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WEB3 EXPLAINED — WHAT IS AN NFT?. What are NFTs? How do I create an NFT… | by Lukas Glatt | Coinmonks | Apr, 2023

What are NFTs? How do I create an NFT? And what is the Metaverse anyway? In this blog article we will answer your questions about Web3.

Web3 is a term that refers to the third generation of the Internet, a new phase in the evolution of the World Wide Web. It builds on the concepts of decentralized technologies such as blockchain, cryptocurrencies and token and aims to make the Internet more decentralized, secure, and user-centric.

To understand the difference between Web3 and previous versions, it is helpful to look at the stages of the Internet’s development:

Web 1.0 (the static Web): In this first phase, the Web was primarily static and consisted of simple Wesbites. Users could consume information, but interaction with the web pages was very limited. It was difficult to create or share your own content, and most websites were created by tech-savvy individuals or companies, which made the Web1.0 not dynamic. Websites like Yahoo or Google allowed users to get information, but not to create something in the Web. Because the content to consume was published by only a few, the results of a search on Google for example often didn’t hit the nail on the head.

Web 2.0 (the social web): In this second phase, the Internet became more interactive and dynamic, with users able to create, share, and collaborate on content. Platforms such as social networks, blogs and wikis emerged, allowing users to play a more active role on the Internet. All of a sudden people were able to chat with each other, like or comment on content and a way bigger group of people was able to create their own content on the internet. However, this phase also led to a big centralization of power, with large companies like Google, Facebook, and Amazon taking control of user data and online experiences.

Web 3.0 (the decentralized web): This is where Web3 comes in. This third phase aims to make the Internet more decentralized and secure by relying on technologies such as blockchain, distributed systems, and NFTs. These technologies enable all participants to own digital items for the first time. Whether it is data, access to communities or websites, collectibles, or memberships, owning these digital assets creates entirely new opportunities for users. This is just one example, how Web3 revolutionizes the way we interact online (and sometimes in person) with each other.

In summary, Web3 is an evolution of the Internet that aims to promote decentralization, privacy, and user control. It differs from previous generations in its use of blockchain technology and other decentralized protocols that offer users greater freedom and autonomy‍

Web 1.0, Web 2.0 & Web 3.0 in comparison

Many people confuse NFTs with investment assets or simply define them as images. Of course, NFTs can be bought, sold, or traded because their actual ownership can be tracked and verified via the blockchain. And this is a great opportunity for people and companies to use new ways of interaction, identification and verification.

However, the fact that NFTs can be traded on marketplaces like OpenSea should not be understood as the main purpose of NFTs. In the following, we want to explain what NFTs are in its core and why we think they play an essential part in the way we interact with brands and with each other.

NFTs, or non-fungible tokens, are basically code on the blockchain that represent, for example, uniqueness or ownership of digital goods. Unlike fungible tokens, such as cryptocurrencies, which are auto-exchangeable and have a fixed value, NFTs are unique and not one-for-one exchangeable. Each NFT can have unique characteristics that distinguish it from other NFTs.

NFTs manifest themselves in the real world through images, which, however, rarely represent the functional or usage possibilities of the tokens. For this reason, the image often plays only a minor role in the characteristics of an NFT. Of course, art NFTs or collections that define their rarity based on features in the image are excluded from this.‍

Important terms in the Web3 and Metaverse area

We have already touched on the areas of art and collectibles, which offer exciting use cases and opportunities. However, as a business consultancy, we focus on more concrete applications for businesses and therefore describe how NFTs can be used to achieve business goals in innovative ways.

For example, NFTs offer numerous exciting use cases outside of the arts. One area where Web3 technologies will be used extensively in the coming years is the event and ticketing sector. For example, NFTs can not only combat the black market through authenticity verification and transparent tracking, but also provide exclusive access before, during and after the event using token gating. This gives the ticket much more functionality than just access to the event. Token gating refers to a process that grants access — online or offline — exclusively to those who hold a specific token, such as the festival ticket. For example, a visitor may be incentivized before the event, given exclusive access or drinks during the event, and given access to the exclusive web store after the event.

