In the past year you have probably heard the mysterious term NFT mentioned. Maybe at some point you tried to understand what it meant, but it's just not clear enough. This beginner's guide will explain NFTs for beginners. What they are and their uses in different NFT projects like digital artwork, in game items, trading cards, and other roles.
NFT stands for "non-fungible token". Here "non-fungible" simply means "unique", and the "token" is the proof of ownership of said asset. This is done by creating a unique digital token on a blockchain, typically on the Ethereum blockchain.
It contains metadata that describes the asset it represents, stores digital ownership, and contains its creator's data, along with any associated rights or royalties. Because non-fungible tokens are unique, they cannot be exchanged for another token on a one-to-one basis, unlike cryptocurrencies such as Bitcoin or Ether.
Blockchain technology lets NFTs contain proof of ownership and authenticity. A blockchain is a decentralized, digital ledger that records and verifies all transactions related to that blockchain. "Decentralized" means it is not controlled by a single central authority or entity, but a distributed network.
This makes it easy to verify the ownership and origin of the asset the NFT represents, and to track its ownership history. Non-fungible tokens are digital assets stored in a digital wallet using blockchain technology, the same way you might keep a physical work of art in a safe.
Non-fungible tokens are a type of digital asset that is stored on a blockchain. Unlike traditional cryptocurrencies like Bitcoin, which are fungible assets and can be exchanged for one another, each NFT is unique and represents a specific item or piece of content, such as artwork, a video game item, or a tweet.
Non-fungible tokens, or non-fungible assets, work by using "smart contracts", which are self-executing computer programs that run on the blockchain to verify the ownership and authenticity of a digital asset.
When someone buys an NFT, they are purchasing ownership and the right to claim the original version of that digital asset as verified by the blockchain.
Because non-fungible tokens are unique and verifiable, they are increasingly being used in the art world and other industries as a way to certify ownership and ensure the value of digital collectibles, essentially creating an NFT history.
Non-fungible tokens or NFTs are digital assets that are used to represent ownership of unique items or assets such as art, music, videos, or other types of creative work. NFTs can also represent ownership of physical assets like real estate or luxury items like watches or cars.
This kind of crossover asset between the digital and physical asset is called "phygital". They are designed to provide proof of ownership and authenticity, and to enable the sale and trade of digital collectibles on a blockchain.
They are sold on different marketplace pages, for example OpenSea, perhaps the most popular NFT marketplace. When you own NFTs—especially one made by a famous digital artist—you can use it as a profile picture on different social media networks. No matter where you use it however, it will still have the same value.
NFTs can be anything that needs to be verified as unique, such as digital art, music, videos, or even tweets. Some popular examples of NFTs include the CryptoPunks, a collection of 10,000 unique digital characters, and Beeple's "Everydays: The First 5000 Days", a digital work of art that sold for $69 million at a Christie's auction.
One of the most famous NFT art collections is the Bored Ape Yacht Club by Yuga Labs. Bored Ape NFTs can be used as digital collectibles for trading or virtual avatars on different social networks. If you're interested in auctions, you could also take a look at Nifty Gateway.
In-game items can also be bought as NFTs. This is usually implemented to make the items into digital collectibles with different levels of rarity. Axie Infinity is a game based on such a gameplay mechanic.
Another reason for in-game NFTs is to let the players resell the NFTs later in order to recoup value or to use NFTs as an initial investment to start making money in play-to-earn games. These are games collectively known as Web3 games, but that's a subject for another article.
The answer is no, Bitcoin is not an NFT. While both Bitcoin and NFTs are forms of digital assets, they serve different purposes.
Bitcoin is a cryptocurrency used as a means of exchange, while NFTs are digital assets that represent ownership of a specific item, such as a piece of artwork or a collectible, and can't be exchanged—only sold. A good example again is Bored Ape Yacht Club NFTs.
