A Comprehensive Guide to NFTs
An NFT (non-fungible token) is a type of digital asset. These can be created to represent anything, from physical items like a car or an antique watch to non-physical things like the copyright for a video game or a song’s intellectual property.
A user can store an NFT in a wallet and then transfer it, sell it, or re-sell it to someone else through any existing cryptocurrency exchange. The blockchain technology used by NFTs allows them to be unique, meaning each one is different from every other one in existence.
This means that each token can truly represent something new and unique and can’t be duplicated or counterfeited. NFTs also play a role in the cryptocurrency markets and are minted, bought, and sold at high volumes every day.
Because they’re so easy to transfer and transact with, NFTs can provide clear ownership over digital items.
One company called Folk uses NFTs as tickets for events such as concerts—these are used instead of paper tickets because they can’t be copied and provide proof of ownership that’s verifiable on the blockchain, unlike with most paper tickets.
How Do They Work?
To get started, it’s helpful to understand what a Non-Fungible Token (NFT) is. In this context, the word “fungible” means one thing can be easily replaced by another of the same kind.
To illustrate, let’s take an example; a yellow ball is fungible with many other yellow balls because they’re all fundamentally identical.
An NFT, on the other hand, is unique and different from others because each NFT represents something that has its characteristics and history; each tokenized asset is different from any others, even if they’re of the same type.
This also sets NFTs aside from regular cryptocurrencies in that one Bitcoin is identical to every other Bitcoin, save for the hash that allows it to be tracked during transactions.
Any given Bitcoin’s value is identical to every other Bitcoin that has been mined over the years. This is why we can track the price of Bitcoins in terms of USD.
However, every NFT minted on a blockchain, whether they are the same or on different blockchains, doesn’t matter.
They have their value, whether it is a fiat value or a cryptocurrency value. One Bored Ape Yacht Club doodle is not unique in appearance. No two Apes are valued at the same price, except perhaps at their initial offering or by sheer coincidence.
In this case, each non-fungible token (NFT) is linked to a digital artwork or collectible item that has been created or acquired by an individual or corporation. In fact, the nature of NFTs is such that no two tokens can be identical. Each instance of an asset comes with specific criteria for how it can be used.
The list of possible usages for an NFT or digital asset may include buying access to certain features within a game (such as allowing you to play as a character) or purchasing unique physical goods such as artworks produced by renowned artists or special clothing items made by luxury brands.
These physical goods can also be stored using blockchain technology which provides unparalleled security, or perhaps redeeming your NFT for tickets to see your favorite band perform at a live concert event.
Why Are They So Popular Right Now?
Non Fungible Tokens, or NFTs, have recently seen an explosion in popularity and public interest. This is because so many big names are involved in the space right now, such as:
- The creator of Dogecoin, Jackson Palmer
- A notable venture capital firm, Union Square Ventures
- The creator of Ethereum, Vitalik Buterin
How Can I Buy Some?
Now that you’ve gotten a general idea of what NFTs are all about, how can you start buying some? This guide will take you through the process.
The first step is to acquire cryptocurrency, like Bitcoin or Ethereum. To do this, you’ll need to have some knowledge of cryptocurrency prices.
Then you’ll need to create an account with an exchange that allows for fiat transactions using your government-issued currency and transfer money from your bank account into the exchange’s bank account.
Once you’ve purchased cryptocurrency through one of these exchanges, it’s stored in a digital wallet on your computer.
If you’re ready to buy some NFTs, such as Cryptokitties or Etheremon monsters, you’ll need to get extra ETH into your wallet so that the NFT contract can “touch” it and transfer ownership over the token to your address.
In other words, when using a basic wallet like MetaMask, it needs ETH to operate—and because it only has ETH in its “brain” at this point, buying more and moving it into your wallet is necessary to purchase new NFTs.
What’s The Big Deal, Anyway?
NFTs are a relatively new kind of digital asset that is generated on the Ethereum blockchain. NFTs are a way to personify virtual items and collect them without duplicating or losing track of their value.
For example, if there was one royal blue-colored digital kitty in existence with the number 0 on its forehead and another royal blue-colored kitty with the number 1 on its forehead, they would be identical and therefore not considered unique or worth collecting. In short: they’d be worthless as art pieces.
On the other hand, if there was only one royal blue-colored digital kitty in existence with a unique snowflake pattern on its forehead and it had a unique identifier known as a “nonce” attached to it… well that kitty would be priceless!
Imagine how much more likely you’d be willing to pay $787 for that royal blue-colored snowflake-patterned nonce-attributed Ethereum token instead of just $1 – because it’s yours and no one else can have it!
So basically, ERC721 allows for crypto kitties (and all other NFTs) to have real value because they’re not all identical; each one is different from every other one.
NFTS Are Unique Digital Assets That Are Stored on a Blockchain
A non-fungible token is a cryptocurrency that isn’t divisible. It can’t be broken up into smaller denominations, unlike regular currency. This means that each one is worth something different, like a collectible card or an antique at auction.
They’re also stored on blockchain technology, which means that they’re secure and immutable—their value can’t be tampered with by anyone other than the owner.
NFTs are usually purchased using cryptocurrencies like Ether or Bitcoin. Some of the most popular NFTs include CryptoKitties, Etheremon (a game similar to Pokemon), Decentraland (a virtual world), and CryptoPunks (your own CryptoPunk). After purchasing an NFT, it’s stored on a blockchain like Ethereum.
For example, suppose you buy a CryptoKitty using Ether (ETH). It’s recorded permanently on the Ethereum blockchain—you never have to worry about someone tampering with your kitty in any way!
NFTs are a new form of ownership that the advent of blockchain technology has facilitated. It is relatively easy to mint an NFT, and as a result, new NFTs are minted every day in bulk.
The Bored Ape Yacht Club, masterminded by Beeple, is currently the highest-selling and most expensive NFT collection out there, and you’d need 420,000 USD to buy into the club.
However, there are affordable options and could see gains in the future. It is always advisable to play at cryptocurrencies and NFTs with a good understanding of markets so you know where to hedge your bets.
Even more important is a knowledge of the human psyche because the value of an NFT is determined by how much value someone is willing to assign to it. If you’re a good speaker, you could sell your first CryptoKitty for a million dollars; it’s all in the salesmanship.
The markets, as always, will remain volatile since blockchain technology is fast becoming a ground for hackers to practice their skills and Ponzi artists trying to make a quick buck.
But we’ve provided you with a primer to the world of NFTs, and we certainly hope that you’ll be able to easily navigate its treacherous waters now that you’ve read this guide.