Update learn-nft.md. New content propopsal.

docs/learn/learn-nft.md

@@ -12,67 +12,131 @@ NFTs within the Polkadot ecosystem.
 
 ## Fungibility
 
-NFT stands for _non-fungible token_. Fungibility means interchangeability inside of a group. In
-theory, a $20 bill is always worth $20 in a store and identical in value to any other $20 bill. It
-is not, however, fungible with a $1 or $100 dollar bill (outside its group).
+NFT stands for non-fungible token. Fungibility is defined as interchangeability inside of a group.
+All valid issued $1 notes are a group to itself. A $1 note is always interchangeable with any other
+$1 note. It is not, however, interchangeable with $20, $50 or $100 dollar notes (these are separate
+note groups).
 
-A Pokemon™ trading card of a Charizard is non-fungible with a card of Squirtle, whereas editions of
-Charizard are fungible with each other.
+A fungible item may be unique. In the currency note example, each issued note has a serial number
+making it a unique member of the group
 
-Fungibility is a spectrum - what is fungible to some might not be fungible to others. In reality,
-Pokemon™ cards, the canonical example of non-fungible assets are more fungible than US dollar
-bills, each of which has a unique serial number that may be important to a government agency. The
-cards have no serial numbers [1].
+![one dollar](https://www.investopedia.com/thmb/Nr-RLORu5CX_lIWZfLmV5X0eIrc=/613x345/smart/filters:no_upscale%28%29/Clipboard01-d20f6eb9351e4f36a46e11fd87b53b2d.jpg)
 
-![one dollar](<https://www.investopedia.com/thmb/Nr-RLORu5CX_lIWZfLmV5X0eIrc=/613x345/smart/filters:no_upscale()/Clipboard01-d20f6eb9351e4f36a46e11fd87b53b2d.jpg>)
+A case where a fungible item is not unique is a simple plastic betting chip. Each chip in its
+pristine state is indistinguishable from any other chip and each is interchangeable within its own
+group.
 
-Additionally, a digital item like a "purple magic sword" in a game may be fungible with another
-visually identical sword if all the player cares about is the looks of their character. But if the
-other sword has a different function, and that function influences the outcome of an adventure the
-player is about to embark on, then visually identical swords are absolutely non-fungible.
+On the other hand, an NFT is unique and has features that allow for its uniqueness.
 
-Bearing that in mind, the simplest explanation of NFTs is that **NFTs are rows of arbitrary,
-project-specific, and non-interchangeable data that can be cryptographically proven to "belong" to
-someone**. This data can be anything - concert tickets, attendance badges, simple words, avatars,
-plots of land in a metaverse, audio clips, house deeds, mortgages, and more.
+## NFT Anatomy
+
+Every NFT has three common components irrespective of the chain it belongs to or originates from
+that make it unique.
+
+- **Identity**: Defined via a property, address or a contract.
+- **Ownership**: Determined via a contract or a wallet address.
+- **Metadata**: Can be a single reference to an off-chain object (digital asset or contract) or, in
+  case of advanced NFTs, an elaborate data structure containing both on-chain data and off-chain
+  references.
+
+## NFT Purpose
+
+What purpose does a unique digital asset provide? The answer to this question lies in the two
+distinct ways an NFT is utilized.
+
+The first is the use of NFTs as a speculative store of value derived from their uniqueness (rarity,
+implied, or intrinsic worth). This initial novelty aspect of NFTs initiated an era of collectibles
+and tradeables and instantiated the appearance of the mass markets where NFTs were traded as a
+commodity. This is also recognized as the era of the simple NFT, otherwise known as static NFT. The
+Uniques pallet was created to facilitate this implementation of the NFT.
+
+The second implementation is as a utility. As mentioned, when we define an NFT, it can store data
+on-chain. By convention, we call this NFT component the NFT’s _metadata_. Generally, an NFT is an
+independent, sovereign data record. This is where the utility aspect of an NFT lies. An NFT can be a
+digital key, a collection of documents, an atomic data fragment, or a unique personal set of related
+assets and information that can be owned. An example of NFT utility is the
+[OG WUD Burn NFT Collection](https://kodadot.xyz/ahp/collection/244) where each NFT grants some
+benefits within the [FlappyWUD game](https://flappywud.lol/).
+
+These two roles are not mutually exclusive. An NFT can be a store of value only, a value-less
+utility token exclusively, or both at the same time if it has worth on the market as a utility token
+or, inversely, if it is primarily a token of worth with additional utility.
+
+It is the utility aspect of the NFTs that has been the driving force behind the development of and
+transition to the advanced NFT concept central to Polkadot’s NFTs pallet development.
 
