What is NFT? All about NFT

Basic Introduction of NFT

  • Everyone seems to talk about Non-fungible Tokens (NFTs) these days. The sale of these digital assets has gone through the roof. But, what are Non-fungible tokens or NFTs? How do they work? Are NFTs worth investing in? Let’s try to answer all these questions and more in this blog post.
  • If you are someone who is wondering what NFTs are and if they are worth investing in, all you need to do is read this blog post till the end.
  • In this post, we will be explaining what NFTs are and we will also be covering everything that you should know about NFTs How they differ from Cryptocurrency, how NFTs work, their application, the ways of buying them, well-known marketplaces for NFTs, and if they are worth buying.

What are NFTs exactly?

  • NFTs are unique digital assets that are transacted online, often with cryptocurrency, and their encoding software is the same as cryptocurrencies. They represent objects that are present in the real world like music, art, videos, and items found in games, among others. They have unique identification codes and are not available in infinite amounts.
  • Recently NFTs have gained huge popularity as far as transactions in digital artwork are concerned. Since November 2017, the amount that has been spent on NFTs stands at a whopping $174 million.
  • People spend money on buying NFTs even though they are available online for free because of the exclusive ownership right that it gives the buyers. There is also proof of ownership in the form of built-in authentication within NFTs.

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How do NFTs differ from Cryptocurrencies?

  • Cryptocurrencies are touted as “fungible” which means you can trade or exchange one cryptocurrency for another cryptocurrency. Also, their value is equal. In other words, one bitcoin is of the same value as another bitcoin. Since they are fungible, they are also a trusted means through which transactions can be conducted.
  • NFTs are different in the sense that they cannot be traded or exchanged for another NFT because each of them has a digital signature.

How do NFTs work?

  • NFTs run on the same technology as cryptocurrencies i.e Blockchain. Blockchain keeps a record of transactions and is a distributed public ledger.
  • Mostly the Ethereum Blockchain contains NFTs but there are also other blockchains that contain NFTs.
  • How are NFTs created? NFTs are created from digital objects such as videos, music, art, GIFs, Video game skins, and even tweets, among others.
  • NFTs, give exclusive ownership rights to the buyers which means only one buyer can own an NFT at a time. Since NFTs have unique data, verification of ownership and transfer of tokens between owners becomes easy. If you are an owner or a creator of an NFT, you can even store specific information within NFTs. For example, if you are an artist who wants to sign their artwork, you can do so. How? By using the metadata of NFTs to include your signature.

Applications of NFTs

  • Now, let’s talk about the application of NFTs. The amount that Nyan Cat, a GIF of a cat having a pop-tart body, was sold for was a whopping $6,00,000.
  •  A highlight NFT of LeBron Jones sold for a massive $200,000.
  • The NFT art of Taco Bell was auctioned (for charity) at the highest bid of 1.5 WETH that equals $3,723.83.

Ways to buy NFTs

Here are the things you should get/do to be able to buy NFTs:

1) A Digital Wallet

  • A digital wallet helps you store NFTs and cryptocurrencies.

2) Buy Cryptocurrencies

  • You need to buy cryptocurrencies that are accepted by your NFT provider. If you want to purchase cryptocurrencies using your credit card, you can also do so on the following platforms – Coinbase, PayPal, and Kraken, among others. You will then have to transfer it from the exchange to your preferred wallet.

3) Pay a percentage to your Exchange

  • Many exchanges charge a percentage of your transaction while purchasing cryptocurrency. You have to keep that in mind.

Well-known & Largest NFT Marketplaces

Here’s the list:

1) OpenSea.io

  • You have to set up an account and shop through the collection of NFTs that they have.

2) Rarible

  • This platform is similar to OpenSea.io and is an open marketplace.

3) Foundation

  • Fellow creators send upvotes or invitations to artists to post their creations. Artists will have to buy “gas” to enter the marketplace. Nyan Cat was sold on this platform.

Are NFTs worth buying?

Here are the following things you should keep in mind before going for the plunge:

  • NFTs are new and therefore, there are a lot of risks involved. You must invest in small amounts first.
  • You have to keep in mind that the demand for NFTs influences the price of NFTs.
  • Also, you have to do your research thoroughly before investing in any of the marketplaces listed above, and beware of imposters.
  • The resale value of NFTs may be less than what you have originally paid. So, you need to invest accordingly.
  • Purchasing NFTs and cryptocurrencies involve capital gain taxes. So, you have to check with a tax professional before transacting.

Conclusion

  • To summarize, investing in NFTs is a personal decision and should be done after taking a lot of caution and conducting thorough research. As for other investments, there are risks involved here too. So, “trade” carefully.

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