What is NFT? how to create & buy one
Cryptocurrency enthusiasts have probably heard of the term “Non-Fungible Token” or “NFT,” for short. If you’re a critic, believer, or don’t even know what a non-fungible token is, you’re not alone. In the next few posts, I will be explaining what an NFT is, how it works, how to buy an NFT, and how to sell one.
Firstly, let’s understand fungible and non-fungible items.
Fungible items are defined by their value rather than their unique properties. Physical money, for example, is fungible because one dollar is always worth another dollar regardless of its serial number. One dollar can be exchanged for another one dollar.
Non-fungible items are those that have unique properties and cannot be interchanged with items of the same kind. Antiques, fine art, and collectibles are examples of non-fungible items, given that their value is subjective. Even though you can take a picture or print of a painting, there will only be one original.
What’s a Non-Fungible token then?
NFTs are tokens that we can use to represent ownership of unique items. These digital tokens can be thought of as certificates of ownership of these unique items. It allows the item it represents to be bought, sold, or have its authenticity verified.
You can own digital artwork, collectibles, game items, digital art, event tickets, domain names, property deeds, and even ownership records for physical assets like a designer watch. There can only be one owner of the tokens at a time.
An NFT can represent anything that is unique and requires proving ownership. To give you some sense of what NFTs are like today, here are some examples:
- Digital Art
- Game Items
- Domain Names
- Tickets to a real-world event
Digital art: A digital art’s ownership records are not stored on a server controlled by a company but as a public record. Digital arts can be anything like GIFs, Collectibles, Music, Videos. The purchaser of a digital art NFT receives the artwork as a token in their digital wallet. Creators can retain ownership rights to their own work and claim resale royalties directly.
Games: Most regular games allow you to purchase items to use in your game. However, if that item was an NFT, you could recoup your money by selling it once you’re finished with the game. It is even possible to make a profit if that item becomes more desirable.
How does NFT work?
A record of who owns what is stored on a shared ledger known as the blockchain. The owner data can never be altered or copied and pasted into existence by anyone because the ledger is maintained by thousands of computers around the world. By using blockchain, you can also embed code into an item, known as a smart contract. For example, the artist may be able to receive a percentage of the token’s future sales via a smart contract.
An NFT can only have one owner at a time. Token ownership is managed through a unique ID and metadata that no other token can replicate. When someone creates or mints an NFT, they execute code stored within smart contracts that record the information into the blockchain. This smart contract also manages the transfer of the token to another owner.
Current Trend— NFT ARTS
There is currently a lot of excitement surrounding using NFT technology to sell digital art. Content creators and artists have a unique opportunity to monetize their creations with blockchain and NFTs. Today, artists do not have to rely on exhibition galleries or auction houses to sell their art. NFT allows them to sell directly to the consumer, increasing their profits as well. Funds go directly to them when they sell their content. After the new owner sells the NFT, the original creator can even receive royalties automatically. Every time it is sold, this is guaranteed since the creator’s address is part of the token’s metadata which can’t be modified.
Anyone can view the art or download it for free online. So why are people willing to spend millions of dollars on something that can be easily screenshotted or downloaded?
Because an NFT allows the buyer to own the original item, it also offers built-in authentication, which acts as proof of ownership. Verifiably real things will always be more valuable than fakes. Everybody sees it, only one owns it.
“Yes, anyone can download and view the image for free, but they don’t own it and they can’t gain any value from it without owning the NFT as well. As a collector you want as many people as possible to be downloading and enjoying the artworks that only you probably own because this is how the artwork gains value. Imagine if one million people around the world were featuring artwork that only you owned on digital frames in their houses. THAT is a piece of art that has real value.” SuperRare
NFT benefits the creator in the following ways:
- You can sell it peer-to-peer or on any NFT marketplace. You are not tied to any platform and no intermediate is necessary.
- You can easily prove that you are the creator.
- Scarcity can be defined however you wish.
- It is possible to earn royalties every time it is sold.
NFT benefits the purchaser in the following ways:
- You can easily prove that you own it.
- The creator’s public key can be used to prove that the token you hold was created by a particular individual, thus contributing to its market value.
- You can sell it/transfer it.
- You can hold it forever, knowing your wallet on the Blockchain keeps it secure.
Future of NFT:
We live in a world where technology is rapidly advancing. Blockchain may one day be used to purchase cars or houses and receive the deed as an NFT. It is easy to imagine the day when your Ethereum wallet becomes the key to your car or house, cryptographic proof of ownership will unlock your door. Imagine you getting a loan for an NFT as collateral, its cool right. I will cover more details on business models, ideas, marketplaces, startups in the NFT space in the coming posts.
