What are NFTs?

NFTs, short for Non-Fungible Tokens, are a type of digital asset that represent ownership or proof of authenticity of a unique item or piece of content. Unlike cryptocurrencies such as Bitcoin or Ethereum, which are fungible and can be exchanged on a one-to-one basis, NFTs are unique and indivisible, making each one distinct from another.

NFTs have been instrumental in creating communities and providing various benefits to their holders. The Bored Ape Yacht Club (BAYC) is an example of such a community that has leveraged NFTs to build an engaged and exclusive group of members. Here's how NFTs, like the Bored Apes, are used to create communities and offer additional benefits:

1. Membership and Exclusivity: NFTs serve as digital membership certificates, granting owners exclusive access to a particular community or club. In the case of Bored Ape Yacht Club, owning a Bored Ape NFT grants membership to the club. This membership provides a sense of exclusivity and belonging to a select group of individuals, fostering a strong community spirit.

2. Access to Discord Channels: Discord is a popular communication platform for communities, and NFTs can be used to grant access to exclusive Discord channels. In the Bored Ape Yacht Club, owning a Bored Ape NFT allows members to access private Discord channels where they can interact with other members, participate in discussions, and receive updates and announcements.

3. Utility and Benefits: NFT communities often provide additional benefits and utility to their token holders. For example, Bored Ape Yacht Club introduced "Bored Ape Kennel Club," which allows Bored Ape NFT owners to breed their Apes and generate unique offspring. These offspring can have their own traits and characteristics, adding value and utility to the original NFT. Additionally, NFT communities may offer early access to new releases, exclusive merchandise, or special events to token holders.

4. Gaming Integration: Some NFT communities incorporate gaming elements, providing members with unique in-game assets or access to exclusive game features. For instance, certain NFTs can grant special abilities, items, or characters within blockchain-based games. These games often have their own economies and enable token holders to participate in trading, earning rewards, or competing with other community members.

5. Collaborative Projects and Collectibles: NFT communities frequently engage in collaborative projects and initiatives. Members may participate in community-driven art collaborations, where different NFT holders contribute their assets to create collective artworks. These collaborations enhance the sense of community ownership and create unique collectibles that can be traded or showcased.

Overall, NFT communities leverage the ownership and unique characteristics of NFTs to create an environment of exclusivity, provide access to private channels or platforms, offer additional utility or benefits, integrate with gaming experiences, and foster collaboration among their members. These elements contribute to the development of strong and vibrant communities centered around the shared ownership and appreciation of NFTs.

The history of NFTs can be traced back to the emergence of Colored Coins on the Bitcoin blockchain in 2012. However, the breakthrough moment for NFTs came with the launch of the Ethereum blockchain and the introduction of the ERC-721 standard in 2017. ERC-721 enabled the creation and trading of unique tokens, paving the way for the NFT boom.

Ethereum is the most popular blockchain supporting NFTs, thanks to its smart contract capabilities and robust ecosystem. The ERC-721 and ERC-1155 standards are commonly used for creating and managing NFTs on Ethereum. However, other blockchains have also entered the NFT space, such as Binance Smart Chain (BSC), Flow, and Tezos, each with its own unique features and community.

In addition to blockchains, NFTs can also utilize IPFS (InterPlanetary File System) for storing the actual content associated with the token. IPFS is a peer-to-peer decentralized file storage system that allows for the distribution and retrieval of files across a network of nodes. Instead of hosting the content directly on the blockchain, IPFS provides a way to store files off-chain while keeping the content accessible through a unique hash stored on the blockchain.

When it comes to storing images or other media associated with NFTs, there are two main approaches: on-chain and off-chain storage.

1. On-chain storage: Some blockchains allow for the direct storage of small files on the blockchain itself. However, on-chain storage of large files or high-resolution images is not feasible due to scalability and cost considerations.

2. Off-chain storage: The most common approach is to store the actual content off-chain, utilizing platforms like IPFS, centralized servers, or cloud storage services. The NFT metadata on the blockchain typically includes a link or reference to the off-chain location of the content. This approach reduces the burden on the blockchain, provides flexibility for storing larger files, and allows for more efficient management and delivery of content.

Both on-chain and off-chain storage approaches have their trade-offs. On-chain storage provides stronger immutability and ensures the content is always available as long as the blockchain exists, but it can be limited in terms of file size and cost. Off-chain storage offers more flexibility and scalability but relies on external systems, which may introduce centralization risks or dependencies on third-party services.

Ultimately, the choice between on-chain and off-chain storage depends on factors such as the specific blockchain capabilities, desired level of decentralization, file size requirements, and the trade-offs deemed acceptable for the specific NFT use case.