What are NFTs?

Non-fungible tokens (NFT) have revolutionized the digital world. Being a new crypto addition, NFTs are taking the digital world by storm. They are a form of digital asset that people can own and earn great value since they are making huge sales in the digital marketplace.

But what are they and how do they work? To find out more on the topic of NFTs, read on.

What are NFTs and How Do They Work?

NFTs are unique, making them irreplaceable and non-exchangeable. They are a form of fixed digital asset that can be sold for their original value but cannot be copied or exchanged with other assets.

The idea of NFTs differs from a fungible token that can be replaced with other items in exchange for money. For instance, the owner of the famous original painting, Mona Lisa, cannot exchange it with other assets. People can either buy it from them or they can only take their pictures, which means they cannot purchase their copies.

In other words, NFTs represent ownership of unique digital assets that are one of a kind. There is only one owner of any NFT at a time. To guard the ownership and originality of NFTs, they are secured with Ethereum blockchain technology including metadata, transaction rights, and identification codes that do not allow the copy/paste of the assets and prevent the modification of the ownership documents.

Although they are bought with cryptocurrencies, they have different properties. Unlike cryptocurrencies that can be traded or exchanged, NFT is a unique asset that is non-fungible.

Scarcity of NFTs

An NFT owner has the authority to decide whether their asset will have a scarcity or they will have replicas. They can make thousands and billions of replicas or they can keep them unique.

Royalties

An NFT owner gets to receive royalties when they sell their asset. For instance, EulerBeats Originals earned 8% royalty for every sale.

How are NFTs Secured?

The process of storing and securing NFTs consists of the following steps:

  •     A new block is created.
  •     Information is validated and recorded in the blockchain.
  •     The owner receives a unique identification code that is linked to one Ethereum address only.
  •     The code can be used by owners to track their assets.
  •     The creator receives a public key as a certificate of authenticity.

How Is an NFT Different from Cryptocurrency?

Cryptocurrencies like Bitcoin or Ethereum are built with the same kind of programming that NFT shares. However, the difference is that cryptocurrency is fungible, whereas an NFT is a non-fungible asset.

Examples of Non-Fungible Assets

A lot of things around us are non-fungible assets. For instance,

  •     Tokenized invoices
  •     unique sneaker in a limited-run fashion line
  •     Legal documents
  •     unique digital artwork
  •     A domain name
  •     GIFs
  •     A digital collectible
  •     Signatures
  •     An in-game item
  •     A ticket that gives you access to an event or a coupon
  •     A domain name
  •     An essay
  •     Digital Art including Music or Videos
  •     Collectibles
  •     Deeds to a car
  •     Tickets to a real-world event

What are NFTs Used For?

On Ethereum, NFTs can be used for the following things:

  •     Investments and collateral
  •     Gaming items
  •     Digital content
  •     Physical items
  •     Domain names

Key Points

  •     NFTs are unique cryptographic tokens.
  •     You can prove your ownership
  •     They are secured by blockchain technology.
  •     They cannot be exchanged or copied.
  •     You can earn royalties each time it’s sold.
  •     NFTs are used to represent people’s identities, property rights, and more or real-world items such as artwork and real estate.
  •     You can determine the scarcity.
  •     They can be sold on any NFT market

NFT Marketplaces

How to Make an NFT?

As mentioned earlier, NFTs can be anything. To create an NFT you need to search the marketplace that supports the sales of NFTs. Next, you need to have a digital wallet on Ethereum where you will turn your content or asset to NFT.

From Where Can You Buy an NFT?

Some of the platforms currently selling NFTs are:

  • Foundation
  • OpenSea
  • Nifty Gateway
  • SuperRare
  • Axie Marketplace
  • NFT ShowRoom
  • VIV3
  • BakerySwap
  • NFT ShowRoom
  • Rarible
  • Mintable

Niche-Specific Marketplace

Some marketplaces sell niche-specific NFTs. Such as,

  •     Valuables for auctioning tweets
  •     NBA Top Shot for basketball video highlights

How to Sell NFTs?

If you are willing to sell NFTs, you need to upload your content or asset to a marketplace. Following the given instruction on the platform, you will convert them into NFT. Then, you will be allowed to add a price and description beneath your listing. There are different platforms where you can sell NFTs. However, most purchases are made using Ethereum cryptocurrency. Other ERC-20 tokens such as WAX and Flow also support their transactions.

How to Buy NFTs?

For beginners, it is very difficult to decide their directions as an NFT investor. Before investing in any NFTs, you need to examine a few factors. For instance,

  •     Which marketplace is supporting the sales and purchase of NFT?
  •     How you will store them?
  •     What kind of digital wallet allows storing them?
  •     Which cryptocurrency promotes the sales and purchase of NFT?

 

  •     An animated Gif of Nyan Cat which is a 2011 meme of a flying pop-tart cat has been sold for more than £365,000 ($500,000) on 19th February.
  •     This event was followed by a sale of digital art by the musician Grimes worth $6m and more.
  •     Twitter’s founder Jack Dorsey has sold his tweet with bids hitting $2.5m that making it the first-ever selling NFT tweet. This event indicates that only art is not traded. The list of things goes beyond it where you can trade anything.
  •     French firm Sorare has raised $680m (£498m) on football trading cards. He sold it as an NFT.
  •     Also, according to some sources, the popular meme, ‘Side-eyeing Chloe’ is all set to be sold as NFT.

How Much Has the Market Grown Recently?

NFTs are traded since 2017, but recently in 2021, the world of digital assets has seen a revolution in form of NFTs. it has surged in popularity since 2021 and awaits more popularity in the coming years. According to the data received from the market tracker DappRadar, NFTs have made up to $10.7 billion in sales in the third quarter of the year 2021, eight times greater than the previous records. In October 2021, OpenSea which is one of the biggest NFT marketplaces has earned $2.6 billion from NFT trading.

Here are some examples of big NFT deals that got popular. 

  •     An animated Gif of Nyan Cat which is a 2011 meme of a flying pop-tart cat has been sold for more than £365,000 ($500,000) on 19th February.
  •     This event was followed by a sale of digital art by the musician Grimes worth $6m and more.
  •     Twitter’s founder Jack Dorsey has sold his tweet with bids hitting $2.5m that making it the first-ever selling NFT tweet. This event indicates that only art is not traded. The list of things goes beyond it where you can trade anything.
  •     French firm Sorare has raised $680m (£498m) on football trading cards. He sold it as an NFT.
  •     Also, according to some sources, the popular meme, ‘Side-eyeing Chloe’ is all set to be sold as NFT.

Why Have NFTs Surged in Popularity?

With people spending more time at their homes since the lockdown has been imposed throughout the world, the NFT has been able to secure a good position in the digital world. It has given people an online platform to invest in unique digital assets through digital currencies, most popularly with Ethereum cryptocurrency.

Until now, many people have made great wealth by selling their NFTs on online marketplaces. The hype also surrounds the fact that the NFTs can be created with anything that circulates on the internet. Be it games, memes, tweets, art, or real-life investments, you can trade anything. Artists can monetize their art. People can even invest in Decentralands through NFTs where you can have your digital lands that can be customized according to your needs and desires. Also, it supports the digital investment of physical properties.

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