NFT has emerged in recent years as one of the most advances in technology, economics, fashion, sports, and the arts. As the newest cultural trend, NFT has been the cause of drama since its widespread introduction in 2021. However, if you are unfamiliar with cryptocurrencies and digital assets, it might be challenging to comprehend NFT. Thus, this article provides the NFT’s details to clarify your understanding.
List of Contents
What Is an NFT?
NFTs stands for non-fungible tokens. They are digital assets that reflect real-world artifacts such as art, music, in-game goods, and films. NFTs are purchased and traded online by using cryptocurrency. They are typically encoded with the same underlying software as many cryptos.
Even though they have been present since 2014, NFTs are gaining popularity in purchasing and selling digital artwork. The market for NFTs was approximately $41 billion in 2021, which is nearing the whole value of the worldwide fine art industry. In addition, they are often one-of-a-kind or part of a very limited run and contain unique identifier characteristics.
Working Principles of Non-Fungible Token
They are decentralized financial products that are stored on a blockchain. Blockchain is perhaps most recognizable to you as the method that lies under the surface of cryptocurrencies and enables their use efficiently. They are commonly kept on the Ethereum blockchain. However, they may also be held on other blockchains.
They are digital versions of tangible collector’s artifacts. Therefore, the purchaser receives a digital file instead of a real oil painting to put on the wall. They are formed using digital objects representing both tangible and intangible elements. Examples are Graphic Art, GIFs, Virtual avatars, and video game skins.
The Differences between Non-Fungible Token And Cryptocurrencies
Generally, they are constructed using the same programming language as cryptocurrencies such as Bitcoin and Ethereum. However, they are still different in some ways.
Cryptocurrencies Are Fungible
The first thing you should know is that physical money and digital currencies are “fungible,” which means they may be traded for one another. Moreover, they are also equivalent in terms of value. For example, one dollar is always equivalent to another dollar, and one Bitcoin is always equivalent to another Bitcoin. The fungibility of crypto makes it a reliable method for performing blockchain transactions. On the other hand, they contain a digital signature that prevents them from being swapped for or equivalent to one another; non-fungible.
What Is the Purpose of NFTs?
NFTs offer a good opportunity for artists to sell their work
Artists and content creators have a unique potential to promote their work via blockchain technology and NFTs. Artists; for example, no longer have to depend on galleries or auction houses to sell their work. Instead, the artist may sell it straight to the buyer as an NFT. This allows them to retain a larger portion of the income. Furthermore, artists may set up royalties, so that they get a share of income anytime their work is sold to a new owner. This is an appealing feature since most artists do not earn future income once they sold the works.
Besides, with NFTs, art is not the only way to make money. To raise money for charity, companies such as Charmin and Taco Bell have auctioned off themed NFTs artwork. Charmin called their product “NFTP” (non-fungible toilet paper). At the same time, Taco Bell’s NFTs art sold out in minutes, with the top bids reaching 1.5 wrapped ether, or $3,723.83.
How to Invest in NFTs?
The best way to invest in NFTs is that you may purchase tokenized assets via any marketplaces and some cryptocurrency exchanges. Importantly, you must have a digital wallet that can hold them and cryptocurrencies. Depending on which currencies your NFTs provider allows. However, you may now purchase cryptocurrency using a credit card on some platforms. Finally, you will be able to transfer it from the exchange to your preferred wallet. One thing you should remember is that when you acquire cryptocurrency, the majority of exchanges will charge you at least a portion of your transaction.
Famous NFTs Marketplaces
After you have created your digital wallet, there are a variety of NFTs marketplaces available to you. At this time, the following are the most famous NFTs marketplaces.
OpenSea
This peer-to-peer website advertises itself as a retailer of rare digital products and collectibles. To begin browsing NFTs collections, you will first need to establish an account for yourself on the website. You may also find new artists by sorting the works by the number of their sales.
Foundation
One of the most popular markets on the internet is Foundation. The founders of the Foundation have made a total of 39,000 ETH, which is equivalent to 160 million dollars. The site played host to historic NFTs auctions such as the inaugural NFTs auction held by Edward Snowden and the sale for the animation of Nyan Cat.
Rarible
Rarible is the platform’s native cryptocurrency. It is the first governance token introduced to the NFTs marketplaces. Importantly, Rarible is a leading decentralized exchange for NFTs that was developed on the Ethereum network. Rarible has the long-term vision of becoming a decentralized autonomous organization, or DAO.
Conclusion
However, since NFTs are quite a new innovation, investors may not have sufficient knowledge and understanding of them. Thus, it can lead to investment losses from various risks whether coin wallet theft, lack of transparency of cryptocurrency exchanges, including the reliability of the markets. Investors who are interested in NFTs investing should be careful and study the surrounding market conditions. This is because the NFTs market still needs time to prove the viability of real economic value.
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Read more: Cryptocurrency
Source: Investopedia, Forbes Advisor