It's not new that some of us are still quite confused about the world of NFTs and why they are so much talked about.
I myself can't say I'm excluded from this set of people as not quite long ago, I was very much disinterested about matters concerning NFTs. I would literally skip media contents discussing the issues of NFTs as they always seemed too complex.
However, I've been doing a bit of research lately and I guess it's safe to say that I now have a much clearer understanding of it.
So I thought it'd be helpful to share with the community, some of the basic things one should know about this cryptocurrency rage that is changing the world.
WHAT ARE NFTs?
NFTs stand for "Non Fungible Tokens" and they are cryptographic assets which exists on a blockchain and possess unique IDs which distinguish them from one another.
These tokens typically contain references to digital files such as photos, videos, and audio. NFTs require little or no coding skills to create. Therefore, they can be created by anyone.
They are designed as a way for digital items to be secured in a way that will enhance scarcity and also ensure ownership.
Each piece of NFT is unique in itself and is stored using blockchain technology in a digital ledger which ensure the establishment of proof of ownership.
NFTs can also be sold just like the regular physical art but what makes things interesting is that the blockchain makes it possible for the artist to retain the copyright or they can simply just transfer it to the buyer or decide on a percentage the owner can get from secondary sales.
HOW ARE THEY ANY DIFFERENT FROM CRYPTO?
NFTs are very much different from crypto currency in the sense that they are "fungible", meaning that unlike cryptocurrencies which holders can easily trade on the respective platforms, NFTs can not be exchanged for other assets.
On the other hand, fungible tokens such as cryptos are identical and can be used as a medium of payment. For instance, one unit of Hive token is identical to another.
NFTs also possesses crytographic signatures which relate to the blockchain in which they are built. It is with these signatures that the current owners and the origin of these assets are determined.
HOW ARE NFTs CREATED?
Well, this process is called minting which basically means turning digital files such as JPEGs into digital assets on the blockchain.
It involves signing of blockchain transactions and outlining the details of the token. A smart contract is then generated for the token which is assigned to it's owner. This unique token can then be sold on the blockchain after being published. Although, an amount of crypto currency will be required to mint the NFT.
HOW DO NFTs WORK?
Most NFTs are minted and stored on the Ethereum blockchain but there are also many other blockchains that that support NFTs. The tokens which convey ownership is added to the blockchain while the file size of the digital item remains separate from the blockchain.
Whether the original file is a JPG, MP3, GIF or anything else, the NFT that identifies its ownership can be bought and sold just like any other type of art and just like physical art, the price is largely set by market demand. So, no one can undo your ownership of an NFT or re-create that exact same one.
HOW TO BUY NFTs?
NFTs can be created, bought, sold and traded on online exchange and marketplaces which is the most common way. These marketplaces are auction platforms created specifically to showcase NFTs.
The most popular ones are OpenSea, Rarible, SuperRare, Nifty Gateway, Magic Eden and Foundation.
You'll need to have a wallet which is specific to the platform you're buying on and you'll need to hold cryptocurrency.
HOW DO PEOPLE MAKE MONEY FROM NFTs?
NFTs and blockchain technology afford many artists and content creators a unique opportunity to monetize their wares. For instance, artists no longer have to rely on art galleries or auction houses to sell their art. Rather, the artist can sell it directly to the consumer as an NFT, which also enables them to keep more of the profits.
A lot of people also make money from play-to-earn games. These new kind of games enable you to own the assets you earn or unlock in a game. You can collect and sell these NFTs within a game's store or on a marketplace.
NFTs are also changing how games are played and made. Players can buy characters or cards in an NFT game like Axie infinity, Gods Unchained, Splinterlands and develop their heroes, the more unique they become the more valuable they are.
Some people also like to buy NFTs for the purpose of selling them at a higher price.
But as professionals would say, it's risky!
There may be many practical applications for NFTs in the future but today, they're primarily used with digital art. A lot of people have made thousands or millions of dollars selling NFTs. If you're considering purchasing an NFT as an investment, know that there's no guarantee it will increase in value.
While some NFTs sell for thousands or millions of dollars, others may remain or become worthless. All these mean that an NFT may resale for less than you paid for it or you may not be able to resell it at all if no one wants it.
Nevertheless, it's possible to earn money by investing in NFTs, but you'll have to do your own research.
Thanks for reading!
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You mention markets, you probably forget NFT Show room which is Hive based.
Yeah you're right! that's also a pretty cool marketplace but I just thought to mention a few of the most popular ones.
Thanks for reading!