What is NFT? A Beginner’s Guide to Non-Fungible Tokens (NFT)
NFTs are the new normal. It is a new craze among netizens in recent years and has gained immense popularity and extreme attention. But yet, there are many intricacies to know, a lot to understand in NFTs. So, in this blog, we will discuss everything about NFTs step-by-step.
What does NFT mean?
To explain in the simple-most manner, NFT is a Non-Fungible Token, where fungible means something identical or replaceable. Thus, we can say that NFT is something whose identical token is unavailable anywhere and whose exact replica can’t be created. For example, let’s assume that when Mark Zuckerberg created Facebook, he was the one who uploaded the first post. So, there can only be one post that will be called the first Facebook post. And this will be the case even after 1000 years. It can be turned into an NFT and sold. The same rule goes with any digital art or photo.
How does NFT work?
Well, after understanding what NFT is, a question pops up- how does NFT actually work? How to turn digital art into an NFT? NFT runs on blockchain technology. The Ethereum blockchain is the source code of most of the NFTs. In addition to its cryptocurrency status, Ethereum’s blockchain also supports NFTs, which are additional information-based coins that differ from standard Ethereum coins in many ways. So, when anything is to be turned into NFT, it is the Ethereum code that records it along with the name of the owner and seller.
Can NFT be physical?
A lot of the current buzz revolves around the use of technology to sell digital art. As such, NFTs can really be anything digital (such as drawings, music, even your brain transformed into an AI). Yes, literally, NFTs of digital arts are booming more than anything else. Though there are some instances when physical arts have been sold as an NFT but it doesn’t mean it is secured by the blockchain network. Thus, technically, NFT cannot be a physical asset, i.e., it must be digital.
What are the pros of NFT?
NFT guarantees full copyright to artists and other content creators. Most licensing agreements do not guarantee the full copyright of content creators. By doing so, the creators retain their rights to generate revenue with every sale. Moreover, NFTs are secure as they can’t be easily stolen. Using NFTs, creators can monetize their work directly. Taking any Art as an example, someone would need to hire an agent to market and sell their work. Artists or original creators can transact directly with customers through NFTs, thus, eliminating these middlemen.
What are the cons of NFT?
No matter how the artists try putting it, digitising physical art is impossible. The value of NFTs is uncertain. Even for some tech-geeks, NFTs are confusing assets which means artists may fall trap in the hands of some organisation who may scam them of all the money without their notice. Moreover, the environmental cost of every NFT transaction is too much than the value it creates. Every NFT transaction uses a tremendous amount of energy and thus, contributes to global warming.
What makes NFTs so special? or Can NFT be copied?
All this brings us to a question- Is it worth spending so much on one NFT token? After all, it’s the internet, anyone can download and copy from anywhere. So, what’s the purpose of having an NFT? Well, to answer this, we must correlate it with an example of a real-life physical piece of art. Take, for instance, the portrait of the Mona Lisa. No doubt, one can create endless copies of it either by sketching the same or by taking a picture and printing it out. But, there will always be only one Mona Lisa by Leonardo Da Vinci. There is no substitute for the original painting. The price of an original painting will always be more than all the replicas. Similarly, digital art of the NFTs can be replicated but there will always be one owner of the original piece created by the original artist. So, NFT has its value.
Why should I buy NFT? Are NFTs a good investment?
This GIF named the Gucci Ghost was sold for $3600. In today’s era, where customers take days to finalise one deal, this Gucci Ghost GIF sold out in 12 seconds! Currently, it can be bought for $16,300. This shows that there is value for NFTs which is, at the moment, going up. But no one knows if it’s a bubble or a real growth. So, it’s always advisable to start with small steps only.
How to buy NFT?
NFT can be bought from online marketplaces who bring the buyer and seller together. You’ll need to decide which marketplace to buy from, what type of digital wallet is required to store the cryptocurrency, and what kind of cryptocurrency you’ll require for the purchase. So, for example, you can use Bitcoin or any other cryptocurrency to pay for the NFT, and use any popular marketplace to buy an NFT.
Where to buy & sell NFT?
NFTs are digital art collections available on e-marketplaces. There are many popular marketplaces like OpenSea, Mintable, Nifty Gateway, and Rarible. You can either register as a buyer and buy one NFT or upload your own creation and sell your NFT.
Which NFT should I buy?
NFTs are a new topic and don’t have a long history of credibility to support it. So, it’s hard to say which NFT one should buy based on historical data. But, NFTs from popular artists may become famous and their prices may go up. So, if you see an NFT from a well-known personality, consider trying your luck on that.
How to create an NFT?
NFTs can be created by anyone. The NFT marketplace lets you upload content and turn it into an NFT or crypto art by simply connecting your digital wallet, a small purchase of Ethereum, and an NFT marketplace. So, for example, if you have a photo which you think is selling material, you can upload it in the NFT marketplace and follow the other processes deliberately. Soon, you will have an NFT created ready to be sold.
How to sell NFT?
When your NFT has been minted, you will have the option of listing it on the marketplace. Follow the prompts after clicking the “Sell” button. NFT buyers can pay you in cryptocurrencies by using this section. For example, you may specify the price of the transaction or the time limit of the auction. In addition to “gas fees,” (a fee charged by the Ethereum blockchain network for registering transactions), the marketplace will calculate any “transaction fees” at this point. As the blockchain network gets busier, the gas fees will vary.
How many NFT marketplaces are there?
Platforms for buying and selling NFTs (Non-Fungible Tokens) abound, but they differ greatly from one another. A person should understand what fees are charged by an NFT Marketplace before opening an account, what payment methods the platform accepts, and if the platform is considered trustworthy by its users before opening an account. Besides broader marketplaces, there are also niche sites that cater to specific needs, like NBA Top Shot which offers basketball highlights or Valuables that allows retailers to sell tweets such as the one Jack Dorsey (ex-CEO of Twitter) auctioned.
Which NFT marketplace is the best?
Choosing a good marketplace is the most important task as a fraudulent marketplace will end up taking all your money. Moreover, you might have to pay extra fees if you choose to transfer and sell NFTs on other marketplaces. So, better to choose one good marketplace and stick with that ever. OpenSea, Mintable, Nifty Gateway, and Rarible are a few of the most common NFT marketplaces.
Here are examples of some NFTs and the amount it was sold for
- The Merge sold for $ 91.8 million
- The first 5000 days sold for $ 69 million
- Human One sold for $28.9 million
- CryptoPunk #7523 sold for $ 11.7 million
- A frame of Doge sold for $ 4 million
So, this was all about NFT and why, how, where and when to buy or sell it. If you still have some doubts, tell us in the comments section below!