What is an NFT?
In this article, we explain what an NFT is and give an overview of the most important facts.
First, let’s explain the name: NFT is the abbreviation for Non-Fungible Token. The components of the term can be explained as follows:
Token
A token is the digitized form of an asset. This asset has a certain value or function. Computer-generated images are directly digital and therefore do not need to be digitized first. The scenario is different for real estate or music rights. These can be tokenized by overwriting the associated rights on the token. Digitization makes the rights easier to trade.
Non-fungible
A token can be both fungible and non-fungible. Basically, non-fungible equates to unique since a non-fungible token cannot be exchanged one-to-one for another token. A good example are paintings. You can exchange them, but the value of the exchange object is not directly comparable with another painting.
The situation is different with Bitcoins. Bitcoins can be exchanged at any time since each Bitcoin represents an identical value. The same applies to cash or fiat currencies in general.
So, what do NFTs have to do with the blockchain?
Like cryptocurrencies, NFTs are based on a blockchain, which is a decentralized database. To put it in simple terms, this database is made up of blocks of information, which are strung together like the links in a chain. Each block contains the actual data as well as its hash value and the hash value of the previous block. The data stored in a block can include, for instance, the transaction details of cryptocurrencies or NFTs: Seller, buyer, and the transaction amount.
The hash value can be thought of as an electronic fingerprint. It is always unique and is used to identify a particular block. Since each block also contains the hash value of its predecessor, a blockchain is created.
Technically, the blockchain is based on a peer-to-peer network, i.e. a network in which every participant owns a complete copy of the blockchain. When a new block of information is created, all computers in the network receive this information, check it and then confirm the inclusion.
If someone wants to try to add a block of misinformation to the blockchain, they would have to feed it into all copies of it. Since this is (almost) impossible (see e.g. https://bitcoin.org/bitcoin.pdf), the blockchain is an extremely secure way to store data. Because data is thus stored permanently and traceably on a blockchain, every purchase and sale of NFT can be tracked very well. The owner of the token is clearly recorded.
Where can I buy NFTs?
NFTs are being offered on the internet on many trading sites. The best known are OpenSea, Rarible, and Mintable. To buy NFTs, in most cases, you need a cryptocurrency that is stored in a digital wallet. Today, Ethereum (ETH) is the leading cryptocurrency. However, other currencies, such as SOLANA, are also worth at least a look.
Trading sites are often used only for resale. Many projects offer the initial sale exclusively on their own website at a self-defined minting date. We will summarize the reasons for this and how you can find good NFT projects in a separate story.
Examples of a good NFT project
For every good NFT project, there are at least twice as many bad NFT projects. We would like to suggest you have a look at our NFT World News project: World News (nft-world.news).
Criticism of NFT Art
Some critics argue that NFT images can also be saved with a simple right-click, and thus documented ownership on the blockchain provides no added value. Feel free to read our story on this topic:
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