What Are NFTs? A Quick Summary In 5 Steps
Everyone in the cryptocurrency industry has become aware of the non-fungible tokens after this year’s record sales.
Even people who are not interested in cryptocurrency are now aware of NFTs. How can you not? Considering that EVERYDAYS: THE FIRST 500 DAYS by Beeple was sold for $69.3 million, it is clear that the NFT market is full of money-making opportunities. And money always draws attention.
Most people are aware of the incredible prices NFTs can sell for. And this technology has a very dedicated and diverse community.
Still, the truth is that most do not really know what an NFT is. We know that it can sell for millions. But what makes it different from normal digital art? And how is it that people resort to buying them, instead of just taking a screenshot? What technology makes NFTs unique?
We have prepared this article to answer your questions about this new craze! So if you want to know more about NFTs, keep on reading!
- NFTs cannot be replicated. They can be connected to a digital asset to make it unique.
- NFT owners can prove that they are the original owner, and their asset is the authentic piece.
- This technology is mainly used for digital artwork, but there are also possible, real world applications.
- NFTs can sell for millions of dollars.
What is an NFT?
NFT, or Non-Fungible Token refers to digital assets that are connected to the blockchain. You can think of them as cryptocurrencies, but the main difference is that coins like Bitcoin and Ethereum are fungible, meaning that they can be replaced or exchanged with another one of identical value, much like a fiat currency.
On the other hand, NFT’s are non-fungible, so they cannot be replaced or exchanged with one another on equal terms. Each NFT is unique and their value depends on the property they represent
The construction of each NFT is unique, so they can digitally represent assets like property and artwork. As they are based on blockchain technology, they can be used to remove intermediaries, and connect artists directly with the audiences.
Right now, the NFT market is mainly based on collectable digital artworks and rarities. Think of sports cards, rare coins, or limited edition stamps.
Normally, digital artwork is infinite. You can copy them as much as you want, and nobody will know which iteration is the original one.
But with the application of non-fungible tokens, digital assets can be made unique. Each work of art can have a specific blockchain token that cannot be replicated or copied. So even if you copy artwork, you won’t be able to copy the blockchain registry it has. The original copy can be authenticated, and it will always be unique.
So you can actually own a digital asset. You will always be able to prove that you have the authentic copy, and you are the original owner.
How to Buy NFTs?
NFTs are mostly bought and sold via blockchain-backed marketplaces, and they are mainly traded via “drops”, which are timed online sales.
In order to buy and sell NFTs, you will need:
- A digital wallet that can hold NFTs and cryptocurrencies.
- Cryptocurrency of your provider’s choice, such as Ether.
- A blockchain marketplace like Nifty Gateway or Opensea.
Why Should I Own NFTs?
You can buy and own NFTs for a couple of reasons.
They can be used as a potential investment opportunity. Like cryptocurrencies, their value can rise and fluctuate.
Or they can be collected as artworks or collections. This mainly involves an emotional connection, as the NFTs will allow you to prove that you actually own the original artwork, not a copy.
The Future of NFTs
Right now, this technology is mainly used for trading digital artworks, but in its essence, NFTs are digital tokens that can represent anything.
The main advantage of NFTs is the ability to authenticate and prove the originality of the item they are attached to.
So they can be used to identify an asset, without a need for a third party middleman.
You can have an NFT which proves you are you and your car is yours on a public registry, Without the need for a public institution to vouch or regulate it.
So in the future, NFTs can become how we identify assets.
Should I Use NTFs For Investment?
NFTs are a fluctuating and new market. No one really knows what shape it will take in the future and how valuable it will be. It can remain as is, take a different form, or be forgotten.
So If you want to invest in NFTs, research carefully. You are not only investing in artwork but a technology. Make sure you understand the cornerstones of this tech, its limitations, and possibilities.
In the end, the decision to invest in NFT is yours alone. And yes, this is not financial advice.