an exceptional
cultural moment. The artwork’s historical significance
enhances its rarity and distinctiveness, giving it a highly
valuable addition in any collection. CryptoPunks is the most
well-known example.
Visual Appeal
To some extent, the NFT art’s worth may depend on how
much the viewers find it visually appealing. Compared to less
appealing or generic artwork, NFT art that is visually striking
or aesthetically pleasing is likely to be more expensive.
Collectors are more eager to pay a premium for more
outstanding pieces and are often dawn to visually captivating
artwork.
CAN NFT ART BE REPRODUCED?
The digital file that a customer paid millions of dollars for can
be downloaded and copied as many times as desired, but it is
not the same item. The ownership of the work is what NFTs
are intended to provide you; it is something that cannot be
duplicated. The original artist still has the right to replication
and copyright, just like with tangible artwork. However, once
you buy the NFT art, you’ll gain the ownership.
KEY FUNCTIONS OF NFTS (SDDIN)
1. Sophisticated form of basic encryption
Non-fungible tokens (NFTs) are unique cryptographic tokens
or digital assets that couldn’t be replicated and exist on a
blockchain. In NFT, various encryption methods are employed
to ensure the integrity and security of the digital assets of an
individual.
To protect one's unique digital assets, including music or
artwork, NFT might be compared to an intricate, customized
lock. Every NFT functions as a unique key that guarantees the
validity and authenticity of the digital content it represents and
serves as a symbol of ownership. In essence, NFTs use a high-
tech security layer that not only stops copying but also
establishes a unique, verifiable connection between the owner
of the digital asset and its digital asset. This reflects NFTs'
function as a high-tech method of guaranteeing the
authenticity and uniqueness of digital assets by elevating them
from basic digital files to safe, tamper-resistant certificates of
ownership.
2. Digital physical asset representation
NFTs are unique digital tokens that stand in for one-of-a-kind
goods or resources. Although NFTs are primarily linked to the
digital realm, they can also be connected to tangible assets
through tokenization, hence facilitating the integration of the
virtual and physical worlds. Through this relationship, NFTs
can now be used for purposes outside of the digital world.
Tokenization refers to the process of converting physical
assets or real-world assets such as artwork or real property
into digital tokens that people can buy, sell or transfer using
blockchain technology. When an NFT represents a physical
asset, the NFT serves as a proof of ownership for that physical
asset.
This relationship between NFTs and tangible assets has led to
the emergence of innovative ideas such as "phygitals," which
combine the digital and tangible worlds to produce immersive
and interactive experiences and products for NFT holders.
Imagine having an NFT of a limited-edition fashion item that
can be used to unlock a physical replica of the item. Nike has
acted in precisely this way.
A blockchain-based sneaker patent was made public by the
sneaker empire in 2019. Nike continued to explore phygital
experiences and later acquired NFT sneaker studio RTFKT
Studios, which resulted in the introduction of Nike's metaverse
sneaker line. Buying one of these NFTs gives you a physical
pair of sneakers in as well as allowing you to wear your virtual
sneakers in the metaverse.
3. Direct connection for artists
NFT art is a form of digital art, authenticated and owned by
using nonfungible token which radically changes the concept
of ownership in visual arts. Each NFT is distinct and has its
own characteristics and can't be swapped for another, due to
the uniqueness of information in it. The concept of ownership
in the art world is being transformed by NFTs. The artists can
prove their digital creations are unique and authentic by using
NFTs. NFTs provide a way of verifying the authenticity and
ownership of digital art, unlike traditional art forms, which can
easily be duplicated or copied. This ensures that every piece of
NFT art remains rare and invaluable.
By empowering artists to make a profit from their digital
creations, NFTs have revolutionized the art world. Artists can
now express themselves and explore new concepts and styles
that were previously restricted by traditional media, thanks to
the diversity of the metaverse created by NFTs. This has
provided an opportunity for undiscovered artists who might
not be able to gain access to galleries or the means of
presenting their work. Artists can display their works on NFT
marketplaces, making them available to a worldwide audience
far beyond the conventional art markets. Without the need for
intermediaries and galleries, artists have a direct way of
selling their unique digital assets to collectors. This creates
new opportunities for artists to generate income and to be
recognized for their work.
