NFTs are digital items that can be bought and sold using blockchain technology. But what exactly are these digital assets, and how are they traded?
What is an NFT?
NFT stands for Non-Fungible Token.
Something that is “fungible” can be exchanged with an equivalent item — for example, a $100 bill with another $100 bill.
Cryptocurrencies, which use a digital public record of transactions called a blockchain, are fungible.
This means that every NFT is a ‘one-of-a-kind’ item. NFTs are transferred from one owner to à using blockchain technology. It creates a digital trail from the seller to the buyer that verifies the transaction. This encodes the unique ownership rights to the buyer (new owner).
NFTs are digital items that can be bought and sold using blockchain technology. But they are not fungible, making them a different type of asset.
How are NFTs traded?
Like cryptocurrencies, NFTs are bought and sold on specialised platforms. OpenSea is the best-known NFT marketplace.
Read More: What is Blockchain Technology?
The sale does not involve the transfer of the item specified in the token. NFT’s famous drawings have been sold, for example, but the buyer has not received the drawing.
One who sells the NFT’s creates NFTs and lists them on different marketplaces such as OpenSea with a price. The buyer can purchase these NFT’s only if he has his digital wallet.
The wallet can be accessed with Metamask, a free internet browser extension, or a secure portable device. It can also take a simple kind of code printed on paper.
To purchase NFT, the wallet must contain sufficient cryptocurrency – for example, ether (ETH) if a person buys a token on the Ethereum blockchain.
With a little technical knowledge, it is possible to make, or “mint”, your NFT.
Finally, NFTs are digital contracts, with certain rules embedded such as the number of copies available for sale.
How Are NFTs Different From Cryptocurrency?
NFTs are not the same as cryptocurrency. NFT uses cryptocurrency to do the job. It uses the same blockchain technology used by cryptocurrency but assets are structured differently. Although cryptocurrency can be traded or exchanged equally, NFT cannot. This is because each cryptographic asset is organized by a unique identification code and metadata that distinguish one NFT from another. In other words, you can trade one Bitcoin for another Bitcoin – they are equal – but NFTs do not trade equally.
How do NFTs work?
Traditional works of art such as paintings are valuable because they are one of a kind.
But digital files can be duplicated easily and endless.
With NFT, the artwork can be “branded” to create a digital copyright certificate that can be purchased and sold.
Like crypto-currency, the record of who owns what is stored in a shared ledger known as a blockchain.
Records cannot be falsified because the ledger is stored by thousands of computers worldwide. NFTs can also contain smart contracts that may give the artist, for example, a cut of any future sale of the token.
How much are NFTs worth?
Here are some recent headline examples to gave you an idea that how much are NFTs worth.
In theory, anyone can mark his work to sell it as NFT but interest is encouraged by the latest multi-billion dollar news articles.
On February 19, Nyan Cat’s glittering Gif – the 2011 meme of the pop-tart flying cat – sold for over $ 500,000 (£ 365,000).
A few weeks later, artist Grimes sold some of his digital art for over $ 6m.
It’s not just art that is branded and sold. Twitter founder Jack Dorsey has upgraded NFT’s first tweet, with bids reaching up to $ 2.5m.
Christie’s selling NFT digital artist Beeple for $ 69m (£ 50m) set a new digital art record.
French company Sorare, which sells NFTs football trading cards, has raised $ 680m (£ 498m).
NFT is a growing trend in digital marketing and art collection. Make sure you have the right cryptocurrency to buy the NFT you want. Once you have NFT, you store it and use it in digital formats or you can trade it for profit from another trader looking for unique assets.