NFTs (which stand for non-fungible tokens) appear to be ubiquitous these days. These digital assets are selling like 17th-century exotic Dutch tulips, with some costing millions of dollars. They vary from art and music to tacos and toilet paper.
What is an NFT?
An NFT is a digital asset that represents real-world elements such as art, music, video, and in-game stuff. They’re bought and sold online, and they’re usually encoded with the same underlying software as many other cryptos.
Despite the fact that they’ve been there since 2014, NFTs are growing popularity as a tool to buy and sell digital art. In 2021, the global market for NFTs was valued at $41 billion, nearing the whole value of the global fine art market.
NFT grants ownership!
However, many NFTs have been digital works that already exist in some form elsewhere, such as legendary video clips from NBA games or securitized versions of digital art that are already floating around on Instagram, at least in these early days.
Famous digital artist Mike Winklemann, better known as “Beeple,” assembled a composite of 5,000 daily drawings to produce “EVERYDAYS: The First 5000 Days,” which sold for a record-breaking $69.3 million at Christie’s in 2021.
Individual images—or perhaps the full collage of images—can be viewed for free on the internet. So, why are people prepared to spend millions of dollars on something that might be easily screenshotted or downloaded?
Because a non-financial transaction allows the buyer to keep the original object. It also comes with built-in authentication, which acts as proof of ownership. The “digital bragging rights” are almost as valuable as the item itself to collectors.
How does NFT differ from cryptocurrency?
Non-fungible token (NFT) is a term that refers to a token that is not fungible. It’s generally created in the same way as cryptocurrency like Bitcoin or Ethereum is, but that’s where the similarities end.
Physical money and cryptocurrencies are both “fungible,” which means they may be traded or exchanged for each other. They’re also worth the same amount—a dollar is always worth another dollar, and a Bitcoin is always worth another Bitcoin. Because of its fungibility, cryptocurrency is a safe way to perform blockchain transactions.
NFTs aren’t like other materials. Each contains a digital signature that prevents NFTs from being substituted for or compared to one another (hence, non-fungible). Simply because they’re both NFTs, one NBA Top Shot clip isn’t the same as EVERYDAYS. (For that matter, one NBA Top Shot footage isn’t necessarily equal to another NBA Top Shot clip.)
How Does an NFT Work?
NFTs are stored on a blockchain, which is a decentralised public ledger that keeps track of transactions. Most people are familiar with blockchain as the underlying technology that allows cryptocurrencies to exist. NFTs are most commonly kept on the Ethereum blockchain, although they can also be held on other blockchains.
NFTs are essentially digital versions of tangible collector’s artefacts. As a result, rather than receiving an actual oil painting to put on the wall, the customer receives a digital file.
NFTs can only have one owner at any given moment, and their use of blockchain technology makes it simple to verify ownership and transfer tokens between them. In the metadata of an NFT, the creator can store specific information. Artists, for example, can sign their work in the file by signing it.
How to Buy NFTs?
If you’re interested in starting your own NFT collection, you’ll need the following items:
To begin, you’ll need a digital wallet that can hold both NFTs and cryptocurrencies. Depending on what currencies your NFT provider takes, you’ll probably need to buy some cryptocurrency, such as Ether. Coinbase, Kraken, eToro, and even PayPal and Robinhood now allow you to buy cryptocurrency with a credit card. After that, you’ll be able to transfer it from the exchange to your preferred wallet.
When researching your alternatives, keep fees in mind. When you acquire crypto, most exchanges charge at least a portion of your transaction.