The NFTs have played an important role in fostering
community and interaction between artists and art enthusiasts.
NFTs allow artists to display their work on various platforms
and interact with a wider audience by creating unique digital
assets. In the digital art community, this has given rise to
opportunities for collaboration, networking, and mentoring.
Through social media platforms or specific NFT art markets,
artists can reach out directly to collectors and fans. This sense
of connection aids in building relationships, supporting artistic
growth, and creating an environment that nurtures creativity.
In addition, it breaks geographical barriers that may have
traditionally limited access to the art world, allowing artists to
gain recognition from a global audience.
4. Identity management
NFTs are well-known for their applications in digital art and
the collectibles industries. Nonetheless, their unique qualities
and traits can also be used in other fields, such as government
identity management. One example is the blockchain's ability
to store important papers like birth certificates.
Digital identity cards can also be issued by governments as
NFTs on a blockchain. These NFTs would serve as a
representation of a person's identity and would include
validated personal data like name. address, biometric
information, and image. This can lower identity fraud and
provide people more control over their personal information.
In addition, NFTs can be used as an authentication token or
digital signature that users can use to sign documents, access
online services, and complete transactions safely. This feature
increases security and eliminates the need for conventional
login and password authentication. NFTs can be used by
governments to safeguard documents and certifications, which
may offer a quicker and more effective approach to confirm
credentials and qualifications. Furthermore, health records like
vaccination status may be safely stored and shared using
NFTS, which may be very helpful in emergency situations.
People would be able to demonstrate their health status
without disclosing private medical information Travel
document and visas, ownership and property rights, and
personal data management are other examples of such
applications for NFTs.
5. New investment concept
A new investment concept is introduced by NFT which offers
new opportunities for investors and enthusiasts through
fractional NFTs. These F-NFTs allow individuals to invest in
a percentage of NFT rather than an entirety of it, making high-
value assets more accessible to a broader audience.
In real estate, investing is redefined by fractional NFTs with
its new shared ownership model. High value real estate
investments can now be made possible by the pooling of
resources from several investors. This remarkable concept
promotes real estate, facilitating more people to participate in
profitable real estate investing.
NON-FUNGIBLE TOKENS AND BLOCKCHAIN: SIX
KEY PROPERTIES
A blockchain is a distributed database or ledger shared among
a computer network's nodes. They are best known for their
crucial role in cryptocurrency systems for maintaining a
secure and decentralized record of transactions, but they are
not limited to cryptocurrency uses. Blockchains can be used to
make data in any industry immutable—the term used to
describe the inability to be altered.
The Three Major Parts of a Blockchain are:
•Data – it consists all the information that happen in a
transaction.
•Hash – it serves as the user identity. And, it is unique.
•Hash of Previous Block- it represents that a single
transaction is connected in the blockchain.
Blockchain NFTs (Non Fungible Tokens) are a very hot topic
in the digital asset world. And while the craze over NFT
collectibles has certainly brought a lot of attention to
the digital asset space, the value proposition of the technology
is not all that clear. And so, in this lecture, we explore the
definition and unique properties of NFTs. (SITLIPs)
1. STANDARDIZATION
Standards serve to create a uniform set of rules that are being
practiced or used in a context. It ensures that everyone
operates in a compliant manner. It eliminates unnecessary
processes to be directed to what it is needed to do. NFTs are
enrolled through common, reusable and inheritable standards
in terms of basic features such as ownership, transfer and
access control.
 ERC721- is a non-fungible token standard
on the Ethereum blockchain. It provides a
set of guidelines for creating unique tokens
that represent digital assets. These tokens
are non-fungible, meaning that they cannot
be exchanged on a one-to-one basis due to
their unique properties.
 ERC-1155- is a token standard deployed on
the Ethereum blockchain that enables the
creation of both fungible and non-fungible
tokens within a single smart contract,
addressing the limitations of ERC-721 and
ERC-20 by mitigating high gas fees and
simplifying the representation of multiple
tokens.
While ERC-1155 is a multi-token standard supporting
fungible and non-fungible cryptocurrencies, ERC-20 tokens
are entirely fungible, and ERC-721 tokens are non-fungible.
