Do you remember the crypto breaking news from last year, the multi-million-dollar deals? Yes, we’re talking about the time back in February 2021 when the Nyan Cat meme sold for a whopping $600,000. And if this wasn’t enough, shortly afterwards, Twitter’s founder Jack Dorsey auctioned off his first tweet for a jaw-dropping $2.5m and made it to the headlines.
And when you thought you had a little breather to make sense of what’s going on, you come across people paying their hard-earned house money for clip art of rocks.
So, if you’re perplexed about what is going on in the NFT crypto world, welcome to the club.
And if you want to get out of this club and be the ‘know it all’ about what is NFT, how to create an NFT, and how to buy NFT, stay with us as we throw light on all these and much more. So, let’s delve into the NFT crypto world without further ado.
- NFT crypto are blockchain-based cryptographic tokens that are one-of-a-kind and cannot be duplicated.
- NFT crypto can be used to represent real-world objects such as art and real estate.
- These real-world tangible goods are tokenized, making purchasing, selling, and trading them more efficient while lowering the risk of fraud.
- NFT crypto can also be used to represent people’s identities, property rights, and other things.
Walking Through the World of Digital Assets: What is NFT in Crypto
So, you’re eager to know what is NFT? Here we are, simplifying the crypto technobabble for you.
NFT stands for non-fungible token.
Right, sorry, that doesn’t make it any clearer. So, a bit more explaining from our side.
A non-fungible token (NFT) is a blockchain-based cryptographic token representing a single asset. These can be completely digital assets or tokenized representations of physical assets. Because NFTs are not interchangeable, they can be used as proof of validity and ownership in the digital world. In a nutshell, it means they are unique and can’t be replaced with something else.
A bitcoin, for example, is fungible, meaning you can exchange one for another and precisely get the identical thing. However, a one-of-a-kind trade card is not fungible. You’d get something altogether different if you swapped it for another card.
Fungibility essentially means that individual units of an asset are interchangeable and practically indistinguishable from one another. Fiat currencies, for example, are fungible because each unit can be exchanged for any other identical individual unit. A ten-dollar bill can be exchanged for any other ten-dollar bill. This is critical for an asset designed to serve as a means of exchange.
Fungibility is a desirable quality for currency because it allows for unrestricted exchange. After all, there is no way to know each unit’s history theoretically. However, for collector things, this is not a desirable attribute.
What if we could generate digital assets comparable to Bitcoin, but each unit has its own unique identifier? This would distinguish them from the rest of the units (i.e., non-fungible). This is essentially what NFT meaning is.
The Bubble Doomed to Pop or the Future: Understanding How NFT Crypto Works
Most NFTs are part of the Ethereum blockchain at a high level. Ethereum, like bitcoin and dogecoin, is a cryptocurrency, but its blockchain also enables these NFTs which store additional information that allows them to function differently from, say, an ETH coin. It’s worth mentioning that various blockchains can use NFTs in their own ways. Some have already.
NFTs are created and issued using a variety of frameworks. The most well-known is ERC-721, an Ethereum blockchain standard for issuing and exchanging non-fungible assets.
ERC-1155 is a more recent and enhanced standard. It allows a single contract to hold both fungible and non-fungible tokens, which opens up a world of possibilities. The standardization of NFT issuance allows for more interoperability, which benefits users in the long run. It essentially means that unique assets can be easily shared across multiple applications.
NFTs are stored on a blockchain, a decentralized public ledger that keeps track of transactions. Most people are familiar with blockchain as the underlying technology that allows cryptocurrencies to exist.
NFTs are commonly held on the Ethereum blockchain, but they can also be held on other blockchains.
An NFT is made up of digital objects that represent both tangible and immaterial objects, such as:
- GIFs of graphic art
- Highlights from sports videos
- Skins for video games and virtual avatars
- Sneakers by designer
NFTs are essentially digital versions of tangible collector’s artefacts. As a result, rather than receiving an actual oil painting to put on the wall, the customer receives a digital file.
They also have exclusive ownership. NFTs can only have one owner at any given moment, and their use of blockchain technology makes it simple to verify ownership and transfer tokens between them. In the metadata of an NFT, the creator can also store special information. Artists, for example, can sign their work by putting their signatures in the file.
Comparing Apples to Oranges: How is NFT Different from Cryptocurrencies
NFTs and cryptocurrencies are both built on the blockchain and use similar innovations and standards. As a result, they frequently attract similar players. NFTs are a subset of crypto culture, and you’ll almost certainly require cryptographic forms of money to trade them.
The fundamental distinction, though, is evident in the name. Cryptocurrency is a type of money. It has just economic value and is fungible, just like any other currency. That means that no matter which crypto token you hold within a cryptocurrency, it has the same value as the next one; 1 $ETH Equals 1 $ETH. NFTs, on the other hand, are non-fungible and have a value that transcends economics.
