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NFT cheat sheet

Published by jnun on

Market, wallets, minting, transacting on the blockchain

The Market

Go to market fast!

If your goal is to launch an NFT marketplace ASAP, these are the simplest steps.

  1. Launch OpenSea white label for a quick marketplace test, its Github repository contains the necessary source code to go live fast
  2. Add NFT minting / smart contracts to your existing platform (UpgradeMedia can do this)
    1. ETH / test chains can be integrated fast with easy wallet activation
    2. WAX can be integrated in weeks (depending on your existing tech’s complexity)
    3. Flow requires a 30 day minimum wait period for approval (as of now)
    4. Many alternative chains are available (we’ve built ETH and MATIC)
  3. Integrate or publish to existing marketplaces

What is an NFT?

A Non-Fungible Token is simply an entry into a digital ledger, typically using a blockchain technology like Ethereum or WAX, that records ownership of that record and details which can include smart contracts for information pertaining to the asset whether it’s digital or physical.

As an example, you could buy wine futures for a specific barrel of wine as an NFT. The record would be entered into the ledger and your token would be your record of ownership. You could keep it, sell a portion of it, or sell it as a whole piece to another party. It isn’t a commodity or a form of currency. It’s a contract for ownership with unique qualities and definitions that relate to your specific transaction.

You could also buy a digital piece of art and the token has a link to that art that is stored in the distributed file system (like the cloud, but not centrally owned). The token would denote specific and authentic ownership of the art piece.

Non-fungible, for our purposes, just means the token isn’t currency or a trading token like Bitcoin or Ethereum currency. It is not crypto currency. The token is unique, one of a kind. If it were one of 20 digital prints, it would be a numbered, unique one of 20 digital print and owning that token would be unique and not one of a bundle of non-unique tokens like a single Satoshi in Bitcoin currency which is one of many tokens that are interchangeable and not uniquely valuable to itself.

Creator and Selling Services

See an exhaustive list of marketplaces

NFT Retail

Global Brands Jumping on NFT

Big Players

  • Dapper Labs behind Crypto Kitties, NBA TopShot, and Flow ($305M recent capitalization, multibillion valuation)
  • WAX, built on EOS, decentralized and NFT focussed

Terminology

  • DApp: decentralized app
    • What are dapps? “Dapps are decentralized apps. They are like normal apps, and offer similar functions, but the key difference is, they are run on a peer-to-peer network, such as a blockchain.”
    • https://www.stateofthedapps.com
  • IPFS: InterPlanetary File System: A peer-to-peer hypermedia protocol designed to make the web faster, safer, and more open.
  • NFT: non-fungible token
  • Blockchain: A type of database that is a peer to peer network.
    • Blockchains store data in blocks, chained together in chronological order.
    • Everytime data is added, it is added as a new block, which is then added to the chain.
    • Different types of data can be stored on a blockchain.
    • If a blockchain is decentralized, then the data that has been entered is irreversible, making a permanent record.
    • These records are very reliable, and extremely difficult to alter.
  • Wallets: store the public and private keys required for crypto transactions. Wallets also often encrypt information in addition to storing keys. They can be stored on a physical device or be provided as a service by a third party exchange site.
    • Cold Storage – When a wallet is disconnected from the internet.
    • Hot Storage – A wallet connected to the internet.
    • Hardware wallet – A wallet stored on a physical medium, like a USB drive.
    • Software wallet – A wallet that is downloaded onto a device, like an app, but still connected to the internet.
    • Online wallet – A wallet that acts like a website. These are usually controlled by a crypto exchange of some sort.

Technologies

Wallets

  • Bitski web based wallet designed for NFTs
  • Magic (formerly known as Fortmatic) is a wallet technology that branded wallets can be built upon
  • Gemini is an online storage and crypto market that provides NFT storage
  • MetaMask is most commonly used wallet on Ethereum based marketplaces
  • Torus is a web based private key storage service
  • Trust Wallet
  • Wax wallet

Side chains and alternative chains

  • Chainlink flexible decentralized oracle network insertion of smart contracts to multiple blockchains
  • EOS baseline infrastructure for private, public, permissioned, and permissionless chains
  • Flow, and docs (from the creators of CryptoKitties and NBA Top Shot) closed or private blockchain, onboarding to this chain will take at least 30 days after proof of concept and passing the tests, as well as your project must be approved by Flow
  • GoChain private chain
  • Magic (previously Formatic) Ethereum wallet SDK/embed
  • Polygon (previously Mattic) for sidechains
  • xDai USD stable blockchain and multi-chain staking token
  • Wax (can crossover to Ethereum) open blockchain, decentralized NFT purposed technologies built on EOS

Programming Resources

Thinking

How do most marketplaces work?

Most markets are running a side chain or one of the alternative chains. Some marketplaces are “maker spaces” and allow a creator to mint the NFT. Typically, the creator uploads a JPG, sets some details like owner, name, and price, and poof they have an NFT!

Markets that store their NFTs on a local database instead of on a decentralized blockchain often allow you to push the NFT to a public or decentralized blockchain for trading. They will require you to pay the gas fees.

What are gas fees? That’s the cost the “miners” are charging to maintain the public decentralized ledger that we trust to maintain our transactional history.

Problems

  1. If I host wallets, do I expose myself to hackers and risk losing crypto and digital assets?
    • Hosting wallets dramatically raises your exposure and risk level. Your systems are a target for hackers, and put your wallets at 100% loss risk protected only by your engineered security.
    • Creating a side chain or an alternative database record allows you to maintain on-site wallets without putting your assets or currency at 100% risk because the wallets reflect a ledger entry in a database or blockchain your system controls, which can be backed up and patched should an intrusion or damage occur. You can even recreate entries after an attack to repair your damaged record.
    • Digital assets are a URI linking to a distributed file system location or any publicly accessible location like an S3 bucket. Without additional cryptographic protection than a typical NFT smart contract with a clear text URI, the material in the smart contract is visible publicly. Encryption would require privatizing access to the NFT URI material. Encrypting the digital file is not a typical NFT minting method right now.
  2. If I create a side chain, is it possible to push those newly minted NFTs on standard decentralized chains like Ethereum?
    • Side chain transactions that comply with the Ethereum standards can be added to the Ethereum blockchain, but the history won’t be an authentic ETH transaction since it didn’t take place on the actual ETH blockchain. Many vendors are using this method to mitigate theft and gas expenses.
  3. What are the downsides to side chains?
    • You maintain the hosted nodes to run the chain.
    • You don’t immediately offload people to the decentralized economy.
    • Transactions aren’t open to other decentralized markets, and assets require a step to load into the true decentralized blockchain to trade openly.
  4. Do buyers care if the NFT is on a decentralized chain?
    • Clearly there is an appetite for non-standard markets.
    • Many alternative markets are showing tolerance for non-ETH blockchains.
    • Time will tell, but centralized coins are popping up for transactions and NFT storage on centralized side chains.
    • You can create a decentralized chain as an alternative to hosted or centralized chains, that can be pushed or transacted to traditional decentralized chains for private wallets.
  5. Where are the digital assets (files) stored and who pays for storage, is it permanent, and is the material itself publicly visible?
    • Some NFTs are pointing to a URI on a paid hosting service like S3.
    • IPFS is decentralized and an attempt to perpetualize the nodes through a community of opt-in storage participation.
    • At some point a distributed + paid file system is a logical eventuality just like miners who are paid through gas fees.
    • One may assume that S3 hosted digital files may one day disappear.

News

  • Decrypt
  • Coindesk is not NFT specific, but relates to blockchain and crypto currencies generally

Reading

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