Establishment of a company for the NFT project in Estonia

Establishment of a company for the NFT project in EstoniaNon-reciprocable token (NFT, non-fungible token) is a type of cryptographic token, each specimen of which is unique and cannot be replaced by another analogous token without changing the value and substance of the object.

Non-reciprocable token is a certificate of uniqueness of a digital object – a digital cryptographic certificate that confirms ownership of a digital asset. The NFT does not prevent copying of a digital artifact, but only secures ownership of the original copy of a digital asset. NFT tokens are used on open platforms to confirm ownership of digital assets. NFT tokens are most commonly used as examples of computer art, collectible digital objects, and characters in online games. Fully digital art was one of the first uses of unique tokens, as they provide evidence of the authenticity and possession of a digital object.

Like cryptocurrency, NFT is created using a blockchain that acts as a database to record all transactions. Blockchain guarantees authenticity of non-reciprocable tokens. With this system, any user can verify the original and history of each particular NFT. By buying a NFT token, the user buys a certificate on the product. The product itself is not moved anywhere. It is on the Perpetual Repository (IPFS). This certificate is essentially a line of code that confirms that it is the owner of the token who owns the original copy of the object. The NFT token is compared to a painting that may belong to a gallery, a museum or a private individual, but the audience can see it in a catalogue or exhibition.

The NFT market grows and develops every year, and captures millions of investors,  collectors, gamers, and all those who are interested in obtaining unique objects in digital form around the world. In 2021, the NFT market showed an increase of 2,500% compared to 2020. The main beneficiaries of the NFT market were websites (NFT marketplaces), which provide the opportunity for the simplest purchase and sale of NFT.

NFT marketplace operating principle

Unlike cryptocurrency (BTC, Ethereum, etc.) it is not possible to trade non-reciprocable tokens directly on ordinary cryptocurrency exchanges. You can buy and sell NFT on special trading platforms that allow to release, store and trade non-reciprocable tokens. Major marketplaces such as:

These sites generate NFT with special smart contracts that add a unique set of information (metadata) and specify its main parameters (name, permanence, inseparability, address/number, etc.) to each token. After that, you can buy and sell non-replaceable tokens on the site at a fixed price or through auctions.

NFT niches and applications

Most FFTs are used to commercialize digital art from digital copies of real pictures to memes. For example, on the OpenSea marketplace you can buy, sell and transmit images, videos, gifs and music. This platform runs on Ethereum and releases NFT using the ERC721 and ERC1155 protocols. Visual art is not the only field of application of non-retestable tokens. They can also be used for trading collectible cards (NBA Top Shot), game characters (CryptoKitties), real estate (Mintable), virtual worlds (Metaverses), and any other sphere where you can token ownership of something.

Standards for non-reciprocable tokens

To run a NFT on a blockchain basis, it is necessary to use certain token standards that guarantee that the asset will act in a certain way and demonstrate, how to interact with the main functions of the asset. Currently, the most popular standards for running NFT are:

ERC721. Used to uniquely identify someone or something based on Ethereum. It supports smart contracts and offers an authorized transfer method using transferFrom.

ERC1155. By standard, identifiers represent not just one unique asset, but an asset class. This is much more effective than the ERC721 standard.

BEP. The largest cryptocurrency exchange, Binance, launched a new BSC blockchain with support for smart contracts and compatibility with the Ethereum Virtual Machine (EVM). And it has the analogues ERC721 and ERC1155 for NFT – BEP-721 and BEP-1155, respectively.

In which country to launch NFT project?

If you want to start a project using NFT, Estonia is the most appropriate jurisdiction. In Estonia, the issue of NFT tokens is not regulated by law – there are no restrictions provided by law for the creation and further sale of NFT. Income earned in virtual currency is taxed in the same way as income earned in regular currency.

LKS Consult OÜ specialists will be glad to help you with the launch of the project using NFT and will advise you on company formation in Estonia.