 Non-Etherum - This is called “lazy
minting” as it lets you create NFT and put it
for sale without being written to the
blockchain.
2. INTEROPERABILITY
refers to the basic ability of different computerized products or
systems to readily connect and exchange information with one
another, in either implementation or access, without
restriction. NFT are interoperable, which means that they can
be connected, exchanged, or traded over different platforms
that operate on the blockchain network. As NFTs are the
decentralized game system that exists on independent
blockchains, therefore they can act as the backend framework
for other interconnected games.
3. TRADABILITY
it makes it possible for NFTs to be sold in markets throughout
ecosystems. NFTs can be purchased, traded, sold, and
auctioned.
4. LIQUIDITY
 the ease with which these digital assets
can be bought or sold in the market.
Unlike cryptocurrencies like Bitcoin
and Ethereum, NFTs are unique,
making it challenging to establish a
liquid market.
 The speed and efficiency of blockchain-
based marketplaces lead to a high level
of liquidity which describes how many
people are making trades within the
marketplace and how often.
  High level of liquidity means how items
or digital assets are multiplying year by
year. It depends on the system or
blockchain, since digital assets are
multiplying year by year, There will be
more people or investors who will have
an interest. The more traders, the higher
the liquidity.
5. IMMUTABILITY
 When we say something is immutable it
means that it can’t change. Immutability
means that it’s easier to make changes
with collusion. The central idea is the
security of data and proof that data has
not been changed.
 Blockchain is configured as an
immutable database, and it is not possible
to manipulate the data already in the
blockchain.
6. PROVABLE SCARCITY
collectors value rarity and authenticity, and the scarcity of
NFT purchases is provable through the immutable records
embedded in an NFT’s underlying blockchain network. This
distributed public ledger validates the number and uniqueness
of each NFT as well as its ownership history.
DIGITAL SCARCITY
 the idea that a digitally native asset can be
coded to have an immutably (permanently)
limited supply. In the digital world, scarcity
can be artificially created through
techniques such as limiting the total supply
of a digital asset, or by creating unique and
non-fungible tokens (NFTs) that represent a
one-of-a-kind asset.
 Without this feature, Bitcoin would be just
another currency or asset and wouldn't have
inspired the creation of a cryptocurrency
industry.
Non-Ethereum – Minting “just in time” at the moment of
purchase is often called lazy minting, it lets you create an NFT
and put it up for sale without being written in the blockchain.
For example, even with NFT markets, there are deep rabbit
holes to go down, such as selling an NFT minted using
OpenSea on Rarible or programmatically building collections
like Bored Apes.
However, there are alternatives to Ethereum’s blockchain.
Rarible allows you to sell NFTs using a blockchain called
Flow (the same one used by NBA Top Shot).
As you may expect, if there were no catches or drawbacks to
these low / no-fee blockchains, everyone would use them. At
the time of writing, using Flow on Rarible will limit you to
single edition NFTs (one-of-ones), and you will be unable to
sell them through an auction. Furthermore, when using non-
Ethereum blockchains such as Flow or Polygon, individuals
cannot use Ethereum to purchase your NFTs (at least not
without incurring additional fees).
I. METADATA Defined
Metadata is generally recognized as information that furnishes
details about other data. In practical terms, this term is
commonly employed to delineate the distinction between an
entity, dataset, or piece of information (referred to as the
'data') and its correlated descriptors and content attributes
(referred to as the 'metadata').
II. Conceptual Definition of NFT Metadata
NFT metadata provides essential information about the NFT
itself. It describes the NFT’s characteristics, properties, and
other relevant details.
 Metadata includes:
o Name: The name of the NFT.
o Description: A brief description or
summary.
o Transaction History: Details of past
transactions involving the NFT.
o Visual or Auditory Assets: Links to
images, videos, or other digital content
associated with the NFT.
o Traits: Specific attributes or features unique
to the NFT.