Did You Know
Beeple’s (Mike Winkelmann) collage, ‘Everydays: The First 5000 Days,’ sold for $69 million. It’s the third most expensive digital artwork ever sold by a live artist!
The Money-Making Machine? Maybe, Maybe Not: Learn How to Create an NFT
Throughout 2021, people have begun to grasp what is NFT and the potential that NFT crypto has for the future. It has been a cultural phenomenon, with celebrities dabbling in the space resulting in scams and legal battles. However, with some inventors generating millions from NFTs, it’s natural why you’d want to try your hand at it or play with the technology to gain a better sense of it.
And to help you get kickstarted, we’re briefly covering ‘how to create an NFT’, which might help you make millions down the road.
|Pick your item – Any unique digital asset (painting, picture, music, meme, etc.) to which you own the intellectual property right.|
|Choose your blockchain – Determine the blockchain technology that you intend to use for your NFT crypto.|
|Set up your digital wallet – You’ll need to have some crypto connected to your digital wallet to fund your initial investment.|
|Select your NFT marketplace – Find a platform that’s a good fit for your NFT crypto. Then connect it to your digital wallet so that you can pay the fees to mint and hold your NFT crypto and hold the sales proceeds.|
|Upload your file – Your chosen NFT crypto marketplace should have a comprehensive guide for converting your digital file into a marketable NFT.|
|Set up your sales process – Choose how you want to sell your NFT crypto and set a price.|
Word to Remember
The metadata in an NFT is the actual content and the description of the content described in the contract stored on the blockchain. In an NFT, the metadata is pointed to by a cryptographically uniform resource identifier (URI) referenced in the token. This URI could point to a website maintained by the NFT creator or a third party, an IPFS address or other data location that the NFT app can resolve. In almost all cases, the metadata lives outside of the actual NFT. The rare exceptions are a few ASCII artworks small enough to encode directly in a blockchain.
Into it Already? Know What are NFTs Used for and How to Buy One
We’ve come a long way into the crypto-verse from people learning what is NFT and how to create an NFT, but what exactly is NFT crypto used for? How do you buy one? If this is something that bothers you, continue reading to glance over this topic.
Decentralized applications (DApps) leverage NFTs to create one-of-a-kind digital products and crypto collectables. These tokens can be collectables, financial products, or something else entirely.
Gaming economies aren’t a new concept. And, given that many online games already have their own economies, adopting blockchain to tokenize gaming assets is merely a step forward. Indeed, the usage of NFTs has the potential to alleviate or mitigate the problem of inflation that plagues many games.
While virtual worlds are already thriving, the tokenization of real-world assets is another fascinating application of NFTs. These NFTs can represent fractions of real-world assets that can be stored and sold on a blockchain as tokens. This might provide much-needed liquidity to numerous markets that lack it, including fine art, real estate, rare collectable items, and many more.
The features of NFTs can also aid the field of digital identity. For many people worldwide, storing identifying and ownership data on the blockchain would improve privacy and data integrity. Simultaneously, easy and secure transfers of these assets could lessen global economic friction.
Now that you know the basics of what is NFT and how to create an NFT, the million-dollar question you’d want us to answer might be how to buy NFT.
If you wish to buy non-fungible tokens, you should start with NFT marketplaces, like OpenSea.io, Rarible, Foundation, etc. But that’s not all you’ll need to know. NFTs cannot be purchased with a credit card or PayPal. The how to buy NFT process requires a crypto wallet and some cryptocurrency.
Just because you know what is NFT, how to create an NFT and how to buy NFT, does that mean you should just dive in?
Well, it depends.
NFT crypto can be dangerous since their future is unpredictable, and we don’t have any historical data to gauge their performance. Also, because NFT crypto is so new, it could be worth trying them out with little dosages for now.
Put another way, investing in NFTs is essentially a personal choice. If you have some extra cash, it’s worth considering, especially if the piece has sentimental value for you.
That said, you should view NFT crypto like you would any other investment. Do your homework, understand the dangers, and proceed with caution if you decide to invest.
Also, since the NFT crypto involves an element of investment and speculation, your patience might reward you with a mountain of money to sit on top of down the road if you are able to sell your NFT crypto for a profit.
Non-fungible tokens, like cryptocurrencies, employ blockchain technology to ensure security. NFTs are difficult (but not impossible) to hack due to the distributed nature of blockchains. If the platform that hosts the non-fungible token goes out of business, you may lose access to your non-fungible token.
Non-fungible tokens can be used to represent any asset, including digital artwork and real estate. In-game things like avatars, digital and non-digital collectables, domain domains, and event tickets are all examples of assets that NFTs can represent.
Some of the primary advantages of NFT crypto include:
Some of the major risks associated with NFT crypto include but are not limited to:
Hot Potato Effect
Read more about DeFi Cryptocurrency.