What is an NFT?

Definition

A non-fungible token (NFT) is a unique and non-interchangeable unit of data stored on a digitalledger (blockchain). NFTs can be used to represent easily-reproducible items such as photos,videos, audio, and other types of digital files as unique items (analogous to a certificate ofauthenticity), and use blockchain technology to establish a verified and public proof ofownership. Copies of the original file are not restricted to the owner of the NFT, and can becopied and shared like any file.The first NFT project was launched in 2015 on the Ethereum blockchain, and interest grew withthe rise of interest in crypto currencies. According to NonFungible.com, sales exceeded $2billion in the first quarter of 2021, more than 20 times the volume of the previous quarter. NFTshave drawn criticism with respect to the energy cost and carbon footprint associated withvalidating blockchain transactions.

How Does an NFT Work?

NFTs exist on a blockchain, which is a distributed public ledger that records transactions. You’reprobably most familiar with blockchain as the underlying process that makes cryptocurrenciespossible.Specifically, NFTs are typically held on the Ethereum blockchain, although other blockchainssupport them as well.An NFT is created, or “minted” from digital objects that represent both tangible and intangibleitems, including: Art, GIFs, Videos and sports highlights, Collectibles, Virtual avatars and videogame skins and Music. Even tweets count. Twitter co-founder Jack Dorsey sold his first evertweet as an NFT for more than $2.9 million.Essentially, NFTs are like physical collector’s items, only digital. So instead of getting an actualoil painting to hang on the wall, the buyer gets a digital file instead.They also get exclusive ownership rights. That’s right: NFTs can have only one owner at a time.NFTs’ unique data makes it easy to verify their ownership and transfer tokens between owners.The owner or creator can also store specific information inside them. For instance, artists cansign their artwork by including their signature in an NFT’s metadata.

What are the Benefits of NFTs?

Ownership
The foremost advantage of non-fungible tokens is evident in the proof of ownership. Since NFTsare on a blockchain network, they can help in associating ownership to a single account. Mostimportant of all, NFTs are indivisible and could not be distributed among multiple owners. At thesame time, the ownership advantages of NFTs ensure that buyers are safe from the concerns offake NFTs.

Authenticity
The benefits of non-fungible tokens rely largely on the uniqueness of the tokens. NFTs arecreated on the blockchain, thereby implying the association of unique records with them..

Transferability
It is easy to trade NFTs freely on particular markets with a wide range of options for trading.

Economic Opportunity
The benefits of non-fungible tokens could lead to the development and growth of a completelynew creator economy. The creator economy would focus on helping content creators avoid theneed for transferring ownership to platforms used by them for publicizing their content.

How Is an NFT Different from Cryptocurrency?

NFT stands for non-fungible token. It’s generally built using the same kind of programming ascryptocurrency, like Bitcoin or Ethereum, but that’s where the similarity ends.Physical money and cryptocurrencies are “fungible,” meaning they can be traded or exchangedfor one another. They’re also equal in value—one dollar is always worth another dollar; oneBitcoin is always equal to another Bitcoin. Crypto’s fungibility makes it a trusted means ofconducting transactions on the blockchain.NFTs are different. Each has a digital signature that makes it impossible for NFTs to beexchanged for or equal to one another (hence, non-fungible). One NBA Top Shot clip, forexample, is not equal to EVERYDAYS simply because they’re both NFTs. (One NBA Top Shotclip isn’t even necessarily equal to another NBA Top Shot clip, for that matter.)

How to buy or sell NFTs

There are several marketplaces where you can buy/sell NFTs. Buying or selling an NFT is veryeasy through a marketplaceNFT marketplaces are basically websites where you can buy and sell NFT items. Thesemarketplaces are similar to Amazon. Buying and selling NFTs is simple. All you need to do iscreate an account on a marketplace where you are willing to buy or sell NFTs and set up anEthereum wallet.Some marketplaces where you can trade them: OpenSea, Nifty Gateway, SuperRare andRarible.Whether or not NFTs are here to stay, they have certainly become a new plaything forthe uber-rich and there is real money to be made, if you can make it happen. NFTs givenew meaning to digital art, and the prices seen at sale indicate it is a real part of thefuture of art, and collectibles in general.