III. On-Chain Metadata
refers to the situation where the metadata associated with an
NFT exists directly on the blockchain. In this context, the
metadata, encompassing both the foundational digital asset
and its pertinent descriptor attributes, is inherently integrated
into the smart contract. This integration harnesses the inherent
immutability of blockchains, ensuring genuine asset
permanence. The inclusion of an asset within the original
smart contract not only guarantees its scarcity but also ensures
its enduring existence, emphasizing the enduring nature of
assets within the blockchain ecosystem. This ensures the
persistence of the digital asset even in scenarios where, for
instance, the original website host or creator server becomes
inaccessible or is taken down.
IV. Off-Chain Metadata
In cases where NFT metadata is located off-chain, the
metadata, comprising both the underlying digital asset and its
associated descriptor attributes, is stored separately from the
smart contract. This decentralization allows for greater
flexibility and efficiency in managing metadata, as it is not
bound to the immutability constraints of the blockchain.
However, the off-chain approach may introduce
considerations related to data availability and preservation, as
the asset's existence is not inherently guaranteed by the smart
contract, contrasting with the on-chain counterpart.
V. On-Chain vs. Off-Chain
 On-Chain: All data and transactions are stored
directly on the blockchain, ensuring transparency and
immutability. However, this approach can lead to
scalability challenges.
 Off-Chain: Data is stored outside the blockchain,
and only relevant information or proofs are recorded
on-chain. This helps scale solutions and reduces the
burden on the main blockchain.
VI. Data Hashing:
 On-Chain Hashes: Instead of storing full data, the
blockchain often stores the hash (digest) of the data.
This hash serves as a reference, allowing secure and
efficient verification of off-chain data integrity.
 Off-Chain Storage: The actual data resides off-
chain, and its hash is stored on-chain. Anyone can
verify the integrity of the off-chain data by
 comparing it with the recorded hash on the standard way; instead, each person decides
blockchain. what value a product or item holds based on
their feelings and preferences.
VII. Off-Chain Storage Solutions:  For example:
 Centralized Services: Creators can use services There's a rare NFT trading card featuring a cute
like Amazon Web Service for off-chain storage. digital character that some people absolutely
 Decentralized Solutions: Options include love. For those who adore the character, the
the InterPlanetary File System (IPFS), which stores subjective value of that NFT card is high. They
metadata off the main blockchain while remaining might be willing to pay a significant amount to
decentralized, tamper-proof, and permanent
own this unique digital collectible.
VALUE – it rates or evaluates something according to a
On the flip side, if someone is not a fan of the
relative estimate of worth or desirability.
character or the artwork, they might not see the
OBJECTIVE - refers to information or statements that are
same value. The subjective value varies from
unbiased, impartial, and based on facts and observable
person to person based on their personal
phenomena.
preferences and feelings toward the digital
- Objective information is verifiable and can be
content.
supported by evidence and it is not influenced by
 One might see it as a masterpiece and be willing
personal feelings, interpretations, or opinions.
to pay a high price, while the other may not
SUBJECTIVE - relates to personal opinions, interpretations,
appreciate it as much and assign a lower value.
emotions, or perspectives that may vary from person to
B. Market Prices
person.
 are the actual numbers you see when you're
- The subjective value associated with specific works
looking to buy or sell something. These prices
of art may be due to personal sentiments or
are determined by a combination of factors,
emotions experienced only at an individual level.
including what people are willing to pay and
Anything that holds value based on one’s beliefs,
what sellers are willing to accept. So, the market
opinions, bias, personal decisions is known to be
price reflects the collective agreement on value.
Subjective.
 For instance:
Is the Value of NFT subjective or objective?
The market prices of the NFT trading cards
The value of NFTs (Non-Fungible Tokens) is generally
(subjective value example) depend on how much
considered subjective. While certain objective elements, such
people are willing to pay for them. If many
as blockchain technology and smart contracts, contribute to
individuals share a high subjective value for a
the functionality and verifiability of NFTs, the perceived value
particular card, the market price goes up. It's
of an NFT is largely influenced by subjective factors. These
like a digital version of a rare physical trading
subjective aspects include individual preferences, artistic or
card – the rarer and more in demand, the higher
cultural significance, personal taste, and prevailing market
the price it can command in the market.
trends.
