What is an NFT and How does it work?

A non-fungible token (NFT) is a unique digital asset for ownership of art, music, real estate, and video clips. 

NFTs belong to the modern-day collectibles since they are bought and sold online and digitally own any item. NFTs are secure since they use blockchain technology as in cryptocurrencies and make them unique and difficult to counterfeit.

NFTs use identical blockchain technology as used by the cryptocurrencies powers NFTs, but they are not a currency.

NFTs have sold for millions due to their increasing popularity and range from memes to pet rocks.

With the million years that NFTs have been in operation, they are speculative, and not all investors find them appropriate for investment.

For easy handling of NFTs, one must familiarise themselves with the concept of fungibility. It is easy to exchange fungible items with another since their value is not dependent on their uniqueness. To show this is an example; you can exchange a $1 bill for another $1 bill and still have your $1 account but with a different serial number.

In the case of Non-fungible items, tokens are not interchangeable. Each item in NFTs has unique properties, and their worth vary from each other.

According to the co-founder and COO of Galaxy, Solo Ceesya, Creators can verify the authenticity and scarcity by creating NFTs tied to digital items.

For comparison between the traditional art collecting, there are recurring copies of the Mona Lisa in the discussion, but there is a unique one. NFT technology plays a significant role in helping assign the ownership of an original and uniques piece. 

In the modern world, it is a very lucrative business to sell NFTs. In a bid to explain more about NFTs, here are some famous examples you might have heard in the world.

• Jack Dorsey, Twitter CEO, auctioned an NFT of his first tweet and sold for $2.9 Million. 
• LeBron James sold a 20- second video clip dubbed “cosmic Dunk #29” for $208,000. 
• A company dealing in crypto punk NFT sold a first curated NFT for $1.8 Million at Sotheby’s. 
• In a Christie’s auction, a digital artist Beeple sold “Everyday-the First 5000 Days” for $69.3 million.

It is worth noting that the highly-priced NFT business is attracting fraudsters and scammers, and it should be a caution to the investors. The scammers might claim to sell you something in the name of an NFT while it is not. Other fraudsters will sell you an NFT piece of work, claiming that they own it or created it.

Other people may also make copies of videos, images, or any digital item one owns once they buy an NFT. Owing to the value of an NFT, unique and original print media is more valuable.

Most of the NFTs are created and kept on the Ethereum network. There are some blockchains such as Tezos and Flow that support NFTs. It is easy to verify and trace the ownership of an NFT simply because anyone can review NFT, and the owner can remain pseudonymous.

Copyright and licensing rights might not come with the purchase depending on the NFT. As technology advances, NFTs may have many potential applications that are past the art world. 

What’s the difference between NFTs and cryptocurrency?

NFTs and Cryptocurrencies depend majorly on the same blockchain technology. However, NFTs marketplaces might ask people to purchase NFTs with a cryptocurrency, but the two are used for different purposes. 

Cryptocurrencies have the aim of acting as currencies by letting one buy or sell goods or store value. Cryptocurrency tokens are fungible tokens and similar to currencies, like the dollar. The uniqueness of NFTs is that they create a token that can show ownership and still convey rights over the goods sold.

How do you buy an NFT?

NFTs can be created, bought, sold, and traded from online exchanges or marketplaces. The current owner of the NFT chooses a specific price or even through an auction where one interested can bid on the NFT.

Keywords used in NFT. 

Foundation: A community-curated marketplace that requires creators to be invited by other already part of the platform.

Nifty Gateway: An art-focused marketplace that works with big-name brands, athletes, and creators.

Opens: One of the first and largest marketplaces where you can find NFTs for a wide range of collectibles.

Raible: Offers a range of NFTs with an emphasis on art. It uses its own RARI token to reward members.

Super is A marketplace that focuses on curating and offering digital art.

Note

NFTs are assets that can be highly speculative, and some people might make thousands of millions of dollars after selling NFTs. On the other side, others might end up spending a lot of money on digital assets and therefore end up being worthless.

The sign-up of an NFT might vary depending on the marketplace. Buying of NFTs is generally done using cryptocurrency such as ether (Ethereum’s native currency). However, the price might be in dollars, and the marketplaces might have different fees associated with each transaction.

The financial takeaway

NFTs show a very positive future due to the many practical applications and the digital artwork used today.

According to Ceesay, creators of NFTs provide a seamless way to trade and might not get a market that is as they anticipated. However, there are many ways that creators can make money from the subsequent sale of the art. On the flip side, collectors can speculate on the rare collectibles’ digital art and bragging prints. 

Once purchasing an NFT as an investment, you should consider no guarantee that its value will increase. Some of the NFTs bought to sell for millions and thousands of dollars while others remain worthless.