NFTs, or Non-Fungible Tokens, have gained significant popularity in the digital world. Imagine you have a special key to a unique treasure chest that no one else can open. That’s essentially what an NFT is. It is a type of digital asset that represents real-world objects like art, music, in-game items, and videos. They are bought and sold online, usually with cryptocurrency, and they’re encoded with the same underlying software as many cryptos.
Unlike cryptocurrency coins, which are fungible and can be exchanged on a one-for-one basis (like swapping a dollar for another dollar), NFTs are unique (non-fungible). You can think of them like rare, one-of-a-kind collectibles, but instead of a physical object, you’re getting a digital artifact.
Examples Of NFTs
One well-known example is a digital artwork by an artist named Beeple. His piece, called “Everydays: The First 5000 Days,” was sold as an NFT at Christie’s auction house for a staggering $69 million! The purchaser received a unique digital token (the NFT) that proves they own the original work.
An example closer to home might be digital trading cards. Think of the Pokémon cards you might have traded as a kid. NFTs can work in the same way, but these cards are entirely digital and represented as tokens on a blockchain. Each token proves who owns the card, and each card can have different levels of rarity or value.
What Is Cool About NFTs?
There are several aspects of NFTs that people find “cool” or intriguing. NFTs are a cutting edge technology and new developments are being made everyday. Here are some of the most interesting use cases for Non Fungible Tokens otherwise known as digital collectibles.
- Digital Ownership: NFTs provide a way to truly own a piece of digital content. Up until now, digital content like ebooks, mp3s, and digital images were easily copied, and thus they didn’t have the same feeling of ownership as physical items. With NFTs, you can own a unique piece of digital content that cannot be replicated, giving you the same kind of ownership feeling as having a physical object.
- Supporting Artists and Creators: Artists and creators can mint their own NFTs and sell them directly to their audience. This cuts out the middlemen and allows artists to keep more of the profits from their work. In many cases, NFTs also have a feature that provides the original creator with some percentage of the sale every time the NFT is resold, providing them with ongoing royalties.
- Unique Experiences and Access: NFTs can be used to represent more than just digital art or music. They can also be used to represent access to unique experiences or services. For example, a musician might sell NFTs that provide the holder with VIP access to all their concerts.
- Collectibles: Like traditional collectibles, digital NFTs can be collected, traded, and sold. This appeals to the same desire to collect rare and valuable items that drive people to collect things like baseball cards or rare stamps. The popularity of projects like CryptoKitties or NBA Top Shot demonstrates this aspect of NFTs.
- Provenance and Authenticity: One of the core features of NFTs is that the blockchain records every transaction. This means that it’s possible to trace the history of the NFT back to its original creation. For art, this provides an unforgeable record of the artwork’s provenance, which is incredibly important in the art world.
- Interoperability: NFTs are generally built on standard protocols (like Ethereum’s ERC721 and ERC1155), which means that they can be used across multiple platforms. A digital piece of art could be displayed in various virtual galleries, or a virtual pet could be used in multiple games.
Remember, the NFT market is very new and can be highly speculative. While there are many exciting aspects to NFTs, they should be approached with a good understanding of the space and the associated risks.
Creating an NFT, a process also known as “minting,” involves several steps and occurs primarily on blockchain platforms that support this feature. Ethereum has been the most popular platform for minting NFTs, though others like Binance Smart Chain, Flow by Dapper Labs, and Tezos also support them. The process typically follows these steps:
- Creation of the Digital Asset: The first step is to create the digital asset that you want to turn into an NFT. This can be a digital artwork, music, a digital collectible, a tweet, a piece of code, or any form of digital file.
- Blockchain Account and Wallet Setup: Before minting an NFT, you need to set up a blockchain account or digital wallet on the relevant blockchain network. Metamask is a popular choice for Ethereum.
- Connect to an NFT Marketplace: Next, connect your digital wallet to an NFT marketplace. This is where you’ll mint (create) your NFT. Popular marketplaces include OpenSea, Rarible, and Mintable for Ethereum, and NBA Top Shot for Flow.
- Minting the NFT: On the marketplace, you’ll find an option to create or mint an NFT. You upload your digital file and fill out the necessary information.
Frequently Asked Questions About NFTs
What are NFTs?
Non-fungible tokens (NFTs) are unique identifiers that use blockchain technology to assign and prove ownership of a digital good. NFTs are stored in digital asset wallets, like Coinbase Wallet or MetaMask.
Are There Different Types of NFTs?
Yes. The technology of NFTs can be used for many things. At it’s core principle, there is only 1 NFT that is the same on the blockchain, so owning that NFT can do anything the creator of the NFT wishes. For instance, some NFTs grant you exclusive access. Some NFTs are used for tracking. Some NFTs are used as proof that you attended an event (POAP). This will continue to develop over the years. We wouldn’t be surprised if the title to your car comes in the form of an NFT someday.
What is a wallet?
To purchase and store an NFT, collectors must use a digital asset wallet. There are different types of wallets like Coinbase Wallet or MetaMask for etherium and other wallets for other blockchains such as phantom for Solana. Each Ethereum wallet has an Ethereum address, which is a unique public identifier that points to the wallet.
How to create an Ethereum Wallet?
Always write down your private keys and keep them in a safe place. Never store them where anyone else can see them and keep the key off devices that are connected to the internet.
What does it mean to mint an NFT?
Minting an NFT from a collection is the earliest possible opportunity to own an NFT from the respective collection. Those who mint are the first to own the NFT. After an NFT is minted, it can be transferred or sold like any other NFT.
What are Gas Fees?
“Gas fees” are the transaction fees that users pay validators on the blockchain to have their transactions processed (i.e. included in the block). On the Ethereum blockchain, gas fees are paid using ETH cryptocurrency. The amount of gas you’ll need to pay to have your transaction processed will depend on the amount of people that are trying to process transactions on the network at the same time.
There are websites where you can track gas prices, such as: https://etherscan.io/gastracker.
NFTs Revolutionize Digital Ownership
In a broader sense, NFTs can revolutionize digital ownership. In a world where almost everything is being digitized, NFTs can provide a solution to replicate the feeling of owning a physical item. They can represent ownership over unique items or experiences and help creators in various fields monetize their wares in the digital realm.
Keep in mind, though, as a newcomer, that the world of NFTs is still very new and highly speculative. Prices can be volatile, and there’s often uncertainty about the long-term value of these assets. So while the concept of NFTs can be fascinating and potentially lucrative, it’s also crucial to tread carefully and understand what you’re getting into when buying or trading them.