Conversely, if there's less interest in a specific
- The subjective nature of NFT value is evident in the
NFT trading card, the market price may not be
diverse ways people assess and appreciate digital
as high. The market prices reflect the collective
assets. For example, one person may find significant
agreement among buyers and sellers on the
value in a specific digital artwork, while another may
perceived value of these digital collectibles.
not share the same appreciation. The cultural,
 The price of a rare collectible card might
artistic, and personal contexts in which NFTs exist
increase rapidly if many people want it, but it
contribute to the subjectivity of their value.
could drop if the demand decreases.
- It's important to note that the broader market
dynamics, including trends, celebrity endorsements,
The term marketplace has two possible meanings:
and social media attention, can also play a role in
MARKETPLACE
shaping the perceived value of NFTs. While
a. It is a physical place where people engage in
blockchain technology provides objective features
traditional buying, selling, or trading of tangible
like transparency and security, the overall value
products or goods.
assigned to an NFT is a complex interplay of both
 For example: supermarket, shopping malls, or
objective and subjective elements.
car dealership – where face-to-face transactions
Subjective Value and Market Prices
occur.
The correlation between subjective value and market prices is
one of the most imperceptible aspects of modern economics.  It can also be digital, including platforms such as
It is the correlation between subjective value and objective Amazon, eBay, Alibaba, and Shopify, enabling
monetary prices. online transactions.
A. Subjective Value b. It describes the collective existence of people who
share a desire to buy, sell, or exchange a specific
 is like a personal judgment about how much
type of product. It's not just a physical or digital
something is worth to us. It's not measured in a
 location; it signifies a community or group bound by
the common interest in a particular product. This
sense of a market emerges when a product sparks
desire and aligns with consumers' tastes and
preferences.
POPULAR MARKETPLACE
1. OpenSea - a decentralized marketplace for buying and
selling NFTs. It is a go-to platform for a wide range of
digital assets, including art, collectibles, and virtual real
estate.
 Example: An artist creates a unique digital
artwork and lists it on OpenSea. Collectors can
then purchase this digital artwork as an NFT.
2. Rarible – a platform that allows artists to create, sell,
and buy NFTs without coding. It emphasizes user-friendly
creation and trade of digital assets.
 Example: An artist designs a digital illustration,
mints it as an NFT on Rarible, and offers it for
sale to interested buyers.
3. SuperRare – a curated platform dedicated to rare digital
art. It focuses on limited edition and high-quality digital
creations, fostering a community of digital art collectors.
 Example: An artist produces an exclusive digital
art piece and releases it on SuperRare.
Collectors can bid on or purchase this unique
artwork.
4. Foundation – a platform where creators use blockchain
to tokenize their digital creations, turning them into
limited edition NFTs. It's a space for exclusive digital art.
 Example: A digital artist creates a limited
edition series of NFTs on Foundation and offers
them for sale. Collectors acquire ownership of
these exclusive digital pieces.
5. AtomicMarket – a decentralized exchange for various
NFTs, spanning virtual real estate to in-game items. It
provides a marketplace for a diverse range of digital
assets.
 Example: A gamer lists a rare in-game item on
AtomicMarket as an NFT, and other gamers can
buy, sell, or trade these unique digital assets.
6. Myth Market – a platform where creators turn mythical
digital creations into NFTs. It's a marketplace that brings
digital myths to life through blockchain technology.
 Example: An artist designs a unique digital
creature inspired by mythology and sells it as an
NFT on Myth Market.
7. BakerySwap – a decentralized exchange that focuses on
NFTs with a tasty twist. It provides a platform for buying,
selling, and trading unique digital assets.
 Example: An artist creates a series of digital
assets related to bakery themes and lists them
for sale on BakerySwap.
8. KnownOrigin – a digital art platform where artists
showcase and sell limited edition digital creations. It's a
space for high-quality and authenticated digital art.
 Example: An artist displays a limited edition
digital painting on KnownOrigin, and collectors
have the opportunity to purchase and own this
exclusive artwork.
9. Enjin Marketplace – integrates NFTs into the gaming
world. It allows gamers to buy, sell, and trade in-game
items and characters as NFTs, creating a digital economy
within games.
