You might have heard news headlines about artists making millions of dollars selling NFTs. You might have even wondered what the big deal is about the simple, low-resolution pixelated Nyan Cat. If you are like most of us, your biggest question is more than likely, What is an NFT anyway?
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What is an NFT?
NFT art is a digital asset that is like a real-world art object or another asset. They are often one-of-a-kind and have unique codes and smart contracts that do not allow the original to be copied (a screenshot or right-click-save does not create a new original). This is similar to the unique identifying code used in blockchain that assures each transaction is traceable to the source. If you are even more confused, you can think of it as an authenticity certificate that accompanies a physical piece of artwork.
Another term you might have heard is fungible vs non-fungible objects. You could compare a non-fungible object with a one-of-a-kind artwork like the Mona Lisa. There are copies of the Mona Lisa, but they will never be worth as much as the original. The Mona Lisa can never be replaced. Non-fungible objects are like that, and artists who sell them only release one.
Fungible objects can be traded or exchanged for another object. For instance, you can exchange physical money or cryptocurrency for a cup of coffee. The currency can be exchanged and transformed into something else. You could never exchange the original Mona Lisa for a cup of coffee like you could a dollar bill.
Hopefully, this clears up the differences between fungible and non-fungible objects. A non-fungible item is like having the only existing copy of a rare baseball card. It gives the owner bragging rights and could be compared to having the original Mona Lisa in your living room and not just a copy. Currently, the main interest over NFTs is about creating rare, collectible objects, and as a creator, it is a topic you might want to explore deeper.
Why should you care about NFTs?
If you are a creator, you should be aware of changes in the art and culture industry. NFTs can be art, in-game assets, videos, and music creations. In 2020, the NFT market was around $232 million. By 2021, the NFT market had grown to $22 billion.
This explosion alone is reason enough to consider jumping on this trend that is not slowing down. Many creators have gained notoriety and world fame using the NFT trend. If you are new to the NFT world, you might not have heard of creators like Beeple, Jack Butcher, Grimes, or Trevor Jones, but it only takes a short search to find their work. With the development of the Metaverse, NFTs are not expected to go anywhere but up.
What do NFTs do?
By now, you might understand NFTs as you would a piece of artwork, but do they serve any other purpose? For the most part, the world of NFTs is much like the world of art collection. Having the original gives you bragging rights in certain circles. Sometimes, art is created to sell to raise money for charity or to support a cause, just like physical artwork.
Another example of NFTs is objects created to be used in online gaming. For instance, an artist might want to purchase NFT fashions for their avatar in an online world. NFTs allow various mediums to be combined into a single piece. For instance, you can attach a unique music creation to your artwork or video and sell it as a single piece.
How do NFTs work?
Creating an NFT is much like creating blockchain currency. When you create one, you are “minting” it. The first thing you need to do is choose a marketplace. Ethereum (ETH) is the best-known de-fi currency for NFTs, but you can use others like Tezos (XTZ), Binance Coin, Polkadot (DOT), EOS, Tron, Cosmos, and others.
The currency in which you choose to offer the NFT will limit the NFT marketplace you choose. Some possible marketplaces are OpenSea, Rarible, Mintable, BakerySwap, Treasureland, and Juggerworld. Before you begin creating the artwork, you should become familiar with the process and rules for the marketplace you choose. Each one of them has different processes for uploading and minting your NFT.
Web 3 is the next version of the Internet and is the driving force behind the NFT craze. What makes Web 3 different from Web2 is decentralization. Web 3 is self-governing, verifiable, and transparent. It is built on blockchain technology and represents a new token economy that relies on de-fi as the transaction medium.
One concern that has recently come to the surface is that of the environment. The concern is the amount of power that is needed to fuel NFTs, blockchain, and the networks that house them. The increased power and technology needed for them increases the carbon footprint in a world where companies and individuals are doing everything they can to reduce it. Web3 and its power consumption will fuel a need to explore alternative energy and find new ways to reduce fossil fuels.
What are some NFT examples?
Let’s look at some NFT examples and non-fungible tokens use cases besides the digital art mentioned earlier.
Music NFTs attach audio to an image or video to create a piece of music that is a collectible. Musicians who choose this format can use blockchain royalty tracking and blockchain-based streaming platforms.
Real Estate NFT
Real estate NFTs allow you to move ownership rights of property in the physical world to the blockchain. This allows property transfer and ownership to be easier, more transparent, and traceable.
Moving fashion items to the blockchain is a way to prove the authenticity of a fashion item. This technology makes it almost impossible to pass off a fake Gucci bag as the real thing.
Licenses and Certifications NFT
Blockchain is another way to verify professional licenses and certifications. This is being considered as a way to quickly verify university completion by job applicants.
Not all of these blockchain uses are available yet, but they are uses that are being considered. They illustrate the ability of NFTs to create traceability, prove ownership, and verify the authenticity of many items other than artwork and music.
How do I buy NFT tokens?
Now, there are many places to buy NFTs on the internet. The token is attached to the NFT when the artist mints it. You will need a wallet (Coinbase Wallet and Ledger come to mind) to store the NFT token. You can typically use the same wallet you use to store your Doge, Solana, or Binance.
Buying an NFT is much like any other transaction. You decide which one to buy, transfer the crypto required, and transfer the token attached to the NFT to your wallet. Consider getting an offline hardware wallet like a Ledger Nano X too for even more security. Now, you have collected and can start interacting in communities with other NFT enthusiasts.
Where to learn more about NFTs
There are over 800 servers on Discord that include the term “NFT”. Some of the more popular Discord servers include Bored Ape Yacht Club, NFT Community, Vee Friends, OpenSea, Mutant Cat, Cool Cats, and NFT. You can find NFT communities on almost any social media platform, and the numbers of enthusiasts continue to grow.
Conclusion: NFTs and what’s next?
You might be wondering what the future of NFTs is and where it will go from here. NFTs are being considered for use in decentralized gaming systems, as a means to sell tickets to in-person experiences, and as a way to access exclusive clubs and perks. The world of NFTs as collectible art is also expected to grow in the future.
Now that we have answered the question, What is an NFT, you might be wondering what is next. NFTs will be used in more circumstances where you need to create a unique and traceable digital asset. NFTs are more than a digital collectible and offer new mediums and opportunities for creators of all types. Now that you know more about NFTs and how to purchase them, check out our article that goes into the details of how to mint an NFT and get into this exciting world.