What Are NFTs and How Do They Work?
Ethereum.org describes NFTs as “tokens that we can use to represent ownership of unique items. They let us tokenize things like art, collectibles, and even real estate. They can only have one official owner at a time, and the Ethereum blockchain secures them — no one can modify the record of ownership or copy/paste a new NFT into existence.”
Put simply, an NFT is a digital asset that can uniquely represent a piece of media such as art, videos, music, gifs, games, text, memes, and code.
The first-ever NFT sold was by Kevin McCoy, who minted his non-fungible token “Quantum” in 2014. And the most expensive NFT ever sold is The Merge, a digital artwork created by an anonymous digital artist nicknamed Pak. It was sold for $91.8 million on Nifty Gateway.
Before we dive deeper into NFTs, let’s first clarify a few definitions.
- Non-fungible — Something that is unique and isn’t interchangeable with other items. Examples of things that are non-fungible include real estate, diamonds, collectibles, memorabilia, and art.
- Fungible — Something that can be substituted or exchanged for any similar item. Examples of fungible things include bitcoin, oil, bonds, gold, and money.
- Minting — the process of turning a digital file into a crypto collectible or digital asset.
- Cryptocurrency wallet — a device, physical medium, program, or a service that stores the public and/or private keys for cryptocurrency transactions.
Okay, let’s dive a little deeper.
How Do You Make NFTs?
Before you can create an NFT, it’s important to ensure that you own the intellectual property rights to the item you want to turn into an NFT.
Here’s a step-by-step guide to help you create your own NFT.
Step 1: In order to buy NFTs, you will first need to establish a digital wallet. Popular wallets include Metamask, Math Wallet, AlphaWallet, Trust Wallet, and Coinbase Wallet.
Step 2: Choose an NFT marketplace such as Opensea, Rarible, or Superrare. After selecting your NFT marketplace, you’ll need to connect it to your digital wallet.
Step 3: Select create. You can now mint your NFT. NFT marketplaces usually have step-by-step guides to help you upload the digital file you wish to turn into an NFT.
Step 4: Choose your desired sales process. You can either sell your NFT at a fixed price or put it up for auction.
How do NFTs Work?
An NFT is a claim to ownership of an item, not the item itself. So when you are buying an NFT, what you are really buying is a digital record of ownership of a token. You can then transfer this token into a digital wallet. The ledger where that digital token is certified as proof of ownership is what’s called a blockchain.
Each time an NFT is transferred or created, the action is permanently recorded on the blockchain and timestamped.
In the future, NFTs are expected to be used to establish ownership of any asset and to prove ownership of anything. Importantly, an NFT can only have one authorized owner, and they have to have proof of ownership.
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