What is NFT?

NFT stands for “non-fungible token.” Fungible means interchangeable. So, a non-fungible token is a non-interchangeable digital token. Because NFTs are non-interchangeable, it means that they are unique. NFTs represent real-world objects like art, videos, in-game items, and music.

nft_feature_image

Table of Contents

NFTs are powered by blockchain technology. It is blockchain technology that upholds their integrity and security and prevents them from being copied. In other words, blockchain technology allows NFTs to have true digital scarcity. This scarcity helps to attract buyers who want to own unique digital assets.

Key Takeways

  • NFT stands for “non-fungible token” 
  • Non-fungible tokens (NFTs) are non-interchangeable with any other token, this makes them unique 
  • NFTs are digital representations of real-world assets like paintings, graphic art, music, videos, in-game items, etc. 
  • People value NFTs for their scarcity and artistic quality, some NFTs have sold for tens of millions of dollars 

How to Buy NFTs?

If you want to buy NFTs you can do so on NFT marketplaces. There is a wide range of NFT marketplaces available to NFT buyers. Some of the most popular of these marketplaces are: 


 

NFT marketplaces usually require you to make transactions in a cryptocurrency. Ethereum is the most common cryptocurrency for purchasing NFTs on NFT marketplaces. However, each NFT platform has its own list of cryptocurrencies that it accepts for transactions. For example, OpenSea allows transactions to be made in over 150 different cryptocurrencies including Solana, DAI, USDC, and many others in addition to Ethereum. 

 

So, if you would like to buy NFTs on an NFT marketplace, you will need to possess a certain amount of at least one of the cryptocurrencies that the marketplace accepts for transactions. You will also need to create an account on the specific NFT platform you would like to use and deposit your crypto tokens into your wallet on the NFT platform. Once you have done this, you can buy NFTs outright or bid on them in auctions if the platform you are using has auctions. 

How are NFTs Different From Standard Cryptocurrencies?

The biggest difference between NFTs and standard cryptocurrencies is that NFTs are non-fungible and standard cryptocurrencies are fungible. So, for example, two different NFTs, even if they look similar, are still unique and non-interchangeable. But, two Bitcoins on the other hand are completely interchangeable. Bitcoin A does not possess any properties that make it non-interchangeable with Bitcoin B. 

Because cryptocurrencies are interchangeable and fungible, each unit has the same value as any other cryptocurrency of the same nature. So, for example, if Bitcoin A has a value of $50,000, Bitcoin B will also have a value of $50,000. NFTs, on the other hand, tend to have completely different values. Every NFT has a unique digital signature that prevents it from being identical to another NFT. This makes it impossible for the value of NFT A to be consistently equal to the value of NFT B. 

How Do NFTs Work?

NFTs are digital files that have their metadata stored on a blockchain such as the Ethereum blockchain. Once the NFT is added to the blockchain, the metadata for that NFT is forever preserved on the blockchain. This allows the authenticity of each NFT to be verified at any given time. 

In addition to Ethereum, Cardano and Solana are popular blockchain options for NFTs. There are many different blockchains that can be used for creating and storing NFTs. 

The purpose of NFTs is to allow people to own authentic, scarce, and valuable digital collectibles. NFTs are very similar to physical collectibles such as original paintings or autographed photos. However, instead of physically owning the painting or autographed photo, NFTs allow people to own a digital representation of the item. 

NFTs can be made for many different items including: 

 

  • Paintings 
  • Digital illustrations 
  • Videos 
  • Songs 
  • Autographed merchandise 
  • High-end watches 
  • Sports highlights 
  • Video game skins 
  • Virtual avatars 
  • Music 
  • Designer sneakers 
  • Tweets 

Once a person owns an NFT, he or she can keep it for as long as he or she wants. He or she can also sell the NFT at any time.

How are NFTs Created?

NFTs are created through a process that is called “minting.” During the minting process, an artist, content creator, or license holder signs a blockchain transaction that outlines the fundamental details of the token. Once this step is complete, the transaction is broadcasted to the blockchain, which triggers a smart contract function. When the smart contract is triggered, it creates the token and assigns the token to an owner. 

All NFTs contain a unique token identifier, which is also known as a token ID. This token ID is stored inside a smart contract. NFTs are set up so that when the owner wishes to sell or trade the NFT to another person, ownership can be easily reassigned. 

NFTs as Investments

Some people prefer to use NFTs as investments. This is because the value of a particular NFT can increase substantially over time. The value of an NFT can increase over time if demand for the NFT increases. Ever since NFTs started becoming popular between 2015 and 2017, many savvy investors have been using them as investments. 

In many nations, NFTs are subject to capital gains taxes. So, anyone who wants to try to use NFTs as an investment should be aware of this. 

When Were NFTs Invented?

The first-known NFT was created by two men, Kevin McCoy and Anil Dash, in May of 2014. They named their NFT, Quantum. The Quantum NFT consisted of a video that was made by McCoy’s wife and it was registered on the Namecoin blockchain. This NFT was sold for $4. At the time, there was no term for this type of digital asset, so McCoy and Dash referred to it as “monetized graphics.” Quantum represents the first time that a tradeable, non-fungible blockchain marker was linked to a work of art through on-chain metadata. 

What Are NFTs Worth?

The value of NFTs varies dramatically. Some NFTs are only worth a few pennies or a few dollars and some are worth as much as tens of millions of dollars. As of April 2022, the most expensive NFT ever sold was an NFT titled, The Merge by the artist known as Pak. The Merge sold for $91.8 million on December 2nd, 2021. 

This NFT was not bought by one individual, but was instead bought by a group of over 29,000 people who pooled their resources to buy the NFT. 

Another example of a famous NFT that sold for millions of dollars was the NFT offered by Twitter founder, Jack Dorsey. Jack Dorsey created an NFT for the first-ever tweet on Twitter, which was made by him and reads “just setting up my twttr.” This NFT was sold for over $2.9 million in 2021.

Table of Contents

nft_feature_image

What is NFT?

NFT stands for “non-fungible token.” Fungible means interchangeable. So, a non-fungible token is a non-interchangeable digital token. Because NFTs are non-interchangeable, it means that they

Read More »
what is bitcoin

What is Bitcoin?

Bitcoin is a digital or virtual currency created through a sophisticated decentralized process. It can be traded and exchanged without the intervention of banks or

Read More »
fiat money

What is fiat money?

“fiat money refers to a government-issued currency. Plus, this type of currency isn’t backed by physical commodities such as gold and silver. Instead, it is

Read More »
What is Crypto Wallet

What is Crypto Wallet?

Crypto wallets are apps or devices through which we can send and receive coins, and interact with decentralized applications built on the blockchain. Table of

Read More »