Non-Fungible Tokens (NFTs) are rare and unique digital assets (think of original, priceless works of art) that can't be copied or reproduced, and most importantly, NFTs verify ownership of digital assets on the blockchain.
You’ve probably heard the word “NFT” at this point in 2022. That word is being used all over the Web, Twitter and Discord nowadays. In this article, we’ll get into the basics of what NFTs are, what they are NOT, and why you should care. The times are definitely changing with the advancement of Web3 technologies.
NFT stands for “non-fungible token.” As the basic definition or explanation above, an NFT is a type of digital asset that proves ownership of a unique item or piece of content. Traditional digital assets, like digital photos, are interchangeable and identical to each other. NFTs, on the other hand, are unique and can’t be traded one-for-one for other assets.
One of the key features of NFTs is that they are stored on a blockchain, which is a decentralized and secure digital ledger that records transactions. This is the key, and what allows for a verifiable record of ownership and provenance of the NFT you own.
NFTs have become popular in recent years as a way for creators to monetize and sell their digital content in a way that was previously not possible. They have also gained attention as a way for collectors to own and trade unique and rare digital items.
Not a Get rich quick scheme: Not anymore at least. So, don’t think that if you buy any NFT out there, you’ll hit the jackpot and make millions. In the early days of NFTs, there were some projects where lots of NFTs were being minted (created), and that was a hot and crazy market where people just rushed to buy them with the hopes of getting rich. Granted, some did become rich off of those NFT early days, but things are not the same.
Not anymore. Now people are very careful with what the project is behind the NFT and how it’s going to be beneficial to the holder in the long term. We’ll get to that part more later.
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What’s The Difference Between Fungible and Non-Fungible Tokens (NFTs)?
A fungible token is a type of digital asset that can be swapped for other units of the same asset and is the same as those other units. This means that any unit of the asset can be traded for another unit of the same asset without losing any value.
Cryptocurrencies like Bitcoin and Ethereum, as well as other digital assets like in-game money or loyalty points, are examples of fungible tokens.
On the other hand, a non-fungible token (NFT) is a digital asset that is unique and can’t be traded one-to-one for other assets. NFTs show who owns a unique item or piece of content, like a digital work of art or collectible.
The main difference between fungible and non-fungible tokens is that fungible tokens can be traded for other assets, while NFTs are unique and can’t be traded in the same way. This means that an NFT’s value is usually based on how rare and unique it is, not on what it does or how useful it is.
How Do Non-Fungible Tokens Really Work?
Without getting too deep into the technology behind it, a Non-fungible tokens (NFTs) use blockchain technology to create a unique digital asset that represents ownership of a specific item or piece of content.
To make an NFT, the owner of the item or piece of content must first make a digital copy of it, like an image or video file. Then, this digital copy is added to a blockchain, along with information about the NFT and who owns it.
Once the NFT is added to the blockchain, it is given a “token,” which is a unique digital identifier that stands for the NFT. This token is kept on the blockchain and can be used to prove that the NFT is owned by the right person and is real.
Like traditional collectibles, non-fungible tokens (NFTs) can be bought and sold on online marketplaces. When an NFT is bought or sold, the information about who owns it is recorded on the blockchain. This gives a record of the transaction that can be checked.
One of the best things about NFTs is that they can be sent from one person to another without the need for a middleman. This makes it easier to buy and sell digital assets in a market that is more open and efficient.
Just know that NFTs are digital assets with specific or a whole host of “utilities” that come with it. We discuss utilities here as well… keep reading.
Some NFT Examples
Some examples of items that can be represented by non-fungible tokens (NFTs) include digital artwork, music, videos, and even tweets. NFTs are often used in online marketplaces, where they can be bought and sold like traditional physical collectibles.
An NFT’s value comes from its uniqueness, the project team behind it, the community, the utility of the NFT, and the entire ecosystem the NFT project offers.
So how would one use NFTs? What are some examples?
You can purchase a vehicle or a home and use an NFT to verify who the new owner is. Verification is done on the blockchain, another buzzword that we’ll cover in a different article. Blockchain is the underlying technology that allows for NFTs to even exist.
Artists can create digital versions of their art (NFTs) and sell them with full proof of their authenticity while at the same time making sure that no one can copy their work.
We all remember the days of downloading free music from Napster.com, a peer-to-peer network of computers where people shared music downloads for free. That model cut basically cut the original artist out of the equation. I remember how upset and furious musicians were at that time (back in the 90’s).
That is all over.
With non-fungible tokens (NFTs) the artists and creators of the NFTs are in complete control. You the creator can decide how many of the digital assets you will create, what utility it’ll have behind it and at what price.
Once the NFT is sold, the holder of the digital asset can keep it and hope it’ll go up in value or sell it. IF they sell it, the artist makes money on the secondary transaction as well! Amazing isn’t it?
There’s a lot to go over NFTs, so we’ll keep this article to the basics.
Non-fungible tokens (NFTs) come in different types based on the type of content or item they represent. Among the most common NFTs are:
Digital art: Non-Financial Transfers (NFTs) can be used to show who owns digital art like paintings, drawings, or photos. The artist may sell these NFTs to make money from their work and give collectors a way to own and trade unique pieces of digital art.
