What is an NFT?

Introduction

NFTs are currently taking over the world of digital art and collectables. Massive sales to a new crypto-audience are changing the lives of digital artists. Celebrities are joining in as they see a new way to connect with fans. However, digital art is only one application of NFTs. They can be used to represent ownership of any unique asset, such as a deed for a digital or physical item.

An NFT is a cryptographically assigned and proven identifier for digital goods. Because NFTs for digital artwork have sold for millions, if not tens of millions of dollars. Calling them popular may be an understatement. NFT sales reached $29 billion between June 2021 and June 2022.

However, once you understand how NFTs work, you'll notice that there are other applications for this technology. Let's start with what they really mean

What is an NFT?

NFT (Business Today)

An NFT is a digital asset that links ownership to unique physical or digital items such as works of art, real estate, music, or videos. It is also an abbreviation for "Non-Fungible Token".

NFTs can be thought of as modern-day collectables. They are purchased and sold online and serve as digital proof of ownership for any given item. NFTs are securely recorded on a blockchain, the same technology that underpins cryptocurrencies - ensuring that the asset is unique. It also makes it difficult to alter or counterfeit NFTs.

To truly understand NFTs, it's helpful to first understand the economic concept of fungibility.

• Fungible Items have a value that is not tied to their uniqueness. Fungible items can be easily exchanged. You can, for example, exchange a $1 bill for another $1 bill and still have $1 even if your new bill has a different serial number.
• Non-fungible items cannot be interchanged. Each token in an NFT has distinct properties and is not worth the same amount as other similar tokens.

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What makes them so unique and expensive?

Image of an NFT Ape (Forbes Advisor)

Individual images or even the entire collage of images of apes can be viewed online for free by anyone. So, why are people willing to spend millions of dollars on something that can be easily screenshotted or downloaded?

This is simply because an NFT allows the buyer to retain ownership of the original item. Furthermore, it includes built-in authentication, which serves as proof of ownership. Collectors value "digital bragging rights" nearly as much as the item itself. Bringing us to the more technical question of how they work.

How do NFTs work?

Tezos (Unsplash)

Many NFTs are created and stored on the Ethereum network, but NFTs are also supported by other blockchains (such as Flow and Tezos). Because the blockchain is accessible to anyone, NFT ownership can be easily verified and traced, while the person or entity that owns the token can remain anonymous.

Different types of digital goods, such as artwork, game items, and stills or videos from a live broadcast, can be "tokenized". While the NFT that conveys ownership is added to the blockchain, the digital item's file size is irrelevant because it remains separate from the blockchain.

Depending on the NFT, the copyright or licencing rights may or may not be included with the purchase. Same way purchasing a limited-edition print does not automatically grant you exclusive rights to the image.

NFTs may have many potential applications outside of the art world as the underlying technology and concept advance.

What does it mean to have an NFT minted?

NFT (Unsplash)

Simply put, minting an NFT means converting a digital file (such as a JPEG, GIF, or PNG) into a blockchain-based digital asset or crypto collectable. You will be able to sell your unique token once it has been published on the blockchain. To mint an NFT, you must pay a small amount of cryptocurrency.

You can make a collection out of a single image or multiple images. You may be able to add a name, description, and other metadata to your token depending on the marketplace where you host your NFT. You can also set royalty amounts on your NFT, which are percentages of each subsequent sale on the secondary market.

What is the distinction between NFTs and cryptocurrencies?

$SHIBA INU Currency (Unsplash)

NFTs and cryptocurrencies both rely on the same blockchain technology. NFT marketplaces may also require people to use cryptocurrency to purchase NFTs. Cryptocurrencies and NFTs, on the other hand, are created and used for different purposes.

Cryptocurrencies aim to function as currencies by storing value or allowing you to buy and sell goods. Cryptocurrency tokens are fungible, similar to fiat currencies such as the US dollar. NFTs generate one-of-a-kind tokens that can be used to demonstrate ownership and convey rights over digital goods.

How to Purchase an NFT

NFTs can be purchased, sold, traded, and created using online exchanges or marketplaces. The creator or current owner may specify a price. Alternatively, there may be an auction in which you must bid on the NFT. The following is a short list of places you can buy an NFT:

• Foundation: A community-curated marketplace in which creators must be invited by other creators already on the platform.
• Nifty Gateway: An art-focused marketplace that collaborates with well-known brands, athletes, and artists.
• OpenSea: One of the first and largest marketplaces for NFTs for a wide variety of collectables.
• Rarible: Provides a variety of NFTs with a focus on art. Rewards members with its own RARI token.
• SuperRare: is a marketplace that specialises in curating and selling digital art.

Closing

While NFTs may have many practical applications in the future, they are currently primarily used in digital art. NFTs provide a seamless way for creators to sell digital art that may not have a large market.

Want to create your own beautiful NFT collection and make lots of cash selling them? Reach out to us let's make your NFT dreams a reality!