 ## NFT Standards
 
-A general-purpose blockchain is not built to natively understand the concept of NFTs. It is only
-natively aware and optimized for its own native tokens, but implementations built on such a chain
-are essentially "hacks".
+Due to its heterogeneous nature, the Polkadot ecosystem supports differing implementations of NFTs.
+Polkadot’s core blockchain technology is based on Substrate. Accordingly, NFTs created in
+substrate-based context are called “native” NFTs. Native NFTs are created through dedicated methods
+available in pallets, collections of functions written as Wasm code. Polkadot Uniques and NFTs
+pallets and Unique Network’s NFT utility pallet bundle provide a way to do this. Here a common
+standard for metadata may provide direct interoperability and efforts in that direction are being
+made through the XCM initiative
+([RFC-0125: XCM Asset Metadata](https://polkadot-fellows.github.io/RFCs/approved/0125-xcm-asset-metadata.html#rfc-0125-xcm-asset-metadata)).
+
+Polkadot’s Ink! language for writing contracts in Substrate provides a separate mechanism for
+creating NFTs. Astar has been spearheading this effort and one example of this is their
+[PSP34](https://github.com/w3f/PSPs/blob/master/PSPs/psp-34.md) (Polkadot Standards Proposals)
+initiative for standardizing NFTs using the Contracts pallet.
+
+The availability of Ethereum Virtual Machines (EVM) in the Polkadot ecosystem provides yet another
+way to create and manage NFTs using Solidity contracts just like on the Ethereum network. Such NFTs
+are built in adherence to the corresponding ERC standards adopted from the Ethereum network.
+
+## Birth of NFTs - The EVM Domain
+
+A general-purpose blockchain is not built to natively support the concept of NFTs. It is only
+natively aware and optimized for its own native fungible tokens, and implementations built on such a
+chain are essentially "special case smart contracts".
 
-For example, Ethereum is a general-purpose blockchain that does not have the concept of "tokens"
-(fungible or not) built-in. Tokens in Ethereum are essentially spreadsheets of information to be
-interpreted and read in a certain way by various user interfaces. This _way_ in which they should
-read them is called a _standard_.
+For example, Ethereum is a general-purpose blockchain that does not have the concept of "tokens" at
+all (fungible or not) built-in. Tokens in Ethereum are essentially spreadsheets of information to be
+interpreted and read in a certain way by various user interfaces via an executable code named a
+“smart contract”. An agreement on the structure of such a construct is declared a standard and is
+designated by the Ethereum Request For Comments (ERC) document.
 
-The most widespread fungible token standard you may have heard of is ERC20, while the most
-widespread NFT standard is ERC721, followed closely by ERC1155. The downside of having to define
-these standards is that they are always instructions for how to read a spreadsheet pretending to
-serve information in a certain way, which by definition cannot be optimized. For this reason, even
-on a good day of extremely low network congestion, interactions with NFTs on any EVM chain will cost
-a few dollars but were on average around $100 per interaction (transfer, mint, sale) in 2021 on
-Ethereum.
+The core NFT EVM standard is defined in [ERC721](https://eips.ethereum.org/EIPS/eip-721), but there
+are extended implementations that introduce some aspects of advanced NFT features like
+[ERC1155](https://ethereum.org/en/developers/docs/standards/tokens/erc-1155/).
 
-This prevents use cases that go beyond the current craze of _digital dust gathering NFTs_ on
-Ethereum - profile pictures, generative "look once and then put away" art, [ENS](ens) addresses, and
-[proof of attendance badges](https://poap.xyz/) (which have since moved to the xDAI chain to save on
-gas fees).
+This approach’s significant shortcoming is its inability to combine standards implicitly. This
+introduces the necessity of creating custom contract implementations for specialized use cases where
+one might desire combined features. Each ERC that provides an advanced NFT feature is an isolated
+subset. As will be shown later, this is not the case for Polkadot native NFTs.
 
-### A typical [NFT on Ethereum](https://opensea.io/assets/ethereum/0x2127fe7ffce4380459cced92f2d4793f3af094a4/12598)
+A blockchain must provide a mechanism for overcoming these limitations to facilitate the creation of
+advanced NFT tokens, as we will see in the upcoming section.
+
+A typical
+[NFT on Ethereum](https://opensea.io/assets/ethereum/0x2127fe7ffce4380459cced92f2d4793f3af094a4/12598)[​](https://wiki.polkadot.network/docs/learn-nft#a-typical-nft-on-ethereum)\*\*
 
 ![samurai nft](../assets/nft/samurai.png)
 
-For the sake of comparison, we can refer to these as NFTs 1.0: static NFTs that are almost
-exclusively image-based collectibles of varying rarity.
+For the sake of reference, we can refer to these as static NFTs that are almost exclusively
+image-based collectibles of varying rarity.
 