 Example: A gamer owns a rare in-game sword,
tokenizes it as an NFT on Enjin Marketplace, and
sells it to another player.
10. Portion – an exclusive auction house for digital art. It
provides a platform for high-quality digital creations to
be auctioned, allowing collectors to bid for ownership.
 Example: An artist puts up a unique digital
artwork for auction on Portion, and interested
buyers participate in the bidding to acquire
ownership.
A market is organized according to the following different
approaches:
A. FREE COMPETITION
 This happens when prices are determined by the
clash between what different companies offer
and what consumers prefer. It's like a
marketplace battle where companies compete,
and we, as consumers, get to choose from
various offers.
Companies that create NFT Project
 VISXP
 YUGA LABS
 MIRAI LABS
 Example: In the digital world, companies like
VISXP, YUGA LABS, and MIRAI LABS are creating
NFT projects. It's like a digital street where these
companies compete to offer the most unique or
interesting NFTs, and we, the digital audience,
get to choose the ones we like the most.
B. OLIGOPOLY
 Occurs when the offer is made by a small
number of operators.
 The biggest reason why oligopolies exist is
collaboration. Firms see more economic benefits
in collaborating on a specific price than in trying
to compete with their competitors. By
controlling prices, oligopolies can raise their
barriers to entry and protect themselves from
new potential entrants into the market.
 Example: Technology Industry (Computers &
Smartphones)
The computer can be of any brand, but the
operating system will be for sure from any of
Apple, Windows, and Linux Open Source. The
same is the case for an operating system for
smartphones where the majority market share
is captured by Android & iOS. These companies
are coexisting without creating a threat to
others.
C. MONOPOLY
 it occurs when there is only one company or
entity that controls and sells a specific product
 or service, and there are no close substitutes or
competitors. As a result, consumers have limited
or no choice but to accept the prices and terms
set by the sole provider.
 Examples: Railways, Google
The government provides public services like the
railways. Hence, they are a monopolist because
new partners or privately held companies are
not allowed to run railways.
Google has become a household name and
whenever we don’t know any answer, probably
googling is the answer. With their secret
algorithm, the biggest web searcher controls
more than 70% market share.
In addition, the company has grown into a web
of services interlinked like maps, Gmail, search
engines, etc. As a result, the company has left its
competitors – Yahoo and Microsoft- behind its
innovation and technological advancement.
D. MARKET TEST
 A market test is the tool that companies use to
identify the types of people who may be
interested in a product that is about to be put
on the market. This test helps companies to
determine how much money people are willing
to spend to get their products.
 Different people are interested in different types
of products, and some are willing to spend a
certain amount on a specific type of product.
Nowadays, companies pay close attention to
what consumers want and try to give them
exactly that.
 Example: Software development
In software development, a common example of
test marketing is a beta test run. Beta testing,
also known as user acceptance testing (UAT) or
end-user testing, involves providing an early
release product to a limited sample of the
intended audience.
C. NFT MYTHS
Non-Fungible Tokens (NFTs) have gained significant attention
in recent years, but with their rise comes a multitude of
myths that may cloud the understanding of these digital
assets. This report aims to debunk common misconceptions
surrounding NFTs, providing clarity on Ethereum transactions,
addressing concerns about scams, dispelling notions of
volatility and costliness, and highlighting the value NFTs bring
to the gaming industry.
Myth 1: Ethereum has thousands of pending transactions
- Ethereum's transaction backlog is often
misunderstood. Pending transactions are primarily a
result of insufficient transaction fees or
dependencies on previous transactions from the
same wallet. This indicates high network usage,
showcasing Ethereum's popularity and growth.
Myth 2: NFTs are a scam
- The early days saw scams exploiting artists and
collectors unfamiliar with crypto. Instances of
unauthorized NFT sales of high-profile artists' works
occurred. However, as awareness grew, the
perception shifted. Professional traders now view
NFTs as investments, with platforms like Twinci
providing a secure space for NFT creation and trade.
Myth 3: NFTs are too volatile
- NFT prices fluctuate due to market demand and
supply dynamics. Market demand and decreased
supply contribute to NFT value appreciation. The
example of the Bored Ape Yacht Club demonstrates
significant value growth over time.
