NFT is the latest buzzword in the world of crypto and blockchain. Ever since the popularity of cryptokitties and the record-breaking sale of Beeple’s NFT art, Non-Fungible Tokens have gained the attention of crypto enthusiasts. If you have no idea about this new term creating a buzz on the internet, this post can help! Here we’ll find out what NFT means and how does it work.
What are NFTs?
A Non-Fungible Token, in short NFT, is a unit of data stored on a blockchain. The term “Non-fungible” refers to something distinctive that can’t be replaced. It means that non-fungible tokens are unique which makes this blockchain-based digital asset one-of-a-kind and scarce. NFTs are virtual tokens such as artwork, a collectible, music, an in-game item, etc. This type of token represents ownership of something inherently distinct and its value cannot be replicated. Fungible tokens or assets, on the other hand, can be exchanged for another token or asset of the same value. For example, the value of one Bitcoin is equal to another Bitcoin. Likewise, fiat currencies are fungible which means that a $10 bill can be exchanged for another $10 or two bills of $5. However, NFTs cannot be mutually exchanged for one another because each token is unique and has a specific value.
NFTs are similar to a house or a painting of the Mona Lisa which is unique. Even if someone builds a similar house or makes another Mona Lisa painting, there will always be only one original painting. NFTs typically include:
- Virtual avatars and video game skins
- Music & Soundtrack
- And More
How do NFTs work?
NFTs exist on the blockchain, a digital ledger that records transactions. Since distributed ledger supports NFTs, these tokens are decentralized which makes the stored data encrypted. It means that the data can’t be traced back to the owner. Typically, the Ethereum blockchain powers most NFTs but some other blockchain also that support NFTs.
In addition to GIFs, art, collectibles, and music, now even tweets can be sold as NFTs. Lately, a tweet by Twitter co-founder Jack Dorsey was sold as an NFT for more than $2.9 million. This has opened up a new opportunity for artists to sell their art. Instead of depending on galleries or auction houses, artists can now directly sell their work to the consumer as an NFT. But what is the process of buying or selling NFTs?
What are NFT Marketplaces?
NFTs are not bought or sold like regular cryptocurrencies on centralized or decentralized crypto exchanges. For minting or buying NFTs, there are online marketplaces that are specially developed for NFTs, known as NFT marketplaces. Whether you want to create, buy, or sell an NFT, you can find specialized platforms known as NFT marketplaces where NFTs can be minted (created), stored, displayed, or traded. It is similar to how you list products or buy goods online through Amazon.
Anyone interest in buying or selling NFTs needs access to these specialized marketplaces. But before you start using it, you will need to have a crypto wallet that is compatible with the blockchain network that supports the NFTs you’re interested in. Whether you want to list or buy an NFT, make sure you have some coins in the wallet that are accepted by the marketplace you intend to use. In addition to this, you will need to create an account on the marketplace of your choice. The buyers can purchase NFTs directly for a fixed price or through an auction. It is also possible to negotiate a better price. The process of listing or selling NFTs is a bit complicated than buying.