 ## NFTs in Polkadot & Kusama
 
-This is where Polkadot's technology shines and where NFTs 2.0 come into play. By allowing
-[heterogeneous application-specific shards](learn-parachains.md) to exist, builders can natively
-optimize for complex NFT use cases without tradeoffs that would make interacting with the system
-prohibitively inefficient and expensive in other environments.
+As mentioned, standardized pallets provide a decentralized processing mechanism through Wasm
+contracts, specifically optimized for an NFT implementation’s advanced functionality. Two examples
+are the Polkadot NFTs pallet and the Unique Network’s collection of NFT utility pallets. This
+approach allows any parachain in the ecosystem to access advanced NFT features without building a
+contract framework from scratch.
+
+With the introduction of NFT capabilities to the cross-chain messaging format (XCM), a direct
+inter-chain NFT transfer solution is becoming a reality.
+
+A critical aspect of NFT interoperability hinges on the ability of differing networks to agree on a
+common metadata format. This greatly simplifies interoperability and removes the need for metadata
+conversion steps. In this regard, an effort is underway to make this a reality in this proposal
+[RFC-0125: XCM Asset Metadata](https://polkadot-fellows.github.io/RFCs/approved/0125-xcm-asset-metadata.html#rfc-0125-xcm-asset-metadata).
+
+The other option of building a framework of Solidity contracts as the scaffolding for advanced
+features within an EVM is also viable. Still, it is hampered by the necessity of using bridging
+mechanisms for cross-chain transfers and a lack of a derivative NFT solution. This approach exhibits
+much less efficient transaction processing than the native substrate solutions.
 
 :::info
 
@@ -81,22 +145,47 @@ and Kusama.
 
 :::
 
-## Bridging
+## Cross-Chain Transfers
+
+Transfer of NFTs across chains is one of the most engaging issues in blockchain. In terms of the
+mechanism through which a transfer of the NFT can occur on the Polkadot network, two distinct
+approaches exist:
+
+- Asset teleportation
+- Asset reservation via sovereign account mechanism - derivative NFTs
+
+Cross-chain transfers within the Polkadot Substrate ecosystem are exclusively executed through the
+XCM (Cross-Consensus Messaging) system. This system provides native, trustless security at the
+protocol level, eliminating the need for external bridge solutions. The XCM implementation
+significantly enhances security by removing the trustful aspect of the transactions, which is
+typically required by bridge architectures and represents potential points of failure and security
+risk in cross-chain communication.
+
+NFT transfers can be decomposed into two independently transferable components:
+
+- core asset properties, consisting of identity and ownership data, and
+- optional metadata attributes.
+
+In certain cross-chain operations, such as staking, complete NFT teleportation is unnecessary. This
+was demonstrated through a successful
+[XCM implementation between Unique Network and Acala](https://unique.network/blog/unique-network-cross-chain-nft-proof-of-concept-is-here/),
+where a derivative NFT was created on the Acala chain representing the original NFT from Unique
+Network. The derivative implementation required only core asset properties, as metadata transfer was
+nonessential for staking and collateral use cases where only identity and ownership verification are
+required.
+
+Teleportation, i.e., a complete transfer of identity ownership and metadata, may be the optimal
+solution for a complete asset migration and the only available option for bridging mechanisms.
 
 Bridging to and from Substrate chains and EVM chains takes much effort but is a highly desired
 feature in the NFT industry. Merging the collector and customer base has significant implications,
 so multiple projects focus on making this possible.
 
-Apart from RMRK (Substrate-to-Substrate seamless teleportation natively with [XCMP](learn-xcm.md))
-and Efinity (Paratoken), the following efforts are underway:
-
-- [**MyNFT**](https://mynft.com/): an EVM to EVM bridging effort.
-- **RMRK \<-\> EVM** Simplification bridge: a bridge developed during the
-  [RMRK hackathon](https://rmrk.devpost.com) for porting RMRK NFTs into simplified IOUs on EVM
-  chains
+## What’s Next From Here?
 
-## References
+Utility NFTs are at a very early adoption stage.
 
-- [1]: [Investopedia](https://www.investopedia.com/terms/l/liars-poker.asp)
-- [2]:
-  [Unique Network's Chelobrick](https://unique.network/blog/chelobricks-making-waves-with-10-000-substrate-based-nfts/)
+If you consider an NFT an ownable, universal digital encapsulation of data, it has a role as
+significant as that of a smart contract. Real-world asset tokenization, tradable digital coupons,
+virtual digital keys and badges, bundles of utility, resource, and accomplishment tokens, data
+wrappers… a likely advent of the era of discovery lays ahead.