What is NFT and How Does NFT Work?
Just as we saw in the article ‘What is Cryptocurrency’, how Cryptocurrency is the answer to digital currency, similarly NFT is the answer to digital collectibles, artwork. Similar to cryptocurrencies, NFTs are also based on blockchain technology and cannot be modified, but they are not a currency.
You might have heard about Beeple’s digital artwork “Everydays — The First 5000 Days” was sold for whopping $69 million and Julian Assange and Pak’s Clock NFT became the second-most expensive single NFT ever sold at $52.7 million. Twitter CEO Jack Dorsey sold an NFT of his first tweet for $2.9 million. The global NFT market size is expected to grow from USD 3.0 billion in 2022 to USD 13.6 billion by 2027, at a CAGRof 35.0% from 2022 to 2027.
Let’s dive in and see more on NFTs.
Table of Contents
What is an NFT?
NFT stands for a Non-Fungible Token. But what does Non-Fungible mean? Well it simply means – one that can neither be replaced nor interchanged because of its unique properties. Physical currency and cryptocurrency are fungible, which means that they can be traded or exchanged for one another. An NFT is a digital certificate that represents ownership of assets like art,
music, videos and games. Each NFT has unique token with valuable information stored in them and prove ownership of digital assets, hence, two NFTs are never the same. Basically, the key concept with NFTs is that you can invest in something of value without needing to physically own or store the respective item.
Solo Ceesay, co-founder and COO of Calaxy . “To compare it to traditional art collecting, there are endless copies of the Mona Lisa in circulation, but there is only one original. NFT helps assign the ownership of the original
piece.”
How does NFTs work?
All NFTs are hosted on a blockchain. Most NFTs are created and stored on the Ethereum blockchain, but there are other blockchains such as the Binance Smart Chain that too support NFTs. Basically, NFTs can be issued on any blockchain platform that supports smart contracts. We’ll see more on smart contracts in some different post.
What is NFT Minting?
Minting an NFT means converting your asset into digital assets and get it recorded on the blockchain so that it cannot be edited, modified, or deleted. When you buy NFT tokens, you are purchasing a digital asset that has already been created by somebody else. What if you want to create a new NFT and claim the ownership. This can be done by NFT minting. You can
do this with ease by minting an NFT on top of a blockchain network.
How do you buy and sell NFTs?
You can buy and sell NFTs on marketplaces such as OpenSea, Coinbase and Nifty Gateway. You need a digital wallet that allows you to store your NFTs and cryptocurrencies as transactions on such platforms are done in cryptocurrencies. There are other thousands of NFT creators and collectors but need to research carefully as there might be some scams going around. We’ll see more on crypto scams in some different post.
The bottom line
NFTs have been around since 2015, but they are now experiencing a boost in popularity and many artists, musicians, content producers, and video game developers are eager to capitalize on this trend. The rising popularity of NFTs is only set to increase in the coming years, though you need to research and understand the risk before taking the plunge. If you’re looking to gain exposure, watch out this space for more upcoming posts.
Image by Gerd Altmann from Pixabay