Token gating is one of many ways NFTs can be used to engage customers and enhance the experience. Other ways include linking NFTs to physical products or building communities with NFTs as a form of membership. Finally, NFTs promote community building by enabling the creation of an ecosystem of engaged and loyal customers and fans who can enjoy special status and exclusive benefits through their NFTs.

The properties of ownership, uniqueness, and authenticity contribute to these added values by clearly proving which user owns which NFT. As described, NFTs can be traded and thus have an individual value that is measured by market demand. For example, when brands distribute NFTs to loyal customers to offer them special brand experiences or rewards that are only available to token holders, demand increases and so does the value of the NFTs. The same happens with tickets that provide not only access to the event but also, for example, access to a post-event website where musicians and artists give exclusive interviews.

Token Gating Process

As already mentioned, NFTs can be transferred or traded on so-called marketplaces. The tradability of NFTs opens up new opportunities for artists and companies to distribute their content directly to consumers and create a secondary market for trading digital assets. In principle, it is also suitable for companies to distribute NFTs to their clientele for free. However, to purchase an NFT, the following steps are usually required:

  1. Set up a wallet: in order to buy and store NFTs, the recipient needs a digital wallet compatible with the blockchain on which the NFT was created. Most NFTs are based on the Ethereum blockchain and require an ERC-721 compatible wallet, such as MetaMask, Trust Wallet, or Coinbase Wallet.
  2. Cryptocurrency for purchase: to buy NFTs, buyers need cryptocurrency, mostly Ether (ETH). Cryptocurrencies can be purchased on exchanges such as Kraken or Binance with a credit card, for example.
  3. The trading platform: there are several NFT marketplaces where NFTs can be bought, such as OpenSea, Rarible or Foundation. It should be noted that not every marketplace is compatible with every wallet.
  4. Connecting the wallet to the platform: in order to trade on an NFT marketplace, the wallet must be connected to the platform. This allows cryptocurrency to be used to purchase NFTs from the wallet and store purchased NFTs directly in the wallet. There are usually fees for the purchase.

Many companies understandably do not want to confront their customers with this process, as using some exchanges or platforms requires a certain basic Web3 understanding. One of our consulting approaches is therefore to make all interactions in Web3 as user-friendly as possible. The steps described above are therefore usually not necessary for companies and their customers. We often design projects in such a way that only an e-mail login is sufficient for wallet generation. As a “cryptocurrency”, company-internal loyalty points would be conceivable, for example. Alternatively, challenges that the customer must complete can simply be set for the receipt of NFTs.‍

In simple terms, the metaverse refers to a virtual, shared, and interactive environment or collection of interconnected worlds where users can interact in real time and perform a variety of activities. Avatars, for example, can be used to create novel and, more importantly, more immersive experiences and opportunities for interaction with brands. The metaverse is also referred to as an extension of the Internet.

In this context, NFTs play a supporting role insofar as they can ensure the exchange, verification, or even checking of digital assets. NFTs can thus be used in the Metaverse to represent digital assets, including virtual real estate, avatar clothing, unique collectibles, original artwork, or can grant access privileges to specific rooms or events.

Users of the Metaverse can buy, sell or trade digital items through NFTs, just as they would in the real world. Because users can create shared interests and value based on their digital collections and memberships, NFTs also foster the development of communities and social interactions in the Metaverse. So it can be said that NFTs contribute as an integral part of the development of the Metaverse.

Don’t wait any longer and seize the opportunity to dive into the exciting world of Web3 technologies! We’ll show you how your industry and business can incorporate Web3 technologies into the existing business model. Unforgettable customer experiences, innovative customer loyalty measures and engaged communities are opportunities that can be realized with NFTs. Schedule an initial consultation now and discover the benefits of NFTs for your business.

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