Myth 4: NFTs are too expensive
- NFT prices vary, but on average, they align with
other cryptocurrencies, offering affordability
compared to traditional currencies. This
misconception is debunked by recognizing the cost-
effectiveness of acquiring NFTs in the crypto space.
Myth 5: NFTs are too complicated and hard to create
- NFT creation depends on the blockchain platform
and developer preference. Ethereum, a popular
choice, offers tools like NFT-Crowdfund, simplifying
NFT creation without extensive programming
knowledge. Understanding Ethereum basics is crucial
for developers.
Myth 6: NFTs don't bring value to the gaming industry
- Contrary to this belief, numerous games incorporate
NFTs, enhancing their value. Examples like Big Time,
Axie Infinity, and Chain Z Arena showcase how NFTs
are integral to play-to-earn gaming, providing
players with ownership of unique in-game assets.
PROBLEMS AND CONTROVERSIES
I. Environmental
- NFTs, or Non-Fungible Tokens, are digital versions of rare
assets that have created new opportunities for collectors and
artists to earn income through selling, buying, or trading, like
cryptocurrency investments. The digital nature of NFTs
results in lower maintenance costs and increased asset
security, as they are managed through blockchain technology.
This could potentially revolutionize how we collect rare items
in the future. However, like all technological advancements,
NFTs have their issues and shortcomings. One major concern
is the environmental impact, as human activities often
negatively affect the environment, causing deterioration.
Do NFTs harm the environment?
- As an investor or crypto expert, you might know
about NFTs and their environmental impact. While
NFTs don't directly harm the environment, their
production process can affect our climate.
How do NFTs really impact the environment?
- NFTs themselves do not impact the environment,
but how they are minted can have substantial
environmental consequences. Here’s a look at how
NFTs are made:
1. First, the creator mints the NFT on a digital
marketplace, tokenizing it and storing it in the
blockchain.
 2. Next, the minted NFT is listed on the marketplace.
3. Finally, when the NFT is bought, a blockchain
transaction, either proof-of-work or proof-of-stake,
is initiated, which consumes significant energy
resources.
NFT transactions can occur via two different blockchain
mechanisms: proof-of-work and proof-of-stake.
In proof-of-work, miners compete to validate the transaction
and receive blockchain rewards. However, this process
consumes a significant amount of energy, emitting a
substantial amount of
carbon dioxide.
- For example, a single NFT transaction on the Bitcoin
platform emits approximately 748 kilograms of
carbon dioxide.
On the other hand, in proof-of-stake, only one validator is
responsible for the transaction, resulting in significantly lower
carbon emissions.
- For instance, a single NFT transaction on the
Ethereum platform emits around 0.02 kilograms of
carbon dioxide.
Can NFTs use less energy?
Since the main impact of NFTs on the environment lies with
its energy consumption during the minting process. Here are
some remedies on how NFTs can lessen the consumption of
energy.
1. First, miners can opt to use renewable energy
sources to power their machines during the minting
process, reducing carbon dioxide emissions.
Additionally,
2. Investing a portion of the proceeds from NFT sales
into renewable energy projects can help offset the
environmental impact.
3. Funds can also be directed towards experimental
technologies aimed at addressing climate change.
4. Lastly, choosing to purchase NFTs minted on
proof-of-stake blockchains, which consume less
energy compared to proof-of-work, is a more
sustainable option.
Where can we buy Energy-Efficient NFTs?
1. Ethereum
2. Solana
3. Algorand
4. Cardano
5. Tezos
II. Logistical
- Logistical issues relate to strategy or management
problems.
Example: The Muddled Metaverse - A case against NFT
interoperability in videogames authored by Todd Harris, CEO,
Skillshot | CEO, Ghost Gaming | Chair, Atlanta Esports
Alliance | Chair, NASEF | Co-founder, Hi-Rez Studios (one of
the leading video game publisher and developer in the US)
In a 2022 article, Mr. Harris disputed the claim that NFTs or
"Web 3.0" will allow item interoperability across games
within a single metaverse. He argued this reflects a
misunderstanding of game development and gamer
preferences. Harris highlighted the technical challenges of
asset interoperability, using League of Legends and Valorant
as examples. Despite being from the same publisher, these
games use different and incompatible technology pipelines
for digital assets, making interoperability difficult.
