NFT or non-fungible tokens are one-of-a-kind cryptographic tokens that are recognized by a set of characteristics that differentiate them. They are also known as collectibles and antiques. The value of NFTs is generally due to their uniqueness. These digital assets are not interchangeable as they are different from each other. Each NFT has different characteristics and has a unique value.
When a celebrity does something, it gets immense popularity. The same thing is happening in the crypto space of late. Artists and celebrities like Chris Torres are selling their artwork for cryptocurrencies.
Chris Torres created the Nyan Cat, a popular internet meme, sold a version of his meme for more than 300 Ethereum.
Similarly, musician Grimes sold his cryptographic art using non-fungible tokens worth $5.8 million. The crypto industry is booming, and the space left by NFTs is being flooded with celebrities and crypto enthusiasts.
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We are going to know better what NFTs are, their characteristics, their history and how they work.
Table of Contents
What is NFT or Non-fungible Tokens?
NFT or non-fungible tokens are one-of-a-kind cryptographic tokens that are recognized by a set of characteristics that differentiate them. They are also known as collectibles and antiques.
The value of NFTs is generally due to their uniqueness. These digital assets are not interchangeable as they are different from each other. Each NFT has different characteristics and has a unique value.
NFT history
Non-fungible tokens appeared in 2017. It started with a game: “Cryptokitties”, where players had to buy limited edition virtual cats and also generate or create them. NFTs were used to provide players with prizes for the games they win. The developers of the game “Cryptokitties” began using the NFTs for these prizes, collectibles and other in-game rewards.
Non-fungible tokens can be transferred to other players via NFT’s specialized blockchain marketplace. However, the rise in popularity of these tokens is due to digital artists and other celebrities selling their collectibles and artwork for NFT.
NFT or Non-fungible Tokens: features
The main characteristic that differentiates NFTs in the world of cryptocurrencies are:
The NFT is not interchangeable: These tokens can not be exchanged nor interoperate. NFTs are based on ERC-721 standards, and therefore the information found in these tokens cannot be exchanged with any other token or used in any other way.
The NFT can not be destroyed: these tokens are indestructible. These tokens are managed by blockchain and information is also stored in them. Therefore, the security level is too high for anyone to destroy these tokens.
Non-fungible or NFT tokens are unique: these tokens sound like real works of art, and they make use of the blockchain to maintain their authenticity. The blockchain helps to distinguish the original elements from the replicas. Also, the number of NFT tokens is very low which makes them scarce digital assets.
An NFT is indivisible: you cannot divide and send a part as it happens with cryptocurrencies. This is because NFTs do not have a defined value like cryptocurrencies, so their partition is not possible.
How do NFTs or non-fungible tokens work?
NFTs work differently than cryptocurrencies or other digital assets. Being unique with their own sets of characteristics, they cannot be manipulated in any way. The person who owns an NFT, can prove that they are his as they have property.
Non-fungible tokens can be managed and stored from the Ethereum wallet safely.
Two aspects to take into account of non-fungible tokens are royalties, and also scarcity:
When you own a non-fungible token, you can keep it for eternity or sell it on the open market. Being a scarce asset, this causes its valuation to rise. You don’t need a middleman for the sale of these digital assets, but by selling them, the creators of the tokens often earn royalties.
Royalties
When you sell an NFT, you and the creator of the token get the royalties. This is one of the most interesting concepts that is still in its development stage. There are platforms that already have royalties for artists.
This process works automatically, so every time there is a sale of the NFT, the royalty from the NFT is automatically credited to the creator’s account. However, royalty scheduling must be done correctly so that the process can be automated, as doing it manually is a difficult and time-consuming process.
Shortage
The creator of the NFTs decides the number of tokens that are developed. Since it is a unique asset, the artist can create and set the number of NFTs to be released to the market. These tokens must be slightly different from each other so that it maintains the characteristic of uniqueness. The creator can decide whether to create them similar with minor differences or develop them with major differences.
How to buy NFT?
The value of the NFT lies in its uniqueness, scarcity and rarity. Because each is different from the other, they have a unique value. The value of cryptocurrencies, on the contrary, depends on supply and demand.
- To acquire the NFTs you must select a platform for the purchase and sale of non-fungible tokens. Like, for example, OpenSea or Rarible.
- The second step is to connect the wallet, such as MetaMask, WalletConnect, MyEtherWallet, ect.
- Once you find the NFT you want to buy, you just have to click to buy and verify the information that they request.
How to make or sell NFT?
The process for creating and selling NFTs is as follows:
- Access any of the NFT markets like OpenSea or Rarible.
- Click on the CREATE option in the market you have selected.
- Create the unique collection or collectible of your art or anything creative you’ve made that you want to sell or monetize.
- Choose the file type: PNG, MP or GIF and select the one that is appropriate for your creation.
- The maximum size can be 30 MB.
- You must put a description and a name for the NFT, enter the price for the creation, and set the royalty schedule.
- Once the previous steps are finished, you must connect the wallet and pay the GAS fee, sign the sale order using the digital wallet and confirm the sale.
- Each time your NFT is sold, the amount of the royalty will be credited to your wallet.
The future of NFT
The future of NFTs looks promising with the growing number of artists and celebrities taking an interest in these tokens. The overall market for these tokens is becoming huge by the day and analysts anticipate that it will continue to grow. Investors are taking short-term risks from these tokens to achieve long-term profits.
Conclusion
NFTs are unique tokens with characteristics that differentiate them from cryptocurrencies and other digital assets. These tokens are gaining more fame with each passing day, and not only among artists and celebrities but also among investors and fans of cryptocurrencies.
The future looks bright for NFTs, we just have to wait and see.
Probably wanna read:
- Cryptocurrencies: What are they, when they appeared and how do they work
- Blockchain: What it is, how it works, types and benefits for cryptocurrencies
- Altcoins: What are alternative cryptocurrencies and how do they work
