Establishment of a Company for the NFT Project in Lithuania
Although digital assets, namely digital art, have been around for decades, only recently it has become possible to verify its authenticity by using non-fungible tokens (NFTs), thanks to cryptography-based blockchain technology which is an unchangeable, unhackable database shared across the entire network of computer systems on the blockchain.
A non-fungible token is a unique, non-interchangeable piece of data, or a digital asset, stored on the blockchain. It can be created and traded on such NFT marketplaces as OpenSea, Rarible, MakersPlace and others. By purchasing an NFT, a buyer receives the equivalent of a digital certificate of title or stamp of authenticity, which essentially attests that that particular asset is an original.
However, just like any other digital assets, an NFT can also be shared, downloaded and screenshotted. This doesn’t mean a copyist owns the original image, also such replications don’t have the same monetary value as the authentic asset. The principle is basically the same as in the physical art world: everyone can purchase a reproduction of Gustave Klimt, but there is only one owner of the original, which makes all the difference.
Different Types and Applications of NFTs
NFT’s can be created from a variety of currently available digital files – photos of real-world objects, digital art, GIF’s, any kind of videos, audio files, or text documents. What sort of data or themes those files contain is really a matter of a creator’s imagination as NFTs are not restricted only to the art world, though the market was popularised by digital art NFTs.
One of the most popular examples in the NFT world is the CryptoPunks collection (in the form of 24-by-24 pixel heads) stored on the Ethereum blockchain. When the art project consisting of 10,000 tokens was launched in 2017, their popularity was rather low. As soon as their story and concept got published on a global media website, all the available tokens were swiftly secured by the collectors. Since then the prices have been only increasing. In 2021 CryptoPunk 7523 token was sold in a Sotheby’s auction for $11.8 million (€10.8 million). This early example illustrates the importance of consistent publicity for new NFT projects.
Since NFTs attest the ownership of an authentic object, they are used in the metaverse to buy and trade specific virtual locations, such as LAND in The Sandbox game. Other ways to utilise NFTs are event tickets, music, domain names, identity and more. Further development and growing application of NFTs is positively impacted by the constantly innovated and upgraded infrastructure of the blockchain. As the physical world is slowly migrating into the virtual spaces, many use cases are yet to be invented by the traditional industries, which are looking for ways to capitalise on the demand for the NFTs.
NFT Marketplace Operating Principles
NFT marketplace is a decentralised, blockchain-powered platform where users can create, trade, auction and collect non-fungible tokens after signing up on the platform and installing a digital wallet to store their NFTs along with the cryptocurrency they use to purchase those NFTs.
The number of NFT marketplaces is constantly growing with the focus on different types of NFTs, blockchains, security levels and other factors that should be taken into consideration by potential users before they make any business decisions.
Some notable NFT marketplaces:
- OpenSea – the most established, Ethereum-based marketplace that covers all types of NFTs
- SuperRare – Ethereum-based market, specialising in native digital art NFTs, very selective as it only accepts 1% of the applications
- Rarible – community-owned platform for rare media and sports collections, powered by Ethereum, Flow and Tezos blockchains
- Binance NFT – supported by Binance blockchain, it’s one of the most promising marketplaces due to its steady growth
Lastly, it’s worth noting that every marketplace has terms of service governing business relationships between market participants. Every potential user should familiarise themselves with such documentation prior to deciding to make their digital assets available for trading on one of the platforms.
Types of NFT Standards
NFT standards, simply put, are templates that software developers collectively follow. They determine fundamental principles for building non-fungible tokens on a particular blockchain protocol. Adherence to those principles guarantees frictionless and consistent functioning of the technology, as well as compatibility with other applications.
A few most common NFT standards:
- ERC-721 by Ethereum – the first token standard developed to standardise creation of NFTs on Ethereum platform, remains widely used to this day, especially for rare collectables
- ERC-998 by Ethereum – facilitates arrangeability of the NFT’s which means that users can arrange these tokens into sets of digital assets and sell them as one entity, they’re usually utilised by owners of portfolios containing diverse digital assets
- FA2 by Tezos – growing in popularity, it supports not only non-fungible tokens but also fungible, transferable, non-transferable and multi-asset contracts
NFT Market Growth
The NFT market is booming, with the marketplaces reporting record high numbers of active users. According to DappRadar (a global app store for decentralised applications), sales of NFTs reached almost $25 billion (€22.9 billion) in 2021 compared to $94.9 million (€86.7 million) in 2020.
Not only the most reputable auction houses are jumping in – the most famous global fashion brands (such as Gucci, Nike) and even FMCG companies (such as Coca-Cola, Campbell’s, Clinique) are creating their own NFTs which signals growing adoption of these novel digital assets. They have a huge potential to become one of the main revenue models for the emerging metaverse ecosystem, although some market experts warn of market corrections which normally occur after a rapid growth.
Launching an NFT Startup in Lithuania
Legislation applicable to NFT commerce in the EU is still in its infancy, and the Lithuanian government doesn’t currently enforce any distinctive regulatory framework. Nevertheless, before establishing or investing in a new NFT startup, it’s imperative to dive into the peculiarities of the market regulations.
When it comes to launching an NFT company, it’s all about being dynamic, adopting an individual approach and taking measured risks. If you’re planning to launch a company for your NFT project in Lithuania, a dedicated and qualified team of Company in Lithuania UAB will be pleased to guide you through the process. Our services range from legal advice to assistance in obtaining financial licences in Lithuania.