Interestingly the idea for NFTs was inspired by colored Bitcoins. Colored Bitcoins are a way of representing a Bitcoin transaction that includes additional metadata, such as information about the asset being exchanged. For example, a colored Bitcoin might represent ownership of a specific piece of artwork or a particular stock.
Colored bitcoins were first introduced in 2012 by a developer named Mike Hearn, who proposed a way of embedding metadata into Bitcoin transactions using a protocol called "colored coins".
This protocol allowed users to create their own tokens on top of the Bitcoin blockchain, which could represent anything from stocks and bonds to digital works like music and video.
Considering how far this industry has come today, it makes things like a music store app seem like an ancient relic.
As with any investment, the value of an NFT can fluctuate over time, depending on various factors such as market demand, rarity, and popularity. Some NFTs have sold for millions of dollars, while others have failed to generate much interest or value.
Investing in general can be risky, and it is important to do your research and understand the market before investing. It is also important to be aware of the environmental impact of NFTs, as the process of creating and trading them requires a significant amount of energy.
Non-fungible tokens are available on an enormous number of NFT markets. How do I use Rarible for digital access?
Step 1: Visit the Rarible website, then click "Connect" on the top left. Click on the digital wallet that is connected to the website and log in there.
It requires accepting these conditions for services for your account in order to create a digital wallet. There are many digital wallets, but in our examples, we'll connect via MetaMask, a very popular crypto wallet.
Step 2: After login, look for the non-fungible token product you are interested in purchasing. Now you can buy your first NFT.
Making a wallet might be a bit tricky for the uninitiated, but that's the whole point of this article. Most wallets will follow more or less the same process, and will provide what should be easy instructions. They will provide you with a wallet address once you simply confirm the final step of the process. There might be a confirmation window or email. Once you're in and you find something you want to use your new wallet for, you'll be one wallet click away from getting what you want!
If you are interested in creating an NFT, the process is relatively simple. First, you need to decide what item you want to represent as an NFT. This can be a piece of artwork, a collectible, or even a tweet.
Next, you need to create a digital file of the item and go through the process used to mint NFTs using a blockchain platform such as the Ethereum network. Once the minting process is complete, your NFT will be recorded on the blockchain and can be bought, sold, and traded. You can then use an NFT space or NFT marketplace such as OpenSea or Rarible to put it up for sale.
If you want to sell your NFT after NFT minting, there are a few different marketplaces available where people can sell and buy NFTs. Some popular options for an NFT marketplace include OpenSea, Rarible, and SuperRare. Each platform has its own fees and requirements for NFT creators, so it is important to research which one is best for you and your NFT.
When looking for what are called minting locations, there are plenty of NFT markets for you where you can buy NFTs. All NFT marketplaces have their own pros and cons, so do your own research to find the best deal for you.
Among the best-known are OpenSea, Raribles, and SolSea. Several blockchain applications such as OpenSea and Rarible permit “cutback”, or lazy minting. In lazy minting you can reduce the "gas fee" (blockchain transaction fee) by setting up an NFT for sale and then sending the fees on to your buyer if the transaction was concluded. You'll need to pay attention to gas fees on marketplaces, as well as their trading volume to find the best one for you.
Once you are more familiar with how all the transactions we've discussed work, you could consider reading up on how NFTs began in the first place. There are of course other marketplaces where you can buy and sell virtual items using a smart contract. For example you could research the Solana blockchain, which is very similar to Ethereum. There are other wallets as well, for example the Ethereum, or Eth wallet, or even the Coinbase wallet.
Believe it or not, intangible items can actually represent huge sums of money in the form of intellectual property rights. Or they could be something a bit more mundane, but no less fun, than a concert ticket. We've all seen a QR code, which could be seen as a physical form of an NFT.
As we said earlier, there's always a risk when investing in anything, be it digital or physical. With patience, research, a little bit of hard work, and of course a little bit of luck, you could discover a whole new world on the other side of the screen of your device. Whether you want to spend time in the metaverse having fun, or make real money in the real world, this might very well be an ideal investment for you.