Collectibles: NFTs can be used to show ownership of digital collectibles like in-game items, trading cards, and other digital assets. Collectors may use these NFTs as a way to buy and sell rare or unique items within a game or platform.
Music: Non-Financial Transfers (NFTs) can be used to show who owns digital music files, like songs or albums. Musicians can sell these NFTs to make money from their work and give fans a way to own and trade unique digital music items.
Videos: Non-Financial Transfers (NFTs) can be used to show who owns digital video files, like movies or TV shows. Studios or creators may sell these NFTs to make money off of their work and give fans a way to own and trade unique digital video items.
Domain names: Non-Financial Tokens (NFTs) can be used to show ownership of unique and valuable domain names, like short URLs that are easy to remember and are in high demand. Domain name investors can buy and sell these NFTs to own and trade valuable online real estate.
Tweets: non-fungible tokens (NFTs) can be used to show who owns tweets, which are short messages that people post on the social media site Twitter. Users can buy and sell these NFTs to own and trade tweets that are unique or important in history. Bids for Jack Dorsey’s first post on Twitter, a platform that he’s the co-founder of, reached just over $2.5m.
This is just a small list of the different kinds of non-fungible tokens (NFTs). NFTs can stand for any kind of unique digital asset, and their uses and ways of being used are always changing, so do keep an eye out for new types of NFTs and always do your research before jumping into NFT projects.
How To (Safely) Buy an NFT
We recommend you begin your first NFT purchase journey with OpenSea, Niftygateway or Rarible. OpenSea is an online marketplace for buying and selling non-fungible tokens (NFTs), and is one of the largest platforms. Having said that, you still need to do your homework before spending USD or crypto on any NFT. So, in order to buy an NFT on OpenSea, you will need to take the following steps:
Sign up for an OpenSea account
To buy an NFT on OpenSea, you will need to make an account on the platform. You will need to give some basic information, like your email address and a password, in order to do this.
Connect your Ethereum wallet
Because OpenSea stores NFTs on the Ethereum blockchain, you will need to connect an Ethereum wallet to your OpenSea account. You can manage your NFTs with either a hardware wallet, like a Ledger Nano, or a software wallet, like MetaMask.
Fill up your wallet
To buy an NFT, you’ll need money in your Ethereum wallet. You can buy Ethereum (ETH) on a cryptocurrency exchange and then move it to your wallet, or you can use a service like Wyre to buy ETH directly with a credit card.
Look around the OpenSea market
Once you have an account and some Ethereum in your wallet, you can look around in OpenSea for NFTs that interest you. You can search for NFTs that meet your needs or look through them by category.
Place a bid or make an offer
When you find an NFT you want to buy, you can place a bid or make an offer to the seller. The seller can agree to your price or offer a different one.
Finish the deal
If the seller accepts your offer, you can finish the deal by paying for the NFT with the money in your Ethereum wallet. The NFT will be sent to your wallet, and the information about who owns it will be written to the Ethereum blockchain.
Other NFT Related FAQs
What is The Most Famous NFT?
In December 2021, a piece of fractionalized NFT art called “The Merge” was sold for $91.8 million. This was the most expensive NFT sale to date. The piece Everydays: The First 5,000 Days by Beeple comes in second. It sold at auction for $69.3 million to a single buyer.
NBA TopShot collectible highlights are another example of how people spend millions of dollars buying these NFTs today.
What are NFT Utilities?
There are many different ways that non-fungible tokens (NFTs) can be used, depending on the type of content or item they represent. As the adoption of non-fungible tokens (NFTs) continues to grow, new and innovative use cases for these digital asswts are likely to emerge. Here are some examples of NFT utilities that are common today:
Monetizing digital content
NFTs can be used by creators to sell their digital art, music, or other content in a way that was previously not possible. This allows creators to monetize their work and make a living from their creations.
Collecting and trading
NFTs can be used by collectors to own and trade unique and rare digital items, such as in-game items, trading cards, or digital art. This allows collectors to build up a collection of unique and valuable digital assets.
Authenticating and verifying ownership
NFTs can be used to verify the ownership and provenance of digital assets, such as artwork or collectibles. This can help to prevent fraud and counterfeiting, and provide a verifiable record of ownership.
Enabling access to digital experiences
NFTs can be used to grant access to digital experiences, such as concerts, games, or other online events. This allows organizers to create unique and exclusive experiences that are only accessible to those who hold the appropriate NFT.
Providing proof of authenticity
Non-fungible tokens (NFTs) can be used to provide proof of authenticity for digital assets, such as limited edition art prints or exclusive music releases. This can help to increase the value and rarity of the asset.
Offering incentives and rewards
NFTs can be used to offer incentives and rewards to users of a particular platform or community. For example, a platform might offer PFPS (Personalized Fungible Passive Salaries) as a way to reward users for their contributions to the platform
NFTs are still new and risky investments. Always do your research and make sure you understand the purpose of the NFT project and the community, the founders behind the project before investing heavy into it. If you’re just trying to understand the steps involved in buying or minting NFTs even, then at least invest very small amounts initially until you’re a pro at this.
There are a lot of NFTs out there that are very affordable. Pick one or two that you can easily afford and get some experience with wallets, buying crypto currency and finally using that crypto to purchase an NFT. Enjoy!