What are NFTs? Non Fungible Tokens. A Simple Explanation For You

 

What are NFTs? Non Fungible Tokens. A Simple Explanation For You
CryptoPunks NFTs (Larva Labs)

What are NFTs?

NFT stands for non-fungible token. Simply put, it is a digital token that exists on the blockchain to record proof of ownership of the person who owns it. Each token is completely unique because it has its own unique metadata that can never be replicated or replaced by another.

An example for a better understanding is: Bitcoin is a fungible token and every Bitcoin has the same value. However, imagine that you are trading NFT collectibles like CryptoPunks. One CryptoPunk NFT will have completely different characteristics and values ​​from another.

A practical example of this would be: a dollar is a dollar. It is expendable. An airline ticket, on the other hand, is not expendable. Each plane ticket has different information and characteristics and cannot be exchanged for another.

NFTs can be anything digital. Literally, anything can be tokenized, including a photograph that is special to you, one of your tweets, or a two-second video of yourself (yes, such NFTs exist).

The most common types of NFTs are:

  • CryptoArt
  • In-game items
  • Virtual land
  • Music
  • Crypto Collectibles

Are NFTs a cryptocurrency?

No. NFTs are a type of asset that can be purchased with cryptocurrencies, but they behave differently from cryptocurrencies such as Bitcoin or Ethereum. This is because cryptocurrencies like Bitcoin are fungible and all tokens are the same and the same. With NFTs, each token is different and unique.

You will often hear Ethereum and NFT mentioned together. Ether is a cryptocurrency similar to Bitcoin and is the native currency of the Ethereum blockchain. It is also used for NFT creations. and transactions and is currently the most popular blockchain for NFT, especially for CryptoArt.

Why are NFTs valuable?

NFTs allow proof of ownership in the digital world. Think of it this way: there is only one person who can own the real Mona Lisa, but millions can have copies of it. However, the value is in the real Mona Lisa. The same applies to artwork and digital collectibles. Before the invention of NFTs, there was no way to prove ownership or authenticity of digital works of art or collectibles.

Due to blockchain technology and NFTs, the principle of "scarcity" now exists in the digital world as well. This is because each NFT is rare, unique, and indivisible. So when a digital asset is tokenized this creates value as it is possible to prove its authenticity and ownership, which also means that it can be bought and sold many times over.

However, there can be many NFTs of the same trading card or even a work of art if the creator wishes to make a lot of them. In such cases, the first editions of, say 100, will generally be the most expensive.

How is an NFT created?

You will need a crypto wallet with cryptocurrencies to create an NFT. An NFT is created by "minting" your digital asset (whatever it is) on a blockchain. Decryptionary defines minting as the computerized process of validating information, creating a new block, and recording that information on the blockchain.

For example, if you want to create an NFT from one of your digital artworks (known as NFT art and CryptoArt), you will have to use one of the CryptoArt platforms and coin your artwork via your smart contract. It is very simple to do this once you have connected your crypto wallet to a website.

How do you buy and trade an NFT?

The way you buy an NFT depends on the type of NFT you want to buy and the platform you are using. Most NFTs are bought with a cryptocurrency (ETH, the most common) and some with fiat currency. You will have to exchange your fiat currency through an exchange platform like Coinbase, and then set up a crypto wallet (for example, MetaMask) where you can send the money once you have exchanged it.

Once you have some ETH in your wallet, it is very simple on most platforms to connect your wallet with one click and make a purchase.

Whether you want to sell or trade it again depends on the platform and whether you can send it to other platforms or just keep it on that platform.

Why would I want to own an NFT?

It has two main reasons: for fun and as an investment. Just as you would buy a physical item just because you feel like it and think it's cool, so do NFTs. People buy them because they like them.

The other main reason (maybe bigger than the first?) Is an investment or what is called flipping. Many people buy NFTs and resell them at higher prices. Many also keep them as long-term investments.


©nftplazas

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