WhatWhat Is An NFT? And How Does It Work?
This year, non-fungible tokens (NFTs) appear to have exploded from the ether. These digital assets, which range from art and music to tacos and toilet paper, are selling like 17th-century exotic Dutch tulips, with some fetching millions of dollars.
Are NFTs, on the other hand, worth the money — or the hype? Some analysts believe they, like the dotcom mania and Beanie Babies, are about to burst. Others feel that NFTs are here to stay and will forever revolutionize investment.
What Is an NFT?
A digital asset that depicts real-world elements like art, music, in-game items, and films is known as an NFT. They’re bought and traded online, often using cryptocurrency, and they’re usually encoded with the same software as many other cryptos.
NFTs are also one-of-a-kind, or at the very least one of a very small run, and contain unique identifying codes. “Essentially, NFTs generate digital scarcity,” explains Arry Yu, managing director of Yellow Umbrella Ventures and chair of the Washington Technology Industry Association’s Cascadia Blockchain Council.
This is in sharp contrast to the vast majority of digital products, which are nearly always available in endless quantities. If a certain asset is in demand, cutting down the supply should theoretically increase its value.
However, many NFTs have been digital works that already exist in some form elsewhere, such as legendary video clips from NBA games or securitized versions of digital art that are already floating around on Instagram, at least in these early days.
How Is an NFT Different from Cryptocurrency?
The term “non-fungible token” refers to a token that is not fungible. It’s usually programmed in the same way as cryptocurrencies like Bitcoin or Ethereum, but that’s where the similarities end.
Cryptocurrencies and physical money are both “fungible,” meaning they may be traded or exchanged for one another. They’re also worth the same amount of money — one dollar is always worth another dollar and one Bitcoin is always worth another Bitcoin. The fungibility of cryptocurrency makes it a secure way to execute blockchain transactions.
NFTs aren’t like other materials. Each contains a digital signature that prevents NFTs from being substituted for or compared to one another (hence, non-fungible). Simply because they’re both NFTs, one NBA Top Shot clip isn’t the same as every day. (For that matter, one NBA Top Shot footage isn’t necessarily equal to another NBA Top Shot clip.)
How Does an NFT Work?
NFTs are stored on a blockchain, which is a decentralized public ledger that keeps track of transactions. Most people are familiar with blockchain as the underlying technology that allows cryptocurrencies to exist.
NFTs are most commonly kept on the Ethereum blockchain, although they can also be held on other blockchains.
An NFT is made up of digital objects that represent both tangible and intangible objects, such as:
· Art
· GIF’s
· Video and sports highlights
· Collectibles
· Virtual Avatars and Video Game Skins
· Designers Sneakers
· Music
Even tweets are taken into account. Jack Dorsey, a co-founder of Twitter, sold his first tweet as an NFT for more than $2.9 million.
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What Are NFTs Used For?
Artists and content creators have a one-of-a-kind opportunity to monetize their work thanks to blockchain technology and NFTs. Artists, for example, no longer have to sell their work through galleries or auction houses. Instead, the artist can sell it as an NFT straight to the consumer, allowing them to keep a larger portion of the profit. Additionally, artists can integrate royalties into their software so that they receive a share of sales when their work is sold to a new owner. This is a desirable feature because most artists do not receive subsequent proceeds after their first sale.
Making money using NFTs isn’t limited to art. To generate money for charity, companies like Charmin and Taco Bell have auctioned off themed NFT art. Taco Bell’s NFT art sold out in minutes, with the highest bids coming in at 1.5 wrapped ether (WETH) — equal to $3,723.83 at the time of writing. Charmin’s offering was dubbed “NFTP” (non-fungible toilet paper), and Taco Bell’s NFT art sold out in minutes, with the highest bids coming in at 1.5 wrapped ether (WETH) — equal to $3,723.83 at the time of writing.
How to Buy NFTs
If you’re interested in starting your own NFT collection, you’ll need the following items:
To begin, you’ll need a digital wallet that can hold both NFTs and cryptocurrencies. Depending on what currencies your NFT provider takes, you’ll probably need to buy some cryptocurrency, such as Ether. Coinbase, Kraken, eToro, and even PayPal and Robinhood now allow you to buy cryptocurrency with a credit card. After that, you’ll be able to transfer it from the exchange to your preferred wallet.
Popular NFT Marketplaces
OpenSea.io: This peer-to-peer marketplace claims to sell “rare digital products and memorabilia.” To get started, simply create an account and browse the NFT collections. You may also sort pieces by how much they sold to find new artists.
Rarible: Rarible is a democratic, open marketplace that lets artists and producers issue and sells NFTs, similar to OpenSea. The platform’s RARI tokens allow users to vote on features such as fees and community regulations.
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