III. Ethical
It’s pretty difficult to use NFTs to make a living as an artist. On
top of that, there is strong opposition from some of the art
community on the Internet. It is a huge problem that arts and
NFT’s get just downloaded and sold without permission of the
original artists. In general, all buyers should beware and verify
with the real artists on their social media or contact them
directly before buying any of their work online. No one’s
going to stop people from taking pictures on Twitter,
Instagram, ArtStation or other websites and selling them for
prints, on T-shirts, mugs, or cups and now also NFT’s.
Unfortunately, this is the reality of digitized art.
1. Money Laundering - NFTs, essentially digital works of
art, have the same characteristics as traditional art.
Consequently, in the art market, similar problems
with money laundering can be seen. Using a crypto
wallet that does not require verification, criminals
can conceal their identity in the course of money
laundering. They’ll be able to transfer a lot of money
from one wallet to another anonymously. They can
act instantly in the digital world, making it difficult
for law enforcement agencies to seize criminal assets
and money, because they can be instantly
transferred from one digital wallet to another.
2. Plagiarism – In the digital art world, NFT plagiarism is
becoming more and more common. As artists
explore new ways to express themselves, they are
also subject to having their work copied and sold.
Unfortunately, it is not easy to protect your work
from this kind of plagiarism. In any case, it is
important to be aware of the potential risks. As
more artists discover that their works are being
infringed and marketed on online markets, the
debate about NFT plagiarism is growing.
3. Fraud - The nature and scale of NFT fraud is laid out
in the report NFTs and Financial Crime: Money
Laundering, Market Manipulation, Scams &
Sanctions Risks in Non-Fungible Tokens, published by
Elliptic, a London-based provider of crypto asset risk
management services to businesses worldwide. It
says that NFT crimes represent “a small but notable”
portion of overall non-NFT-related trading activity.
Wash trading is when the buyer and seller in a transaction
are the same person or two people cooperating. In traditional
financial markets, it is prohibited because it misleads the rest
of the market about real demand and distorts prices in order
to induce others to engage in fraudulent transactions. Wash
trading is when the buyer and seller in a transaction are the
same person or two people cooperating. In conventional
financial markets, it is prohibited because it misleads the rest
of the market about the true level of demand, distorts prices,
and encourages others to trade in fake information.
This activity has been illegal in many traditional markets in
the U.S. since the passage of the Commodity Exchange Act
(CEA) of 1936. But in unregulated crypto markets, particularly
with NFTs, the practice is still common. Chainalysis reports
that enforcement actions have not yet been brought against
Wash’s trading with NFT.
While wash trades are often hard to detect, there have been
notable examples of inflated NFT trades that were used to
manipulate market prices. On Oct. 28, 2021, CryptoPunk 9998
was traded between two wallets for 124,457 ether (ETH),
worth around $532 million at the time. The sale of the white-
haired, green-eyed, pixelated character was picked up by
CryptoPunks Bot, which automatically tracks and announces
CryptoPunks transactions on Twitter.

A rug pull is a scam in which a crypto or NFT developer

promotes a project to raise investor funds, only to shut it
down or disappear, taking the investor’s assets. There’s a
variation in this theme, such as when developers deliberately
inflate the price of a project and then abruptly sell it, leaving
the price to fall. The term is derived from the saying, “to pull
the rug out from under someone”, leaving them in a state of
confusion. Exit scams may also be referred to as rug pulling.
The rug pull can be performed with backdoors in the smart
contract of a project allowing developers to drain and
manipulate tokens that have been placed at stake or are
otherwise secured. Whatever the mechanic, the rug pull
quickly drives the price down to zero, leaving investors who
didn’t get out early with worthless tokens. Below are further
explanations of the various types of rug pulls.
These schemes take advantage of a lack of regulation in the
crypto space, misinformation, unethical sales techniques, and
investor FOMO (fear of missing out). The difference is that
pump and dump schemes usually operate within shorter
timeframes, focus on price action of low value tokens, and do
not require the involvement of token developers.