What are Non-Fungible Tokens or NFTs?

Non-fungible tokens (NFTs) are currently the hottest cryptocurrency phenomenon gaining widespread popularity. These tokens suddenly grabbed everyone’s attention when Christie’s sold an NFT artwork for $69.3 million.

It has become more common for NFT artworks to sell for millions, more info here.

This unique trend has been perplexing many who wonder why so much is being spent on things that exist only in their digital form. While there are many questions that need answering, NFT supporters consider it to be the next stage in art collection. 

What are NFTs?

Non-fungible refers to the tokens being non-replaceable and unique. These tokens are protected with the help of blockchain technology, just like cryptocurrency.

A digital image can be sold in the form of an NFT, the same way a physical painting is sold. It allows anyone to own the original version of the digital image and earn royalties whenever the NFT gets resold. 

An NFT is a unique identifier that will cryptographically assign the ownership of a digital item. It can also prove the ownership. NFTs for digital artwork have been sold for millions or even tens of millions. Just the first half of 2021 saw NFT sales cross the figure of $2.5 billion. Some of their key features are as follows:

  • An NFT can also link ownership to other digital items including music, videos, and real estate
  • They can be compared to modern-day collectibles
  • These tokens get recorded on a blockchain, the technology that supports cryptocurrencies
  • The recording on the blockchain ensures it is a one-of-a-kind asset
  • This technology prevents any risk of NFTs being altered or counterfeited

Difference Between NFTs & Cryptocurrency

Cryptos are digital currencies that are meant to be used for completing transactions. Cryptography goes behind these currencies to ensure security. More recently, cryptos have become increasingly popular and have started gaining wider acceptance. Many businesses now accept cryptos as payments from their customers. 

On the other hand, NFTs are similar to collectibles. They have the potential to rise in value. 

The basic difference between the two can be summed up as follows:

  • Since NFTs are non-fungible, they are exchangeable but not replaceable. 
  • Cryptos are fungible tokens and are both exchangeable and replaceable.

While NFTs also use cryptography to secure them, they cannot be used as currency. Another similarity is that both rely on a blockchain. Both NFTs and cryptos are usually traded on the same platforms.

How to Purchase NFTs?

Usually, any digital image can be bought as an NFT. However, there are certain considerations that need to be observed. This includes:

  • The marketplace where you are buying from
  • The type of digital wallet needed for storing the NFT
  • The cryptocurrency required for completing the sale

While there are many NFT marketplaces, some are niche-focused and cater to certain types of non-fungible tokens. 

When buying NFTs, it is important to consider the fees charged by a marketplace. For example, some of these platforms charge a fee known as ‘gas’ fee. This refers to the energy needed for completing the transaction on the blockchain. Additional costs can include conversion of dollars to Ethereum and closing fees. 

How to Sell NFTs?

You can also sell NFTs on marketplaces, with the process being different on different platforms. Some of the key features of the selling process are as follows:

  • You will have to upload the content onto the marketplace, follow the specific instructions to convert it into an NFT
  • You can provide details such as its description and expected price
  • NFTs are usually purchased with Ethereum, but you can also use other tokens such as Flow and WAX

Besides, anyone can create a non-fungible token. You will need a digital wallet, a content that you want to turn into an NFT, some Ethereum, and an account on an NFT marketplace.

So, what is the future of NFTs? NFTs are highly speculative assets. Some users have generated a lot of returns selling these tokens. Careful planning and investment are important to ensure you are making the right choices. There is also a chance that you may wind up spending thousands or millions on a digital asset that may not be worth much in the future.

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Bhavna Tank
Freelance showbiz writer

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