What is NFT-Non fungible tokens explained
You must have been awed by an explosion of blockchain news, leaving you thinking, “Um… what is happening?” That is the same feeling many older heads experience while reading about Nyam Cat being sold or Grimes selling NFTs for millions of dollars. All of such news has left many minds wondering: what is NFT?
In the year since NFTs surfaced, the situation keeps on getting complicated. Pictures of apes sold for millions of dollars, hackers actively hacking NFT projects, and corporate cash grabs getting worse.
Well, through this trial, we will satisfy your query about NFTs. In addition, we will also review its literature with real-world examples.
So, let us move forward in developing a sense of NFTs.
What does NFT stand for?
Non-fungible token.
Well, that does not clarify them.
Right, “Non-fungible” means it’s unique and irreplaceable. For instance, a bitcoin is fungible; when you trade a bitcoin for another one, you get the same.
Contrarily, however, the one-of-a-kind token is non-fungible. You will get a completely different thing if you trade it with another token. You can get a 1909 T206 Honus Wagner for a Squirtle when you switch through NFT.
Key Features of NFT
As stated earlier, NFTs differ from other cryptocurrencies like Bitcoin or Ethereum. Here are key identifying features of NFTs;
- Unique: The primary feature of NFT is its uniqueness. It cannot be altered, manipulated or forged.
- Digital Asset: NFTs represent internet collectables as digital assets. These collectables may include art, music, rarities and games authenticated by certificates through blockchain technology.
- Exchange: NFTs are exchangeable just like other digital currencies.
How do NFTs work?
If we dig deep, we will learn that most NFTs are part of the Ethereum blockchain. However, other blockchains have also implemented their version of NFTs. Ethereum works on the same line as other cryptocurrencies, with the only difference being that it keeps track of ownership of holding and trading NFTs.
Furthermore, since they hold a value set by market demand and supply, thus you can buy or sell them like any other type of physical art.
NFTs are recorded in a distributed public ledger, which makes it easy to validate the ownership and transfer of tokens.
Examples of NFTs
Since NFT is a relatively new concept, many people cannot quote examples of NFTs. What is NFT goes fine with mentioning a few examples.
Currently, below mentioned are some examples of NFTs.
- Domain names
- Essays
- Art
- A digital collectables
- Essays
- Games
- Sneakers in the fashion line
Uses of NFTs
NFTs are most commonly used for buying digital artwork. However, this is not the only use of NFT. Here are a few benefits of non-fungible tokens;
- Digital Content: The most significant use of NFTs is digital content trade. Content creators use NFTs to power the economy and subsequently increase the value of their art. NFTs, offer control to owners instead of platforms which publicize them.
- Investment and Collaterals: Since NFTs and DeFi (decentralized finance) use the same infrastructure, you can use DeFi applications to borrow money using collateral. The collaboration of NFT and DeFi is empowering investors to explore new avenues.
- Gaming Items: NFTs have attracted considerable interest from gamers – both developers and players. Usually, in an online game, you purchase upgrades for your characters. However, NFTs are more than buying advancements; you can even resell once you are finished with your purchases.
- Domain Names: NFTs offer easy-to-remember domain names. It works like any other website domain name. However, NFTs add value based on the length and relevance of the domain.
How to buy NFTs?
Since we know what NFT is, the next phase is getting hands with them. With increased popularity among crypto economics, many investors are tipping NFTs as the next big thing.
So, being an early bird may yield high returns; here, we will learn how to buy NFTs.
- Firstly, you need to have a digital wallet to store your NFTs.
- Secondly, you have to get some cryptocurrency. It depends on the NFT provider and which cryptocurrency he accepts. However, most likely, it will be Ether.
- Thirdly, after transferring cryptocurrency to your wallet. You can use this crypto to purchase your desired NFT.
Popular NFT Marketplaces
So let us now explore a few popular marketplaces which are selling NFTs.
- Rarible
Rarible offers a democratic set of a marketplace for artists and creators. It allows holders to set their own rules for fees and community rules.
- OpenSea
Opensea is full of rare digital items and collectables. All you need is to open an account and browse NFT collections. Similarly, you can browse tokens artist-wise.
- Foundation
Foundation allows only. To post your artwork, you must have an invitation from existing artists. The community promotes high-quality artwork, assuming the demand will remain the same or increase.
Future of the NFTs
Aspiring artists find NFTs very valuable as it provides them with a platform to portray their work. Millions of dollars are already spent on NFTs, which is just a little indicator of how valuable they are the NFTs.
With a few celebrities also interested in NFTs, we can sense it will be a million-dollar industry.
Many crypto industry experts tip NFTs to become a source of 40% of new entrants. As a result, driving popularity and seeking new investment will only improve over time. Hence, NFTs could represent a significant portion of the digital economy in the future.
Frequently Asked Questions
Are NFTs safe?
Since NFTs use blockchain technology, hence they are safe. Additionally, their distributed nature adds a layer of security, thus making them almost impossible to hack.
What is meant by non-fungible?
Fungibility in economics means the interchangeability of products or goods. For example, a dollar is fungible when it is interchangeable with another bill. On the other hand, non-fungible items are unique or distinguishable. For instance, if a celebrity signs the same dollar bill, it becomes non-fungible.
How to make money from NFTs?
You can maximize your NFT returns by renting, earning royalties, trading and involving in NFT gaming.
What is the difference between cryptocurrency and NFT?
Unlike cryptocurrency, NFTs cannot be directly exchanged with one another. NFTs are only sold and not traded. Although NFT and cryptocurrency both use blockchain networks.
Parting Thoughts
Thanks to this article, we now know “What is NFT?
In addition, we also covered how to benefit from them, where to buy them and what their future is.
NFTs promise to be the next big thing in digital economics. They have offered million dollar marketplace for artists to showcase their talent and take value from their art.
However, just like any digital asset, NFTs are an evolving idea. They will be ups and downs, but the idea is gaining popularity among investors. So, we can say NFTs are here to stay.
That concludes our guide; feel free to post your queries in the comments section. We are more than happy to revert.