What Is NFT?
It seemed like you finally understood the basics of cryptocurrencies when everyone started talking about NFTs. These tokens have become the latest trend in the crypto industry, and it’s time to learn how they work. This article covers all NFT details, ranging from the working process to creating and trading instructions!
NFT Definition – What Does It Mean?
This is an abbreviation for a non-fungible token. An NFT is a virtual asset that confirms your ownership over a specific real-world or digital item. It could be almost anything, such as art, collectibles, music, videos, video game skins, and land, etc.
What’s the Main Idea of NFT?
The primary idea behind the non-fungible tokens is making your own digital collection. You can consider them a virtual variation of physical cards, such as NFL trading cards. Each NFT has a specific value, which supports the idea that it acts as a collectible.
How Does NFT Work?
Non-fungible tokens are on the Ethereum blockchain. The blockchain is a distributed ledger that keeps track of all transactions occurring on that network. You create an NFT from virtual presentations of items that could be tangible or intangible.
They claim the ownership of a particular item, which makes these tokens collectibles themselves. However, depending on the NFT, you might not have an exclusive right to it. For example, a limited-edition artwork NFT doesn’t give you exclusive ownership over the painting.
NFT’s Pros and Cons
These are the main reasons why you should consider using NFTs:
- You own a unique item. It’s always nice to own something that’s one of a kind.
- Potential value increase. As time passes, a specific NFT might boost its value significantly.
- A simple way to claim your ownership. For physical items, you need to take great care of the artwork or a paper related to its ownership. But with NFTs, the record of authenticity is stored digitally, and you can access and manage it easily.
However, there are some downsides to using NFTs, such as:
- Digital ownership isn’t the same as physical. It’s one thing with in-game items, but if we are talking paintings and old records, physical items are what hold their true value.
- You can’t be sure about the NFT value. There’s hype now, but nobody knows how much NFTs will be valuable in the future.
How Are NFTs Different from Crypto Currencies?
The main difference is that NFTs are non-fungible tokens. Cryptos are fungible tokens, so they are identical, and you can trade them at equivalent rates. A single BTC always has the same value. However, a particular single NFT can be more valuable than another NFT token. Each has original digital information. It’s also why you can’t use non-fungible tokens for commercial transactions, such as buying coffee at Starbucks.
Examples of Top NFT Projects
You can use NFT across a range of different industries. These might be the most promising NFT projects so far:
- Art. If you own digital or physical art, an NFT can be a way to claim your ownership.
- Finance. The business world can also benefit because NFTs can deliver financial abilities to decentralized finance.
- Digital images and videos. You might have created a funny meme or have a video that attracts a large audience. NFTs can be a way of claiming ownership of it.
- Gaming. Axie Infinity is a virtual pet universe where you raise, trade, and battle your fantasy creature collection. The recent news that someone sold a plot of land in this game for $2.5 million is proof of how valuable NFTs can be.
Who Can Create NFTs?
Almost anyone can “mint” or make non-fungible tokens. Some platforms work on an invitation-only basis for creators, while others allow everyone to make NFTs. You’ll need music, video, or another file that you want to upload, as well as a crypto wallet.
Once you pick the desired site, the actual steps vary. However, you should choose “Create” and follow the instructions. It should be fairly easy to finish the minting process, but please note that some platforms charge fees for it.
Where to Store Your NFTs?
You can only use a crypto wallet to store NFTs. These are also virtual tokens, so it’s understandable why they belong in a digital wallet. Make sure to check our suggestions for the best crypto wallets to ensure your NFTs remain safe.
How to Buy and Sell NFTs
If you ever traded crypto, buying and selling NFTs won’t be new to you. However, here is a quick step-by-step explanation:
- You’ll need to pick a suitable exchange, especially since some tokens are only available on some platforms.
- Fund your wallet with a supported currency, such as USDC stablecoin.
- You might need to wait for the NFT drop or another way for the desired tokens to be available. Some drops might require registering in advance, but timing is also important.
- Finalize the transaction and use a suitable wallet to store NFTs.
The selling process is simple and involves the following steps:
- Pick the NFT in your ownership and choose the option to SELL.
- You can list it on a marketplace or sell it directly to another buyer.
- The seller (you) can negotiate the sale’s terms. If you list it on a marketplace, you can pick an auction sale or a fixed sum.
- Buyers usually use ERC-20 tokens or Ether to acquire NFTs. Make sure your wallet supports the currency you plan to receive.
- It’s possible to set royalties for some NFTs. That means you’d receive a portion from each next token sale.